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State injects Sh1.3b into Kenya’s youth economy

WORK LIFE
By Fredrick Obura | February 24th 2021
Youth at Kasarani Sports Complex (Photo: Courtesy)

NAIROBI, KENYA: The Kenya Youth Employment and Opportunities Project will inject Sh1.3 billion into Kenya’s youth economy, President Uhuru Kenyatta said on Wednesday.

The money will be divided among the 750 winners in the just concluded MbelenaBiz competition.

“Of this amount, a total of Sh900 million will go to 250 young entrepreneurs as grants. Each of these young entrepreneurs will receive an award of Sh3.6 million to develop their dreams. The balance of Sh450 million will be given as grants to the other 500 winners. Each of these winners will get a total of 900,000 shillings to develop their innovations and ideas,” he said.

The president said his government is committed to youth development through the creation of an enabling environment for start-ups by young people.

The Building Bridges Initiative which is about constitutional change for instance he said will improve ease of doing business to the young people. The BBI aspect intends to provide a seven-year tax holiday for young entrepreneurs.

To underscore the importance of BBI, the president said if the new bill could have been in place, the winners would have saved billions on taxes in the seven years.

“If for instance, one of the grantees of this project decides to start a nail-making business, he or she plans to spend about Sh1.2 million buying the necessary equipment and setting up.

Market estimates suggest that the net returns to such a start-up business would be about Sh150,000 a month or Sh1.8million a year. In a normal tax scenario, the young entrepreneur would owe KRA about Sh540,000 of the Sh1.8 million profit each year. And in 7 years, they would have paid KRA approximately Sh3.7 million in taxes.

But with the proposed BBI tax holiday, such an enterprise by a young person would not only save the Sh3.7 million in seven years but will have generated a total of Sh12.6 million in the seven years.

And to bring it closer home, if the 250 young entrepreneurs were to earn an average of Sh150,000 every month from their initial grant of Sh3.6 million, they would collectively make Sh37.5 million a month in profit.

And this translates to an average of about Sh450 million per year or Sh3.15 billion in seven years.  If the taxman took his cut from these earnings, the 250 grantees we are empowering today would “forego” close to one billion shillings to tax in seven years.”

On Youth Enterprise Development Fund (YEDF), the President said the Fund, which is one of the Government’s strategies to address youth unemployment through entrepreneurship has to-date supported 2 million youth with loans worth Sh13.5 billion.

He said the plan launched today will raise the revolving Fund from Sh4.5 billion to Sh5.5 billion and is expected to raise loans disbursement to Sh16 billion in five years.

“I am pleased to note that the Fund has disbursed a total of Sh501 million in loans since the first case of COVID-19 was reported in Kenya. These loans have helped to sustain youth owned enterprises, thereby enabling them to diversify into new opportunities, and to maintain employees.

 “The plan we launch today aims to transform the Fund into an efficient and responsive entity that meets the needs of our young people. We consulted widely; we listened keenly; the plan is our attempt to align the work of the Fund with the expectations and aspirations of our young people.

President Kenyatta expressed optimism That YEDF, which also offers training to the youth on how to grow their businesses, will enable young entrepreneurs to recover from losses incurred during the COVID-19 pandemic.

World Bank Kenya Country Director Keith Hansen said the Kenyan economy has shown remarkable resilience in confronting the COVID-19 and thanked the Government for taking steps to manage the situation.

He expressed gratitude that 33 percent of the winners of the business plan competition are women noting that the enterprises which have a multiplier effect are a model to be utilized elsewhere in the world.

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