Unemployment is one of the major challenges faced by African youth. The problem is exacerbated by limited alternate opportunities to earn decent livelihoods. Since the youth form the backbone of the African population - over 60% - the continent’s sustainable development hinges on harnessing the demographic dividend. That entails going beyond the limited formal employment opportunities for youth and creating and availing opportunities to make a decent living and contribute to the realization of Agenda 2063.
Acknowledging the importance of investing in and creating space and opportunities for young people for them to realize their full potential, The Youth Cafe has proposed several initiatives geared towards youth empowerment. The AU Agenda 2063 recognises the need to empower young peopple as a prerequisite for achieving the socio-economic transformation of Africa. This initiative is aimed at reaching millions of youth from across the continent with opportunities and interventions in key areas of employment, entrepreneurship, education and engagement.
Youth entrepreneurship is projected to be increasingly relevant in the current contexts of rising unemployment and underemployment, as well as insecure, low-paying, hazardous employment that does not result in liveable wages. However, the Covid-19 outbreak has shown that pandemics and disasters have the potential to subject young entrepreneurs or businesses to a great deal of uncertainty and exposure to high risk of unproductivity.
Covid-19 has led to a global health emergency and economic slowdown, with trade, investments and employment being seriously affected. This has left many vulnerable youth-led enterprises struggling to carry on business in the face of unexpected economic shockwaves. Response to the Covid-19 crisis should entail cushioning young entrepreneurs against the shockwaves, assisting them in developing long-term growth plans, finding innovative ways to survive the economic slowdown and searching for novel market opportunities.
The Youth Cafe has proposed interventions to promote youth entrepreneurship and consequently create more jobs and enhance livelihoods on the continent. These interventions include ways to cushion youth entrepreneurship against economic shockwaves that may be caused by unexpected phenomena such as pandemics and disasters.
While this paper focuses specifically on youth entrepreneurship, it does not claim that entrepreneurship is a panacea for the challenges facing young people or that it is a solution to get millions out of poverty. However, entrepreneurship has proven to be a viable alternative to employment for many.
This write-up identifies legal, institutional and policy frameworks that should be exploited to enhance youth entrepreneurship. In order to promote youth entrepreneurship in Africa, The Youth Cafe identifies six interventions: Engaging youth directly in entrepreneurship-related policy-making; Integrating relevant education with entrepreneurship to facilitate entrepreneurship skills development;
Supporting and enhancing an enabling entrepreneurial ecosystem; Employing and supporting smart and effective financing for start-ups, particularly for social enterprises addressing a specific gap, niche or problem; Leveraging and strengthening partnerships and collaboration with the private sector and other stakeholders; and Promoting gender-responsive programming.
How to promote youth entrepreneurship in Africa - The Youth Cafe’s perspective.
Engage youth directly in entrepreneurship-related policymaking.
Governments should catalyse youth entrepreneurship promotion by reducing barriers and creating a conducive entrepreneurial ecosystem. Such an entrepreneurial ecosystem may include; human capital, entrepreneurial culture and a supportive network that interacts collaboratively. These elements foster the development and growth of innovative enterprises.
Governments set the rules and regulations that determine an entrepreneur's steps to start, maintain and grow a business. These include taxation laws, registration requirements and procedures, and property rights.
Governments should promote youth entrepreneurship at a strategic level by establishing legal frameworks, policies, regulations, institutions, national plans and agendas, including those that shape the context of entrepreneurship education and training within education systems.
For example, the Ministry of Education and the Ministry of Labour should jointly sign an order to allow students to graduate by submitting their business plans instead of a traditional thesis.
On their part, young Africans have shown that they can be initiators and change-makers by setting up innovative businesses despite challenging business environments and establishing the strongest Africa-wide networks of hubs and co-working spaces.
These pioneers understand the aspirations and needs of their peers and of the coming young generation like no other. Further, in times of crisis, like Covid-19, young people innovatively lead responses in their communities. This provides solid ground for governments to support youth-led initiatives. On the other hand, policy-makers are oftentimes not always in tune with this reality in practice.
Therefore, it makes practical sense to work with the youth to co-create laws and policies that will determine the future legal and regulatory frameworks of innovative start-ups.
Such policy actions could include formulating a national youth entrepreneurship strategy; facilitating technology exchange and innovation; attracting public and private partnerships; optimizing the regulatory environment by providing for, among other things, preferential (quota-based) procurement for youth entrepreneurs, tax incentives as well as facilitating ease of doing business and access to markets for youth entrepreneurs and cushioning youth entrepreneurs against economic impacts caused pandemics like Covid-19.
Engaging youth in any of these areas can add value and ensure that appropriate and impactful policies are being created. Countries at the forefront of youth entrepreneurship ecosystem improvement are actively engaging the youth to find out what their specific needs are and to co-create solutions.
Additionally, governments should engage and collaborate with youth-focused groups, consisting of African tech hub leaders, to support them in developing appropriate rules, regulations and financial mechanisms to support youth-led tech start-ups.
Importantly, such policies conducive to youth entrepreneurship should receive the backing and political will of the African governments, further displayed by the ratification and implementation of relevant continental normative frameworks and commitments aimed at promoting youth entrepreneurship.
2. Integrate relevant education with entrepreneurship to facilitate entrepreneurship skills development.
Most young Africans believe they have the capacity to start a business and that there are good business opportunities. Moreover, research has shown that young Africans who are confident that they possess the skills to start a business are four to six times more likely to be involved in entrepreneurial activity.
However, while confirming the high score on Opportunity Perception, the 2018 Global Entrepreneurship Index shows that the Continent’s entrepreneurial ecosystems score to be lowest in the areas of start-up skills, risk acceptance and risk capital. According to the ILO (2015), the youth unemployment rate increases consistently with the level of education; youth who have completed tertiary education are two to three times more likely to be unemployed than youth with primary education or less.
While this is partly due to the lack of formal employment opportunities in the labour market, it also suggests that Africa’s education systems are not sufficiently preparing young people for the world of work. As acknowledged in the 2018 Africa Talks Jobs Forum, African governments have an important role to play here as the public education system remains the first and foremost avenue for reaching African youth.
Education across all levels, therefore, needs to be more related to job market needs and be designed so as to prepare youth better to start and run their own enterprises.
Primary and secondary schools teach foundational skills such as math, reading and writing but should also influence the development of entrepreneurial mindsets and skills within the population. Although, in past years, access to education has improved so that more young people can get a formal education, curricula and didactical methods are often outdated and focus on knowledge retention instead of real-world competencies.
However, in recent developments, a number of governments have adopted innovative and successful entrepreneurial skills development programs designed by NGOs into formal primary and secondary education systems. At the core of these programs are experiential and immersive teaching methods that have been proven to work well in transferring entrepreneurship-related soft skills.
The education sector can play a significant role in increasing the impact of youth entrepreneurship on a large scale, particularly through strategic partnerships, for example, partnering with other relevant stakeholders to offer age-appropriate experiential learning courses that teach young children and teenagers valuable skills for starting a business including savings, financial planning and budgeting, self-confidence and social skills.
Additionally, educational institutions can tap into the deep sector-specific knowledge of partners in the private sector by allowing them to teach entrepreneurship skills. Through their formed partnerships, they can create programs that provide hands-on experience in setting up, running, and liquidating a business which can improve hard and soft skills related to entrepreneurship, build confidence and improve gender norms.
3. Employ and support smart and effective financing for start-ups.
Young people need access to start-up capital and other types of finance to create and grow their businesses. However, access to formal financial institutions and financial services is particularly restricted for youth in Africa. One of the reasons that banks struggle to provide credit to young people at a reasonable cost is that youth lack traditional collateral and are thus considered high risk.
However, developing entrepreneurial ecosystems that include an adequate supply of affordable credit, even to those lacking traditional collateral, could go a long way towards facilitating high-growth entrepreneurship.
Governments can provide timely tailored financing options by partnering with banks and engaging responsively with youth. They should offer four main types of entrepreneur financing: small financing; incubation financing, equity financing and low-interest loans. Besides financial support, entrepreneurs should also receive training, coaching, mentoring, and opportunities to participate in exchange trips and competitions.
Furthermore, using banks to distribute funds rather than distributing them directly enhances transparency (i.e. the funds are not seen as political funds). The fund designates money for specific sectors and regions so that youth in more remote areas also benefit and economic activity is diversified and decentralized.
Additionally, carefully designed cash-based transfers, and grants, can be highly effective in supporting growth-oriented businesses in job creation. Positive outcomes can be attained by programs providing start-up grants, whether alone or in combination with training and advisory services.
4. Support and enhance an enabling entrepreneurial ecosystem.
Entrepreneurial success is significantly influenced by the supporting ecosystem in which youth create their businesses. There is, therefore, a need to strengthen the entrepreneurship ecosystem, such as to provide room and support for the emergence and growth of young entrepreneurs. This can be done, for instance, through the establishment and support of entrepreneurship hubs. Start-up hubs, incubators and accelerators are the nurseries of the entrepreneurial ecosystem.
Young people gather here to network, access ICT infrastructure, attend training, find business partners, receive business development advice, create prototypes, inspire and be inspired. The 2017 Africa Economic Outlook report emphasizes that skills and business incubation services are prominent determinants of success in supporting entrepreneurial activity.
Many hubs across the continent have been set up in response to gaps young people see in supporting young entrepreneurs. While there is a rapid growth of tech hubs, incubators, maker spaces, and accelerators accessible to youth in African urban centres, youth in smaller cities, towns, and rural areas are still largely detached from these spaces, which play an important part in accessing support programs and networking.
Despite a growing amount of entrepreneurship support programs, most young people are not aware of them and are therefore not accessing assistance to help them get started in business or increase their profitability.
Although young entrepreneurs report similar challenges across income groups, they need differentiated support. While skills development, business experience, market access, access to capital, business networks and the enabling environment are challenges for most entrepreneurs, support must be tailored to the specific type of young entrepreneurs being targeted. For instance, due to the unique challenges that young women face, they should be afforded support that matches their needs.
Additionally, for those entrepreneurs seeking to grow their business, different types of support are needed in the various stages of starting and growing a business, including pre-incubation, incubation, acceleration and scale. Additionally, start-up incubation and acceleration spaces should go beyond tech innovations to also integrate start-ups in other sectors such as agriculture.
Further, multilateral Development Banks (MDBs), bilateral partners, and philanthropic foundations are important stakeholders in promoting youth entrepreneurship through, among others, providing seed capital and finance facilities.
The support of these stakeholders to promote youth entrepreneurship should be deepened and scaled, a role that could be supported and coordinated by the African governments through strategic engagement and partnership with the private sectors and financing institutions in the implementation of flagship initiatives as well as the implementation of national entrepreneurship initiatives.
5. Promote gender-responsive programming
Gender-responsive programming and ecosystem support enhance the participation of and outcomes for young women. Women face different challenges than men, and these are often not considered in general efforts to improve the entrepreneurial ecosystem.
The majority of entrepreneurs in Africa are women, but their businesses are less productive and have fewer employees than their male counterparts. Women more often start a business out of necessity than opportunity compared to men and tend to enter sectors with less growth potential in the informal economy. Moreover, women have fewer assets and capital to invest and are less likely to adopt advanced business practices.
Women face different constraints than men, which causes them to make different decisions that often lead to less productive outcomes. These constraints vary from legal and other forms of discrimination and marginalisation to time constraints due to family obligations and household responsibilities disproportionately placed on them.
When these constraints are alleviated, women perform just as well as men, including in male-dominated sectors. However, policies to improve the entrepreneurial ecosystems that do not explicitly consider these constraints pose the risk of widening the existing gender gap.
For young women, in particular, successful programs tend to combine business skills training with life skills and/or mentorship. When designing and implementing programs for young African entrepreneurs, therefore, it is important that consideration must be given to questions such as whether young women will be able to participate in them or whether any gender-specific barriers may prevent women from participating and how these can be addressed to facilitate equal participation by young women.