In recent years, South Africa’s disheartened youths seem to be growing weary of an unnerving predilection by the public and private sectors to theoretically position young people as the drivers of economic transformation. In reality, the country still hasn’t managed to create a progressive, business ecosystem that enables youth entrepreneurship.
In positioning entrepreneurs as change-makers, it is critical to be cautious of invalidating the very real experiences of South African youth, especially those who come from formerly disenfranchised groups.
Inconducive business climate
Studies by the government, private enterprises and academic scholars all seem to agree that young people have the potential to help in alleviating some of the country’s socio-economic challenges. However, the forementioned analysts and policymakers often tend to disregard the practical challenges of entrepreneurs.
While entrepreneurship is often encouraged as a solution to youth unemployment, the underlying complexities of lack of education, skills, funding, infrastructure and other mechanisms of support should be addressed to enable it.
Entrepreneurship programmes are not uncommon in South Africa. They are largely inspired by the Enterprise Development (ED) incentives central to the Broad-based Black Economic Empowerment (B-BBEE) policy, which incentivises corporates and the private sector to focus on entrepreneurship and address youth most affected by rising unemployment. Data shows that in the first quarter of 2021, of the 10.2 million South African in the 15-24 age bracket, about 3.3 million were not in education, employment, or any kind of skills training, indicating that one in three young people do not engage with the labour market in any form (Statistics South Africa, 2021).
The Covid-19 pandemic has exacerbated both youth unemployment and the stunted growth in young entrepreneurship since its onset. Data from Statistics South Africa (StatsSA) shows that in the 10-year period before Covid-19, that is 2010 to 2019, there was notable growth in the number of young people owning businesses, but the pandemic led to a significant drop in these numbers. When compared to 2019, the average for 2020’s second, third and fourth quarters dropped by 10%.
Most young entrepreneurs could not create jobs as expected and, amongst those who did, many created job opportunities for between two and four employees. Those in the informal sector were less likely to employ 10 or more people than those in the formal sector – and only a small percentage hired more than 50 employees.
The need for effective business development support
South Africa has a low start-up survival rate in comparison with global standards. Research indicates that over 70% of SMMEs in South Africa collapse and fail within the first 5–7 years of inception.
In a virtual panel discussion held on 29 June 2022, Liz Letsoalo, TEDx speaker and founder of Masodi Organics, spoke of some of the challenges encountered in entrepreneurship. These challenges make post-seed funding necessary in order to enhance business performance. “Despite my product being available in 7 countries in the world and 500 stores nationwide, unrealistic metrics have made it nearly impossible for me to access funding for my business,” she said.
Her remarks echoed a common call from many emerging, Black businesses for government and big enterprises to create effective investment support infrastructure with reduced red tape. This can assist in building, growing and scaling promising start-ups that will in turn play a role in to putting the economy back on a growth path and make South Africa an attractive investment destination.
Small businesses can be the drivers of economic growth that our country currently needs. Lack of support in this space is a threat to any long-term growth aspirations we may have.
To make significant impact, it is necessary for enterprise development programmes to be attentive to the systemic, historical and broad conditions of unemployment, and the role they play in stifling youth entrepreneurship. They may even be required to re-remodel their approach when it comes to addressing the training interventions, mentoring and coaching of young entrepreneurs.
Enterprise incubation like the Black Umbrellas’ Accelerator Programme are innovative in how they are filling the skills and business support gap. In a research study (60 Decibels, 2021) on the experiences of 98 entrepreneurs in the Black Umbrellas’ Accelerator Programme, 78% said that it was their first time accessing a service like the BU programme, and 74% said that their businesses had grown through the programme.
The programme offers entrepreneurs executive business coaching with a customised development journey from the Black Umbrellas’ team of qualified experts. It covers everything from marketing to financial management, along with a facilitated procurement and finance approach.
Entrepreneurs aren’t just educated on what to do, they have a support system they can reach out to for more information or guidance as they apply for finance or submit tenders to become suppliers. In addition to this, there are numerous networking opportunities that can lead to beneficial partnerships for growth and long-term success.
Enterprise development programmes need to demonstrate that they are truly learning from the extensive research, neatly packaged reports and the insightful conversations they are having with the youth. The programmes must be in tune with the everyday challenges of young entrepreneurs — respond to what entrepreneurs need, as opposed to ticking theoretical boxes. This will be a significant step in restoring confidence in the initiatives geared towards youth empowerment.