Published On: Fri, Dec 11th, 2015

OPINION: Suggestion to Use IT to Raise Capital

raise capital 1JOHANNESBURG, (CAJ News) – THE removal of the Finance Minister Nhlanhla Nene drew mixed feelings. The issues are the that economy is not growing,jobs are not available, inflation outlook is gloomy as the Rand is falling and global ratings are slipping.

At the heart of the South African tragedy is failure for the inclusivity. The new Finance Minister will find it hard to grow the economy and to create jobs, just as the rest of Africa.

The Jobs Fund was intended to address these and Treasury was tasked to address this challenges, but the eligibility criteria used prevent start ups from accessing the money.

As a result six years after the grant funding was approved by cabinet the first tranche of R9 billion was not fully disbursed. The Ministry responsible for the Jobs Fund is the Treasury.

Lack of development finance has ushered new debate or suggestion to use Information Technology platforms(IT) to raise finance for South Africa’s inclusive development. The document was delivered to Treasury in August 2014, but no feedback had been received.

People want to contribute the CAPITAL for their inclusive participation in the mainstream economy. To come out of stagnation our economy needs 2 million start-ups, properly set up.

But government or banks do not finance start ups, thus the need to contribute start up capital using IT platforms.

This is the age of technology. Everybody (young and old) is paying for use of their communications technology, but we can turn the same to raise funding. People want to contribute 1 cent for each activation on a national basis.

There are 1.6 billion activations of simcards, internet and telephone per day in South Africa. The cost per person is about R3 per month, spread over 30 days. Chat platforms such as whatsup collect small amounts at a time, that one doesn’t even see it. 1.6 billion activations mean R16 million a day, R480 million a month and R5.76 billion a year.

It is not a tax but a contribution or induced savings, separately managed as indicated in the documents. The I cent contributions by ALL will also  go a long way to ease racial and historical imbalances.

People are requesting government to facilitate national consultations on the matter. Samples show it will be accepted.

Then government should instruct ICASSA to instruct the network operators to load the 1 cent contribution on top of the cost of each activation. The money would be used to finance PDI start up programs.

Our economic problem, and the rest of Africa, is that there are too few businesses to provide enough employment for the population. The Davis Tax Committee SME Interim Report, July 2014, page 11, says 600 526 returned
taxes in 2011.

Behind these businesses are about 1 million entrepreneurs, thus 2% of the population. The high ratio of 1:52, one business person sustaining 52 people, shows that 2% cannot carry 98%.

The number of businesses must increase by 5% or 2 million new businesses, so that the ratio becomes 1:18.
But these are start ups which banks and government do not finance.

While foreign interventions help, only local PDI start-ups can provide these 2 million businesses.

Yes, there is global slowdown but as long we have this ratio, very little change will happen.

– CAJ News

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