Entrepreneurship
is being promoted in South as a possible source of job creation, empowerment
and economic dynamism, and this has seen a migration in policy and the voice of
opposition parties increasing attention on the subject. However, despite this
attention, there has been no systematic attempt to look at it from an angle of
a South African young person with his inherent challenges.
We tend to incorporate the youth into the general adult population when it comes to some of the policy decision that drive enterprise development and we ignore their efforts to forge a livelihood through enterprise activities. We have stopped very short of understanding the potential benefits of youth entrepreneurship as a means of improving youth livelihoods.
Can youth entrepreneurship be promoted as a viable career option? What obstacles stand in its way? And what policy measures and strategies can be initiated to support it?
The need to encourage Youth entrepreneurship cannot be understated and below are some of the reasons why it should be encouraged:
- Employment: Enterprise
has the potential to create employment opportunities for both the
self-employed youth and other young people
- Redress: it has a
less centralized platform to bringing the alienated and
marginalized youth into the economic mainstream
- Socio-economic
Solution: it
has the potential to impact on some of the problems and delinquency
that arise from joblessness including crime and drug abuse.
- Innovation: Youth resilience
is associated with innovation
- Local economic
development: it has the potential to revive and revitalize local community
- Accessing fast
paced economic opportunities: Young entrepreneurs may be particularly responsive to new
economic opportunities and trends
- Skills
development: Enterprise helps young women and men develop new skills and
experiences that can be applied to many other challenges in life.
This article was born from attending an
Entrepreneurship Week, where all efforts were around the development of youth
owned enterprises. Naturally the irreplaceable value
of experience and post graduate education has meant that naturally
youth owned business will have the following inherent challenges. (Excuse me
for generalizing, but SEDA or a similar South African institute should
commission a study to verify):
- Youth businesses
face problems of access to resources such as capital, especially if it is
to be loaned, given the South African strict loan regiment under the
National Credit Regulation (NCR). This is particularly more challenging
for young people from impoverished communities, who do not have
alternative sources;
- The result is
that young people will start their enterprises with lower levels of
initial capital and will operate very small businesses that are more
survival level (from hand to mouth as affectionately referred);
- The biggest challenge
with a low capital business includes lower market value or lower inventory
book. This has played into the hands of heavily invested
foreign subsidized small businesses, especially in the retail sector
(a train vegetable vendor vs. a 500 product tuck
shop) ;
- The result
then becomes that youth entrepreneurs are engaged in a narrower range of
activities. They tend to operate from homes or streets (lack of
access to space);
Given
that in South Africa we have the National Youth Development Agency, and I
hesitate to be critical of their efforts to promote youth entrepreneurship. I
would like to remain true to the objective of this blog and share Ten (10)
cardinal rule that can drastically improve this sector:
- Clear Objective. Any programme that promotes youth entrepreneurship should not
attempt to combine social and economic objectives. Many youth enterprise
promotion programmes fail because of a multiplicity of objectives. Someone
in a position of prominence like the NYDA should identify a
future sector of growth and shape the development of youth entrepreneurs
to fulfill the market demands of that growth sector.
Preparations for the world cup in 2010 were way advance before we realized that
we had a shortage of welders (artisans) and I believe that this
was an ideal opportunity to have groomed at the announcement of the bids’
success, a model for owner managed artisan youth enterprises. These
businesses would be instrumental in helping Transnet and PRASA today with
their Capital programmes, which are estimated in the multiple billions.
Unfortunate this bus has left the port and this competence will sourced
internationally.
- Commercial Orientation. A development agency
(NYDA) has the responsibility to instill and enthuse a sense of
professionalism and commercial will. It is not a welfare’ or social
services, this will mandate the agency to develop a professional
capability and technical competence that is critical to the success of
youth enterprise support programmes.
- Adequate funding. Available literature shows that youth
enterprise support programmes in many developing countries fail due to,
among other factors, inadequate funding. NYDA is a well-funded
organisation and has adequate funding to help its clients.
- Well-trained and properly supported staff. The agency requires staff with professional capability in their
operations. Given how competitive the labour market is in South Africa,
this should also be established with staff retention programmes in place.
Staff should be trained and properly supported in their work. Lack of
technically competent staff and/or staff that lack entrepreneurial
experience is a major factor that explains the failure of youth enterprise
support programmes in many countries.
- Flexible and adaptable operation style. Rigid administrative procedures are a factor in the failure of
youth enterprise promotion programmes in many countries.
- An ‘integrated’ package for youth. The Agencies support for young people should not only be limited
to the resources that the youth can gain from the Agency like credit and
voucher services. Such a minimalist approach has a danger of limited
development with similar beneficiaries going through the system over and
over with new ideas every-time. The birth of the Tenderpreneurs in
the past decade is an example. The agency should provide a wide range of
services to youth, including skills training and advice. This is based on
the recognition that young people pass through various stages of
transition and therefore tend to face problems specific to those
transitions.
- Customer-centered loans. The treatment of the youth as mere beneficiaries is the key
challenge in this area and hence the reason why all loans are treated to
youth owned businesses are treated the same. Firstly I believe all loans
should be issued condition to a viable business plan and accepting a
mentor. Secondly, all youth entrepreneurs should be treated as
clients as opposed to beneficiaries. Thirdly there should be a shift from
standardized programmes that are not sensitive to the needs of individual
youth and therefore have little impact on youth entrepreneurship
promotion. For
example, a young professional who has just graduated from University and
after realising that he had no prospect in the employment sector and they
started business. Statistics tells us that this is the most successful
entrepreneur currently in SMME sector in South Africa (SMME's ran by
Professionals). Currently as things stand this guy cannot be loaned money
by the NYDA unless he had surety from someone who is employed. This is the
case even when such a professional has a contract with a reliable third
party and they only require bridge financing. The strength of
the contract and the success of the sector of business they have venture
into do not count for much in their credit rating.
- Proper targeting and selection. Young people are not a homogeneous, and thus the Agency
needs to make an attempts to identify variations amongst young women and
men in their skills, experiences, status, needs, aspirations and capacity
to obtain resources – all of which influence their ability to establish
and run a small business successfully. This is the blueprint that we lack
in South Africa, on how we can help young people from school going age to
choose Entrepreneurship as a career. The difference from reading a Robert
Kiyosaki book and being nurtured in to the profession is the intelligence
we are able to build as a country on the subject. The motivation of
foreign Business heroes like the Donald Trumps and Richard Branson are
different from that of a South African rural youth.
- Mentoring. NYDA needs a strong and highly
effective mentoring programme that is designed to provide young people
with informal advice and guidance on how to properly manage their
businesses. This will help youth entrepreneurs to overcome the constraints
of limited business experience, contacts and skills. Through
mentoring and other business support services, young people will learn to deal
with the risks that they face in running their enterprises.
- A supportive policy environment. Favourable changes in the regulatory environment can have a
positive impact on the provision of business development support to the youth
entrepreneurs;
