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How to Support Youth Entrepreneurship in Africa

For Africa to capitalize on its “youth dividend,” we need a public and private sector strategy to provide African youth the skills they need to thrive as entrepreneurs.

 

Everyone agrees that the youth are the future of Africa. At fora like World Economic Forum on Africa this week and the Global Entrepreneurship Summit in July, much of the region’s — and the world’s — attention will be focusing on the urgent need to provide meaningful employment to the continent’s rapidly rising youth population. So it will be important to build solutions based on the current realities.

Despite optimistic talk of the “youth dividend,” the fact is that the continent is falling short when it comes to providing them with all the tools and opportunities they need to realize their full potential. In fact, the rate of youth unemployment in Sub-Saharan Africa hovers at around 20 percent overall, with the continent’s two economic powerhouses of South Africa and Nigeria standing at 25 percent.

Young people aged between 15 and 25 represent more than 60 percent of the continent’s total population and account for 45 percent of the total labour force. Sadly, however, with an estimated 12.6 million young Africans entering the labour market annually, youth also account for 60 percent of all unemployed in Africa. Of course, this doesn’t even touch upon the masses that are subjected to underemployment!

To address this crippling and expanding problem, government and private sector, we will need to implement a highly coordinated, multi-faceted strategy for endowing youth with the relevant skills, training and confidence to contribute to the economy. Ultimately, given the important role of small and medium-size businesses (SMEs) in African economies — and the low absorption rate into formal employment — youth engagement and training must begin to focus on alternative forms of income generation to the traditional formal employment.

The informal sector contributes about 55 percent of Sub-Saharan Africa’s GDP and constitutes some 80 percent of the labour force, while SMEs make up 95 percent of African businesses. Indeed, because the informal and SME sectors are driving the growth of African economies, there must be a shift in our skills development and career coaching orientation to make youth aware of — and attracted to — the vast opportunities that exist there.

On a policy level, government ministries overseeing education, youth development and employment must encourage the proliferation of technical vocational education and training (TVET) institutions — which develop not only practical, income-generating skills but also embed the entrepreneurial spirit and knowledge.

Unemployed youth have to be assisted in accordance with their needs and unique conditions. The so-called NEETs (not in employment, education or training) risk drifting into long-term unemployment unless they are supported to develop basic skills and raise their aspirations.

Youth who have recently graduated with diplomas or degrees may gain some work — but are often underemployed, have little job security, or have no choice but to accept positions far below their qualification or out of their field due to skills mismatches. Self-employment must be elevated and pursued institutionally as a means of attacking some of these challenges.

Enabling Environment

If youth are to be encouraged into entrepreneurship, there must be an enabling environment that makes such activity possible in the first place. Expanding our education to include more entrepreneurship skills development is just the first step. Negative attitudes towards entrepreneurship based on uncertainty avoidance and risk minimization must also be addressed through public sensitization.

Another challenge is the absence of technical support on how to run and grow a business within the African context — with all the regulatory, logistical and infrastructure challenges. Introducing mentorship schemes would go a long way to passing on the much-needed knowledge to the younger generation.

The epitome of all challenges to entrepreneurship, however, is the lack of access to finance for budding entrepreneurs. This is perhaps the single most binding constraint for entrepreneurs of all ages, but most notably to women and youth. Entrepreneurship at the SME level cannot thrive in environments where credit is only extended at very high interest rates, borrowers may have to offer a substantial amount of collateral to secure loans, or pay fees and kickbacks.

Initiatives such as the Youth Entrepreneurship Facility (YEF) implemented by the International Labour Organization (ILO) in Uganda, Tanzania and Kenya are focused on business development training and entrepreneurship support. This program has supported the start-up and growth of more than 10,000 youth led businesses in these countries alone.

Here are other ways to support entrepreneurship in Africa:

1. Entrepreneurship competitions focused on youth can be expanded to include not just seed money, but also technical support and the provision of collateral and application support for loans if certain revenue parameters are met.

2. Companies with existing corporate social responsibility programs can focus some of their resources on entrepreneurship that addresses challenges faced by the vulnerable.

3. Governments can direct their development and investment promotion strategies toward job-creating industries and consider providing incentives traditionally only offered to foreign investors or those investing in the tens of millions of dollars.

4. Mandatory national service programs — such as those in Ghana and Nigeria that require graduates to serve a year in various sectors— should also encourage a portion of the participants to enter into collective social entrepreneurship.

These are just a few examples of initiatives that could be replicated across the continent, by the public and private sector, to rapidly scale up the number of SMEs being established by the youth in Africa.

With the increasing international focus on entrepreneurship in Africa, both private and public sector actors must be aggressive about how they optimize our moment in the spotlight. Incubators, early stage venture capitalists and others of this ilk should be encouraged to think outside the box in how they engage with the African market and its vast human resource.

After all, for those investors “brave and patient” enough to venture into our economic backyards, few have regretted having done so. Africa’s youth are a vibrant, creative and hungry bunch, and they are ready to be involved in the continued growth of the continent if given the chance.

(Top image: Courtesy of Trevor Samson/World Bank)

 

Buddy Buruku is the Country Program Manager at the African Center for Economic Transformation (ACET). She is a Ugandan national based in Ghana, and when she is not supporting African governments to implement public financial management reform, she is focused on sustainable and equitable Sino-African investment. 

 

 

 

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