Presentation 7NYDA Funding Submission – Summary Strategic Rationale

29 January 2013

Presentation to the Workshop with the Parliamentary Standing Committee on Appropriations

Some 4.7 million young people find themselves with insufficient skills and education required to access and retain meaningful employment, despite their desire to actively participate in the economy. This group represents the NYDA’s core priority

• With 68% of the country’s population younger than 35 and working-age youth comprising more than 70% of the unemployed, South Africa faces grave social concerns related to the plight of its young people.

• As job creation and formal education struggle to keep up with the demands of a young and growing population, the welfare burden on the state has grown substantially while the risk of social instability increases.

• The result is that some 4.7 million young people find themselves with insufficient skills and education required to access and retain meaningful employment – This group represents the NYDA’s core priority

• While the sector funding compliment for youth-focussed social development initiatives in South Africa is substantial (estimated to be R6.415bn), much spend is directed to discrete, low-impact initiatives that prove unsustainable.

• In addition, existing social development initiatives are challenged by coordination problems, concerns over sustainability and a lack of efficiency and focus from mandated role players

The Social Context

Those not economically active are not recognised in official employment statistics but are in fact the very group of people that require uplift through skills development and education. This group is largest among unskilled and semi-skilled individuals, many of these would like to work but have given up

trying

Since 2002, the working age population has grown by 0.4% p/a, while the rate of employment has decreased by 0.5% p/a. This implies that the scale of the

structural mismatch between those of working age and those able to find work is increasing

The unemployed and the discouraged are the core

groups on which the NYDA intends to focus

Structural Challenges

The unemployed and the discouraged are the core

groups on which the NYDA intends to focus

= 4.7m people

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Total Youth 18.8m

Employed 6.2m

Other Not Active 7.6m

Unemployed 3.3m

Discouraged 1.7m

The NYDA is well placed to scale up its activities to take on the challenge by driving internal efficiencies and assuming an active role in both direct and partner-funded programmes

• Formed from the merger of the National Youth Commission and the Umsobomvu Youth Fund, the National Youth Development Agency (NYDA) is broadly mandated with the creation and promotion of coordination in all youth development matters.

• Awareness initiatives, skills development and education and entrepreneur financing and support are the three core areas of activity for the NYDA

• Despite having met KPA targets since inception, the broadness of its mandate, organisational legacy issues brought about by the merger, a scarcity of funding and poor awareness and brand image has meant that the NYDA has made limited progress against its mandate

• The NYDA is well placed to scale up its activities to take on the challenge by identifying the deficiencies in the existing youth development value chain, deriving its operational scope both from the mandate handed down by the Act and from South Africa’s social imperatives

• The NYDA recognises the need to position for growth and strengthen effectiveness – this can be achieved by prioritising distribution efficiency and product design, by addressing structuring concerns and by enhancing lending activities

NYDA Capability

SKILLS & EDUCATION

FINANCE & SUPPORTAWARENESS

Improved and sustainable livelihood opportunities for young people

Enabling environment that promotes youth development

Enhanced sustainable social capital for young people

Maintaining an accountable, prudent and efficient centre for youth development

PROCESS SYSTEMS STRUCTURE1 2 3

Business Value Chain

Direct Project Staff Complement: 277

Support Staff Complement: 191

STRATEGIC OUTCOMES

PRODUCTS & SERVICES

ORGANISATION

KEY CHALLENGES•Broad mandate means budgets and effort are spread very thin , minimising impact•Organisational integration of the two legacy entities remains a challenge.•Poor public image has made partnership building difficult. •The NYDA has found it difficult to convey its message to the youth and advertise its products & services 3

The current funding level has proven insufficient to make a substantial impact. By increasing the grant from R376m for the current financial year to R1.088bn in 2013/14, the NYDA will be in a position to substantially increase the depth and reach of its programmes as well as grow and manage a self-sustaining lending facility

• Faced with the scale of South Africa’s youth-related social concerns and bound by its duty to fulfil its broad mandate, the NYDA’s current funding level has proven insufficient to make a substantial impact

• By increasing the grant from R376m for the current financial year to R1.088bn in 2013/14, the NYDA will be in a position to substantially increase the depth and reach of its programmes

• To aggressively increase impact and stabilise the NYDA’s long-term funding requirement, SME, Cooperative and Microloan disbursements can be scaled-up to develop a self-sustaining lending operation

• In order to quickly address capacity constraints, much of the accelerated loan book growth will be executed through lending partners with the NYDA acting as a wholesale funding partner

Funding Request

2012/13 2013/14 2014/15 2015/16 2016/17 TotalTotal Funding Requirement Rm 414 1 101 1 222 1 349 1 514 5 602

Treasury Funding Requirement Rm 376 1 088 1 104 1 141 1 210 4 921 Total Funding Requirement less funding generated from

operations

Accelerated Loan Book Growth Rm 0 400 250 50 0 700 Funds directed to wholesale enterprise finance to grow

sustainability in operations

Projects to Operations Ratio % 102% 332% 261% 202% 166% 209% Ratio of total outlay on projects and distribution against

operating expenses

Salaries to Expenditure % 43% 25% 30% 32% 31% 31% Ratio of total employee cost against total expenditure

Operational Cost of Lending R 6.04 0.28 0.48 0.55 0.49 0.49 Operating cost to disburse R1 as a loan

Funding Profile Highlights

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The result will be substantially greater impact from NYDA programmes with as many as 4.6 million people participating in awareness programmes, 745 000 receiving skills development and training and some 221 000 people receiving funding and business support over a five year period

Programme Outcomes

5-year Expenditure 5-year Outcomes 5-year Social Return*

R150 704 130 4 606 299

R678 028 234 745 591

R1 504 411 582 221 486

People participating in awareness initiatives

People receiving skills development, training and education

Entrepreneurs receiving funding and business support

SKILLS & EDUCATION

FINANCE & SUPPORT

AWARENESS

Career guidance, job preparedness, life skills, health and wellbeing

awareness

Technical and theoretical skills development to improve earning potential and meet labour

market demand

Business financing, support and market access to establish business

start-ups and create secondary employment opportunities

R158 239 336

R1 695 070 586

R6 769 852 119

* Estimate based on benchmarked multiplier effect of each category of development spending. 5

The impact of this will be that the NYDA’s core priority group of 4.7m under-skilled, under-employed youth can be reached with targeted awareness initiatives while 17% of the group will be able to access skills and finance opportunities – the biggest step yet to alleviating the social concerns facing South African youth

NYDA Social Impact

NYDA 5-year Impact (Current Baseline)

Projected 5-year NYDA impact with the current baseline is 2.2m youth reached with low impact (awareness) initiatives and a further 356 614 reached with high impact (skills and finance) initiatives. THIS LEAVES OVER 2m YOUTH UNSERVED

NYDA 5-year Impact (New Baseline)

Projected 5-year NYDA impact with the new funding level baseline is 4.6m youth reached with low impact (awareness) initiatives and a further 967 080 reached with high impact (skills and finance) initiatives.

The successful mitigation of youth-related challenges is contingent on the active participation of government, municipalities, civil society

and the private sector. 6