Youth Entrepreneurship – How to make it work

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:

1.  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. 
2. 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.
3. 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. 
4. 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.
5. Flexible and adaptable operation style. Rigid administrative procedures are a factor in the failure of youth enterprise promotion programmes in many countries.
6. 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.
7. 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.  
8. 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.
9. 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.
10. 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;