Banks have lost faith in their ability to create jobs, according to Gideon Sam, chairman of Khula Enterprise Finance, one of two government agencies established to promote small and medium-sized businesses.
Khula reported last week that mismanagement, fraud and lack of entrepreneurial skills are preventing employment creation. Khula's duties and lending department was disastrous last year.
Sam said in Khula's annual report submitted to Congress last week that it had suffered losses of nearly R26 million in the year ended March 2000.
Khula's report said the massive losses were primarily due to a lack of business and management skills among those borrowing from Khula.
In line with international trends in job creation, the government has since 1996 targeted the small, medium and microenterprise (SMME) sectors as engine rooms for the eradication of unemployment. The combination of lack of skill and ramp-stretched corruption is damaging this drive.
“What we've learned from recent experience is that we still don't have a significant chunk of people who are more likely to be entrepreneurs that the country needs,” Sam said.
Khula works like a wholesaler and does not deal directly with the public. It does through other retail institutions that it funds. It also provides collateral security to those who are considered high risk by traditional financial operators.
Sam said two collapsed retail financial institutions (RFIs) must develop a contingency plan for further bad debts on R23 964 234 and for further bad debts on R18 858 512.
“Total revenues fell from R67 734 759 in 1999 to R60 201 728. This was caused by a decline in interest rates acquired through Khula's investments and the discount rates charged to RFIS were billed in loan capital.”
The collapse of RFI is especially attributed to fraud. Khula said he will take tough actions against criminals this year, and will get the job creation drive back on track.
Founded in 1996 by the Ministry of Trade and Industry, Khula was forced to consider its own system and its responsibility in the failure of funded institutions.
Sam said, “The disaster focused on important aspects of the SMME environment and forced us to confront questions that were previously left unanswered for convenience.”
The Kuhla itself “is properly managed and enthusiastically applied the principles of good governance,” he said.
“Disclaimer – the views and opinions expressed in this article are the views of the author and are not necessarily those of the Bee Room.”
