Youth needs to get into entrepreneurship to survive

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Gerrie van Biljon, executive director at Business Partners, commented on the current state of youth entrepreneurship in light of the recently released GEM Africa's Young Entrepreneurs: Unlocking the potential for a brighter future report.

"The report states that while Sub-Saharan Africa (SSA) has an average youth unemployment rate of 11.9%, lower than developed economies and the European Union with 18.3%, it hides the real entrepreneurial activity in SSA."

"There is varied youth unemployment rates across SSA. For example, South Africa has a youth unemployment rate of 53%, which is much higher than its neighbouring counterparts with Namibia recording 35.6% and Botswana 34.3%. This is in comparison to youth unemployment rates of 0.7% in Rwanda, 13.6% in Malawi and 13.7% in Nigeria.

Necessity not growth businessess

"The majority of the youth economic activity in SSA is also generated by entrepreneurs in the tourism and hospitality sector, with a reported 97% of youth businesses in the retail sector being low-growth businesses and 54% being a one-man business, thereby not creating additional employment.

"These are often referred to as necessity-driven entrepreneurs, individuals that start a business because they have to, rather than they choose to. Many entrepreneurs in the retail sector will simply copy an existing model rather than innovating. We need to be driving a culture of high-growth entrepreneurs so that they can facilitate wealth and job creation across the region."

Given the already high unemployment rates in South Africa and select African countries, the formal sector is not growing at a pace that can support the expanding population - particularly the youth.

"The youth however are also not actively pursuing entrepreneurial ventures as an answer to this growing challenge. When looking at the distribution of youth in South Africa (20131) the report shows that only 13% are entrepreneurs, with 11% being intentional entrepreneurs and 12% potential entrepreneurs. This means the other 64% of the youth are not even considering entrepreneurship. Other African countries show better results - with Nigeria reporting 53% are entrepreneurs - but more needs to be done to create sustainable employment opportunities and subsequently sustained economic development."

Obstacles to entrepreneurial development

"There are a few key areas hindering youth entrepreneurial development that need to be addressed in order to improve the current entrepreneurial environment for young entrepreneurs. Cultural barriers to entrepreneurship need to be eradicated, starting from a young age within the home.

"Children are not encouraged to pursue entrepreneurship from a young age. To drive entrepreneurial thinking, families should discuss local and international current affairs. This will create a general understanding of the business and economic environment.

"Coupled with this, the state of the education system needs to be improved. We need to teach and equip youth with skills that are required to become a successful entrepreneur, and that includes creative skills, innovation, gutsy determination and perseverance and saving.

"Lastly, access to finance needs to addressed, as without finance a business cannot be established and can only grow organically, which often takes longer. While it is difficult enough to raise finance for an existing business, challenges are more pronounced for start-ups - often associated with youth businesses.

"In practice, around 65% of start-ups are financed via personal sources. Angel investors are also popular sources of start-up funding. This highlights the growing need for small, medium and micro enterprise (SMME) finance for smaller transactions for micro businesses. These transactions are ultra-high risk and as a result, very few financiers are prepared to risk capital on this type of businesses. With that said, there should still be sources available to them, and this is where government should play a greater role.

"As the young population continues to grow, we need to ensure we are equipping the youth with the best opportunities to start and grow a business," concludes van Biljon.