TAMU DUTUMA: UNLOCKING ECONOMIC OPPORTUNITIES FOR OUR YOUTH

Tamu Dutuma | 24 September 2024

Three decades into democracy SA continues to face runaway youth unemployment. About 27.3-million young people were unemployed as of the beginning of 2024, making the unemployment rate of youths aged 15-34 frighteningly high at 45.5% in the first quarter of 2024.

This is a significant increase from the 32.9% recorded in the same period last year. This problem is prevalent throughout Africa, where the average incidence of youth unemployment is close to 12%. With the youth population expected to grow from 1.3-billion to 2.5-billion by 2050, the need for effective solutions is more urgent than ever for Africa to fully take advantage of the future benefits of being the world’s youngest and majority working-age population. 

The Global Employment Trends for Youth 2024 report projects that 72.6-million young people will enter the labour market between 2023 and 2050. The report further highlights that nearly three in four working young adults in Sub-Saharan Africa are in insecure forms of work, with over 50% of these young workers employed in the agricultural sector, often earning less than the median wage and without job security. 

As millions of young Africans enter the labour force a pivotal question arises: how can we sustainably generate meaningful employment for this emerging generation?

While traditional job creation remains important, entrepreneurship offers a path to economic empowerment, especially in SA’s economy. We are far from achieving the average GDP growth rate of more than 5% necessary to sustainably create the job pipeline needed to meaningfully reduce unemployment. The spotlight has been placed on small and medium enterprises (SMEs) to help in addressing youth unemployment in SA. Entrepreneurs stand a better chance of practically reducing the overall unemployment rates. 

According to McKinsey, SMEs constitute over 98% of SA businesses and employ 50%-60% of the workforce. Despite their crucial role in the economy they face significant hurdles, particularly in securing adequate and timely financing. A lack of formality, poor financial record-keeping and inadequate business plans often deter financial institutions from providing the necessary funding. This obstacle is especially difficult for fledgling and expanding companies. 

What becomes clear in SA, where just 9.8% of employed youth are graduates, and 49.4% of young women are unemployed (significantly higher than the 31.9% rate for young men), is that ours is a multifaceted challenge and one that requires a strong and proactive state-business rendezvous of minds, to drive common interest in societal development.

Inaction would be the greatest dereliction of duty in this regard and a missed opportunity to reshape the country’s future. We are a nation standing on the cusp of transformation — the time has come for businesses to see beyond philanthropy and engage in strategic partnerships that promise not just social good but substantial economic returns. 

To find ways to support youth-owned businesses we need not only accelerate current efforts, but to look outside the box for new funding sources. Addressing this challenge requires a concerted effort from both the public and private sectors. Financial institutions, especially banks, are pivotal in providing traditional funding. They can also channel their resources to promote entrepreneurship by way of programmes such as the Allan Gray Orbis Foundation, which focuses on holistic funding and mentorship for entrepreneurs. Complementing these private sector efforts the government can look after regulations and infrastructure to foster a financially inclusive society. Government-backed loan programmes can also be instrumental in supporting emerging and growing enterprises. 

To encourage youth-owned businesses, we should look at other funding opportunities rather than depending only on traditional ones. One such avenue is community-based savings groups, known as stokvels. With millions of participants and billions of rand managed annually, stokvels serve as vehicles for financial inclusion and economic development. In recent years we have witnessed the emergence of some successful businesses that are founded through stokvels, demonstrating their potential to drive entrepreneurship and economic growth.

Crowdfunding platforms offer another exciting avenue and are changing the game, as evident in the case of Lula, an SA mobility-as-a-service company, which successfully raised capital through a crowdfunding platform. These alternative funding models are becoming essential tools for navigating SA’s evolving economic landscape.

While microfinance options provide critical support for SMEs, true financial inclusion requires more than just access to credit or capital. It involves a transformative shift in mindset that empowers young entrepreneurs to thrive. To ensure their long-term success we must offer robust mentorship, incubation programmes and comprehensive business development support.

Equally important is strategic coaching, which helps entrepreneurs develop resilient business strategies and adapt to the ever-changing market landscape. Platforms where entrepreneurs can showcase their propositions for exposure to a network of catalytic capital and value-add support play a critical role. Various models such as Mastercard-backed 54 Collective’s are making positive strides being the nexus between capital and potential. 

We must also support young entrepreneurs by addressing essential business needs, such as reliable internet connectivity and access to office space. Networking is crucial, and both the public and private sectors should facilitate more impactful events to connect entrepreneurs with potential investors, customers and partners. We also need to provide our youth with training in specific skills relevant to entrepreneurship, such as financial management, digital marketing, customer service and negotiation. 

Cultivating an entrepreneurial attitude from an early age is crucial for both solving for the future and developing an entrepreneurial mindset. This requires integrating financial literacy into the school curriculum and offering specialised courses at various education levels.

Investing in our youth and adopting an holistic approach will ensure we help entrepreneurs fill in the gaps and set them on a path to success. In a country where youth with experience transition to employment four times more effectively than those without, the adage “teach a man to fish and you feed him for a lifetime” underscores the importance of empowering young people with the skills and resources they need to become self-sufficient and create their own opportunities.

The choices we make today will determine whether we harness the potential of our youth or risk leaving millions behind, and ultimately miss out on young people’s potential, which is the key to Africa’s sustainable development. 

‘Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER’.

https://www.businesslive.co.za/bd/opinion/2024-09-24-tamu-dutuma-unlocking-economic-opportunities-for-our-youth/