Beyond education: is entrepreneurship the answer to youth unemployment in South Africa?

The Daily Dispatch of the 25th of May, 2013 reports that "Youth unemployment is rising at an "alarming" rate and has soared above the provincial average rate in the Eastern Cape" (pg. 1) (See: Miti, 2013).
The Daily Dispatch of the 25th of May, 2013 reports that “Youth unemployment is rising at an “alarming” rate and has soared above the provincial average rate in the Eastern Cape” (pg. 1) (See: Miti, 2013).

The conversations thus far under the education theme have been great at highlighting both the potential and limitations of education both in Africa and the diaspora. Yet, what has been missing has been a conversation on graduate unemployment as one of the limitations of formal education in our current global economic context. In 2013, the unemployment rate among higher education graduates in South Africa was estimated at around 5,2% which some see as reflective education being “vital to growing employment.” While this does seem like a low rate, it is still telling that even higher education does not guarantee one a job in this climate. In this article I want to look at instances where youth might have some formal education, yet might not be able to find a job. Is entrepreneurship the answer?

Mihaly Simai states that “Employment is a key factor in the human dimension of development. In its broader understanding, it means access to livelihood; in its narrower understanding, it implies activities which result in a job and regular income for those wishing to work” (Endale, 1995: v). Alongside those who are in employment are also the unemployed – these are people who want to work but do not have access to a regular income and livelihood[1]. In 2012 it was estimated that out of over 49 million South Africans, just over 7.5-million South Africans were out of work and that young people were the most affected group for half of 18-25 year olds were unemployed[2] (Price, 2012). This has led to some authors referring to unemployment as “probably the single most pressing challenge facing South Africa today” (Levinsohn, 2007: 1).

According to the Congress of South African Trade Unions (COSATU) there is no other middle-income country in the world that has such a high unemployment rate as South Africa (Brook, 2013). Price (2012) notes that “South Africa has not replaced the one million jobs lost during the global recession[3], and the part of the population living in poverty – nearly 40% — has hardly budged since white minority rule ended in 1994.” COSATU has stated that it rejects the contention that mass unemployment in South Africa is caused by inadequate skills, and argues that “The main cause of high unemployment remains the structure of the economy, which favours large, capital intensive enterprises and makes South Africa one of the most unequal countries in the world” (South African Press Association, 2002). Burger and von Fintel (2009: 1) further find that “the higher unemployment rates faced by the young are predominantly due to the disadvantage of entering the labour market more recently, rather than being attributable to their age.”

South Africa is sitting on what the United Nations Development Programme (UNDP) terms “a veritable asset” or a potential “enigma” (Africa, 2012: 5). According to Africa (2012: 5) the way South Africa utilises its young unemployed people will determine whether these young people turn into productive members of society or a perplex problem for South African society. One of the suggested ways in which many have attempted to turn young people into an asset in the country has been to encourage unemployed young people to look beyond finding jobs, but to rather look to creating employment by forming their own enterprises, businesses and engaging in entrepreneurial activities.

Funders and Founders (2013) demonstrate that globally entrepreneurship is an important form of occupation for close to a half a billion people in the world, although it is still at a comparatively low level in comparison to the billions of people working and employed by others. The interesting thing here is that globally there are more unemployed people than there are entrepreneurs. Please see: http://notes.fundersandfounders.com
Funders and Founders (2013) demonstrate that globally entrepreneurship is an important form of occupation for close to a half a billion people in the world, although it is still at a comparatively low level in comparison to the billions of people working and employed by others. The interesting thing here is that globally there are more unemployed people than there are entrepreneurs. Please see: http://notes.fundersandfounders.com

Entrepreneurship is critical to South Africa’s economic and social development. It is through entrepreneurship that the citizens are empowered to move forward and participate in the local and global economy. Some authors note that it is through entrepreneurial innovation that entrepreneurs are able to “create new, competitive markets and businesses which lead to job creation and have a multiplying effect on the economy” (Fal, Sefolo, Williams, Herrington, Goldberg and Klassen, 2011: 2). Research shows that although South Africa’s entrepreneurial activity is actually improving (albeit at a small pace); for the most part it still lags behind.[1]

According to the SBP (2009: 4) while there have been statutory bodies like the National Youth Development Agency (NYDA) established by an Act[2] of Parliament in 2008 to promote entrepreneurship in South Africa, there are still many challenges young entrepreneurs face[3]. Self-employment and entrepreneurship are accompanied by their own problems such as the unavailability or the lack of appropriate education, no access or limited access to capital and also importantly the lack of social networks, which have the consequence of preventing “entrepreneurship from becoming a solution to youth unemployment”[4] (SBP, 2009: 4).

It is estimated that 72% out of the unemployed young people between the ages of 15 and 35, that only 62% of these young people possess a secondary school qualification while only 33% have been able to complete secondary education although they do not have tertiary education.[5] This means that while education still matters in the South African labour context, to help unemployed young people we need to think beyond education.

This essay contends that in order to help young people succeed in entrepreneurship (beyond the mere provision of finance) a multilateral approach is needed that includes the government, (private) business, civil society and individual responsibility. This is the view taken by The Prince’s Youth Business International report (2009: 2) which states that “Making entrepreneurship work is not the responsibility of one sector alone; it requires dedicated actions from all sectors of the community”. There are thus a number of steps that all these sectors can take to support and ensure that young people succeed as entrepreneurs and that consequently they create jobs.

According to The Prince’s Youth Business International Report (2009: 5) companies should encourage their employees to provide advice and support to young people that are just starting out in business and provide mentorship to new entrepreneurs. Companies should be encouraged to support the development of proper educational initiatives that will teach young people the benefits and opportunities self-employment brings. This will ensure that young people that are making the transition from school to work have the right skills to thrive as entrepreneurs. Companies should thus form partnerships with youth enterprises to help them strengthen operational capacity and efficiency (Prince: 6).

On the side of the government, the government should ensure that the national and local governments are able to work together to make the registration of new business an efficient process. In many cases it’s been found that “there is little support for emerging entrepreneurs in the micro and informal business sectors” (Prince: 7). Secondly government and its education authorities should include the possibility of self-employment within the overall structural career advice sector.  This is because often young people are taught about the world of work and the possibility of young people taking ownership of their own enterprises is rarely explored.

Governments should further make use of structures that already exist such as the Chambers of Commerce and other such business networks to ensure that young people, especially at the start-up phase have the necessary support networks to thrive. Schools and Universities should be encouraged to promote entrepreneurship though the running of business orientated competitions that will encourage entrepreneurship with the students. Initiatives such as the Students in Free Enterprise (SIFE), which runs competitions at all levels of government and globally to promote and motivate students to “develop socially responsible enterprises in their communities that meet local need” could be encouraged. It provides hands-on insights into setting up and running a company” and many students from SIFE have gone on to develop their own successful social enterprises (Prince: 8).

The Prince Report (2009: 9) notes that “Youth enterprise organisations should engage in community outreach and mobilisation to foster a culture and spirit of entrepreneurship”. This is because awareness of entrepreneurship opportunities is often very low not only in South Africa but also across many countries around the world. This means that “Non-governmental organisations working in apparently different areas should identify and develop synergies in order to deliver more effective levels of support to young entrepreneurs”.

Community organisations and Non-governmental organisations should further provide volunteer opportunities to young people to work in the community so they get the experience that can equip them with skills that are necessary in order to continue towards “employment and entrepreneurship, as well as a sense of commitment to their community”. Moreover because of the challenges faced by the unemployed youth in rural and isolated areas, “NGOs should tailor vocational and life skills training according to local community needs” in rural areas in order to reduce mass rural to urban migration by providing economic opportunities in rural areas (Prince: 9).

In conclusion, while education is important, I have shown here that we should start thinking beyond formal education in South Africa before we can fully solve the unemployment crisis we face. I have argued that we should start thinking of creative ways involving multilateral stakeholders that encompasses the individual, government, civil society and (private) business and companies. This entails a collaborative effort between these sectors to ensure that young entrepreneurs have the support networks to increase the efficiency and capacity of their enterprises. This means helping young entrepreneurs needs to move beyond providing funding to other issues such as the enhancement of the entrepreneurship culture in our education system, providing mentorship for new entrepreneurs, building the social capital base of new entrepreneurs and providing business building schemes and so on.

 

References:

Africa, Elroy. 2012. The role of Local Governments in Combating Youth Unemployment in Africa. Discussion Paper, November. United Nations Development Programme: Pretoria.

Brook, Norman. [2013]. “Sport and Employment: future hopes for South African youth”. International Centre for Sport Security Journal, Vol 1, No. 1. Stable URL: http://icss-journal.newsdeskmedia.com/sport-employment-hopes-sa-youth Accessed: 14 May 2013.

Burger, Rulof and von Fintel, Dieter. 2009. Determining the Causes of the Rising South African Unemployment Rate: An Age, Period and Generational Analysis. Working Paper Number 158. University of Oxford/University of Stellenbosch.

Clemensson, Martin and Christensen, Jens Dyring. 2010. How to build an enabling environment for youth entrepreneurship and sustainable enterprises. Paper for the knowledge sharing event on Integrated Youth Employment Strategies, Moscow 17-19 February, 2010. International Labour Organization: Geneva.

Endale, Derseh. 1995. Changing Patterns of Employment and Unemployment in Africa: A Comparative Perspective of Four Sub-Saharan Countries. World Development Studies 7. United Nations University World Institute for Development Economics Research (UNU/WIDER): Finland.

Fatoki, Olawale and Chindoga, Lynetty. 2011. “An Investigation into the Obstacles to Youth Entrepreneurship in South Africa”, International Business Research, Vol. 4, No. 2 (April). Canadian Centre of Science and Education, pp. 161-169.

Fal, M; Sefolo, T, Williams, A; Herrington, M; Goldberg, J; and Klaasen, M. 2011. The Entrepreneurial Dialogues: State of Entrepreneurship in South Africa. Gordon Institute of Business Science/First National Bank: South Africa.

Funders and Founders. 2013. What Do 7 Billion People Do?  Direct URL: http://notes.fundersandfounders.com  Accessed: 23 May 2013.

Levinsohn, James. 2007. Two Policies to Alleviate Unemployment in South Africa. Ford School of Public Policy: University of Michigan and NIBER.

Miti, Siya. 2013. “Youth jobs crisis”, in Daily Dispatch, 25 May 2013. Stable URL: http://www.pressdisplay.com/pressdisplay/iphone/homepage.aspx#_articleaba24b0d-f038-4ae3-ae8d-3174f3ca234d Accessed: 28 May 2013.

Muthethwa, M. Samson. 2012. Job Opportunities and Unemployment in the South African Labour Market (2011-2012). Department of Labour: Pretoria.

Ncube, M; Lufumpa, C.L; Murinde, V; Vencatachellum, D; Ngaruko, F; and Nwachuku, T. 2011 “Enhancing Capacity for Youth Employment in Africa: Some Emerging Lessons”. AfDB Chief Economist Complex, Vol. 2, Issue. 2, December. Africa Capacity Development brief.  African Development Bank: Tunisia.

Price, Claire. 2012. “Youth unemployment: South Africa’s ticking bomb”. Mail & Guardian, 21 February 2012. Stable URL: http://m.mg.co.za/index.php?view=article&urlid=2012-02-21-youth-unemployment-south-africas-ticking-bomb/ Accessed: 14 May 2013.

SBP. 2009. “Boosting Youth Employment Through Entrepreneurship: A response to the National Youth Development Agency”. SBP Occasional Paper, June 2009. Houghton: South Africa.

Seekings, Jeremy. 2003. Do South Africa’s Unemployed Constitute an Underclass? Centre for Social Science Research (CSSR) Working Paper No. 32. CSSR: University of Cape Town.

South African Press Association (SAPA). 2002. “Cosatu ‘horrified’ by SA’s unemployment rate’. Financial News 24 Archives, 2002-09-26 Stable URL: http://www.fin24.com/Economy/Cosatu-horrified-bySAs-unemployment-rate-20020926 Accessed: 14 May 2013.

ybi: The Prince’s Youth Business International. “Youth Entrepreneurship: recommendations for action”, “how businesses, governments and civil society organisations can help people get started in business” – The first report in YBI’s Making Entrepreneurship Work Series – The Princes Charities.



[1] This is further supported the SPB (2009: 4) which notes that South Africa “is significantly behind other low to middle income countries, where, on average, 13 out of 100 adults are building new businesses. The [Global Entrepreneurship Monitor] GEM study also reports that only 2.3 percent of South Africans own businesses that have been established for over 3.5 years, indicating a high failure rate among start up businesses.”

[2] The National Development Agency Act of 2008

[3] Clemensson and Christensen (2010: 4) note that some of the typical challenges youth entrepreneurs face include the “lack of an enterprise culture in many countries; unfavourable legal, policy and regulatory frameworks for youth entrepreneurship; the lack of entrepreneurship education across formal and informal educational systems; the lack of access to affordable financing in the form of start-up, investment or working capital, and; little knowledge about and access to relevant business development services and support schemes for youth already in business or for those or interested in pursuing an entrepreneurial career.”

[4] See also Fotoki and Chindoga (2011: 161) who whose research results find that “youths [in South Africa] perceive lack of capital, lack of skill, lack of support, lack of market opportunities and risk as the main obstacles to entrepreneurial intention.”

[5] Vavi, Z. “What we must do to create jobs”, “How to fix South Africa”, Johannesburg, KMM Review Publishing Company, 2012,p.8

 


[1] Seekings (2003: 1) notes that “In South Africa, evidence from the mid-1990s suggests that, at the end of the apartheid era, one section of the unemployed suffered systematic disadvantage in terms of access to employment. Given that people get jobs in South Africa primarily through friends and family, people without such social capital are relegated to an especially disadvantaged position in the labour market and society in general.”

[2] See also: Ncube, M; Lufumpa, C.L; Murinde, V; Vencatachellum, D; Ngaruko, F; and Nwachuku, T. 2011 “Enhancing Capacity for Youth Employment in Africa: Some Emerging Lessons”. AfDB Chief Economist Complex, Vol. 2, Issue. 2, December. Africa Capacity Development brief.  African Development Bank: Tunisia

[3] This is further confirmed by the South African national Department of Labour. Please see: Muthethwa, M. Samson. 2012. Job Opportunities and Unemployment in the South African Labour Market (2011-2012). Department of Labour: Pretoria

 

Gcobani Qambela

Gcobani Qambela is a Graduate Student in South Africa with an interest in African masculinities, HIV/AIDS research and public health in general.

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