There is an urgent need for Africa to create an environment that celebrates and promotes entrepreneurship as a viable career path given the huge amount of unemployed young people across the continent.
This is according to Gerrie van Biljon, South African risk finance firm Business Partners, who highlighted figures that put the number of Africans aged between 15 and 24 at nearly 20 million, suggesting the continent will have the largest young workforce globally by 2040.
As formal sector employment is already unable to support the size of the workforce in most African countries, young people need to be encouraged to see entrepreneurship as a viable career path, and entrepreneurs needed to be supported in making successes of their ventures.
Van Biljon said currently the majority of the youth economic activity in Sub-Saharan Africa is generated from entrepreneurs in the tourism and hospitality sector, with 97 per cent of youth businesses in the retail sector being low-growth businesses, and 54 per cent being one-man businesses that do not create any 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,” he said.
“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.”
There are already high unemployment rates in African countries, and the formal sector isn’t growing fast enough to support the expanding population – particularly the youth. Van Biljon said that in spite of this young people are not actively pursuing entrepreneurial ventures as an answer.
He said there are a few key areas hindering youth entrepreneurial development that must be addressed in order to improve the current entrepreneurial environment for young entrepreneurs, including cultural barriers.
“Children are not encouraged to pursue entrepreneurship from a young age. To drive entrepreneurial thinking, families should have discussions about local and international current affairs. This will create a general understanding of the business and economic environment,” he said.
Meanwhile, van Biljon said the state of education in Africa 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.”
Access to finance also needs to addressed, as without finance businesses cannot be established and can only grow organically.
“While it is difficult enough to raise finance for an existing business, challenges are more pronounced for startups – often associated with youth businesses,” van Biljon said.
In practice, around 65 per cent of startups are financed via personal sources, though angel investors are also popular sources of startup 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,” he said.
“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.”