UNDP Deputy Res. Rep. Ms. Shaima Hussein, in conversation with Smiling Through Director, Mr. Gcina Dlamini.

By Mavie Thwala

Eswatini is one of the countries with a high youth unemployment rate – at almost half of the share of the labour force aged between 15-24 which is available for and seeking employment (46.2%) – according to the 2019 World Bank estimates. Therefore, I strongly believe that young people should be encouraged and supported to use their youthful exuberance and ingenuity to create viable business enterprises.

The youth can start businesses based on new ideas and try out new models in producing different products and services. While this is true, despite their entrepreneurship skills, talent and the hunger to succeed, the youth does not get easy access to finance their start-ups. Banks and other financers traditionally do not finance “ideas”.

“The financing model for start-ups should be tailored differently from general business financing,” is how the Head of Development at Royal Science and Technology Park (RSPT), Sebenzile Dlamini, responded to my question on how start-ups could be transformed into successful enterprises.

This  makes sense to me for several reasons. Start-ups do not usually have solid business models. Their products and services are unknown in the market. Financial institutions generally want to see cashflows, turnovers and projections when appraising a business proposal for a loan.

Understandably, start-ups are at the stage where they are still experimenting and building up the product. Therefore, any financing vehicle must be flexible enough to support this development stage. Unfortunately, the reality is that mainstream financing institutions such as commercial banks are not of that flexibility, as they are always guarding against None Performing Loans (NPL) in their books. As a result, the uptake of guarantee schemes has generally been less than impressive in Eswatini. Banks’ rules and regulations still do not accommodate loan requests even when a guarantee scheme is available.

It gives me hope though that a partnership between UNDP and RSTP under the Pipeline Innovators and Entrepreneurs Programme, also known as Ematfuba Ami, has seen the success of at least two start-ups which have grown in leaps and bounds.  Both start-ups – ROCILE Investments and Smiling Through Investments – are owned and run by young people. They are both specialising in seed production and multiplication. They were selected to be among 16 youth entrepreneurs who were not only awarded seed capital, but they were also enrolled in an incubation programme with RSTP.

I had the privilege of talking to the directors of both companies. On the one hand, I learnt that since Smiling Through Investment received the grant of E135,000 (USD8 645), they have had E3.1 million (USD198 185) turnover since 2020 and after being able to use the grant to leverage E500,000 (USD31 963) credit facility from the Industrial Development Company of Eswatini (EIDC). On the other hand, ROCILE Investment, owned by two young women, received a grant funding of E165,000 (USD10 542) which it has used to gain access to both local and international markets. The money was used for product development including branding and packaging. As a direct result of the grant, financial institutions started to gain confidence in the start-ups which now had a more structured business model and a market-ready product.

I, therefore, believe that the UNDP and RSTP’s funding model seems to be working. We just need more resources to help start-up access grants. Initially, the programme was aimed at allocating the $100,000 (E1 565 245) UNDP funding to a private institution to issue loans to start-ups. However, owing to the high rate of NPL by young entrepreneurs, the blended approach of first having seed funding in the form of a grant for start-ups together with private financing seems to have been effective.

(Mavie Thwala is the Head of Exploration at UNDP Eswatini AccLab)

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