Brand South Africa CEO, Miller Matola, said entrepreneurship can reduce youth unemployment.
(Image: Shamin Chibba)
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When asked how youth unemployment could be overcome, Miller Matola looked at the crowd, took a deep breath, and said: “Entrepreneurship is going to be a major element in transgressing this problem.”
Matola, Brand South Africa’s chief executive, and six other business leaders spoke at the Africa Frontiers Forum, held at the Industrial Development Corporation head office in Johannesburg on Wednesday, 15 May. Having just returned from the World Economic Forum (WEF) Africa Summit in Cape Town, the panel looked at youth unemployment in Africa, its impact on the continent’s economy, and possible ways to reduce it.
Dr Martyn Davies, the chief executive of Frontier Advisory, opened the discussion by saying the global rise in youth unemployment was harming the economy. “The number of young people who are unemployed in Africa is as large as the population of the United States.”
South Africa had some of the highest unemployment rates in sub-Saharan Africa, he said, partly because of trade unions and rigid laws about hiring. Davies looked at China’s economic growth of 8%, which in turn created 15 million jobs a year, and said if South Africa could rise above its 2% growth to China’s level, then the country’s problems would be solved. “A 2% economy is not going to solve our problems. We are effectively sitting on a time bomb unless we create the opportunities aligned to economic growth.”
Matola added that though economic growth, education and skills were critical, entrepreneurship presented a better solution. Leslie Maasdorp, the president of Bank of America Merrill Lynch for Southern Africa, agreed, saying that though there were a few young businesspeople in Africa, there were not enough to decrease unemployment and strengthen the economy.
This was because the youth were unwilling to take risks: “If you look at people in the United States, they are more inclined to take risks and start businesses and fail. Failure is celebrated there.”
A culture of innovation had to be created for youth to choose entrepreneurship as a career, Maasdorp added, explaining that the idea of competing with large South African conglomerates discouraged young entrepreneurs. “The chance of a small company taking on the likes of MTN or Cell C is slim.”
Slim but not impossible: he said new technologies provided the entrepreneur with new possibilities, referring to M-Pesa, the Kenyan mobile banking service owned by Safaricom. It is now one of the fastest growing mobile banking companies in the world. “Banks from around the world are looking to M-Pesa to understand how this technology works and why there is such a huge uptake.”
Africa needs role models, heroes
Founder and chief executive of Raizcorp, Allon Raiz, said role models played a big part in creating young entrepreneurs. “Black economic empowerment is sucking smart and black entrepreneurs out of the economy. So that means we are not creating role models.”
Most economies with an entrepreneurial base saw people naturally progress into entrepreneurship, he said. “Their parents were entrepreneurs and so were their grandparents. But there is no such thing in this country.” The continent should also look towards the agricultural sector for job opportunities, Raiz added, as it had a higher propensity to employ people.
Jon Foster-Pedley, the dean and director of Henley Business School Africa, said that for youth unemployment to drop, Africa needed a new kind of hero who would be armed not with rifles but with education and skills. “The time for Afro-pessimism is over. The new African hero would be someone who creates something for their children and their grandchildren.”
Young entrepreneurs are out there
Taking a different stance, Jayendra Naidoo, the executive chairman of investment company J&J Group, opposed fellow panellists, saying he had seen an upsurge of twentysomethings starting their own businesses. The nature of work had changed and it now required higher technical content and a greater demand for language and social skills, he explained. “Just as the industrial revolution changed work, we are moving towards jobs that have a flexibility of time. We work seven days a week and at all times of the day and night.”
Naidoo also pointed out that job creation schemes developed by the public sector were not viable solutions to unemployment. It would be preferable, he said, if the government could create a support system that would change society’s behaviour from one of succour to that of resourcefulness. The social grant framework, though strong, did nothing to encourage behaviour change either. “Many countries are experimenting with a modern type of approach to welfare that gives people incentives to develop skills and become more eligible for employment.”
Africa reaching its demographic dividend
Maasdorp was optimistic that youth on the continent could rise because of Africa’s demographic dividend, which he said was an important ingredient for prosperity. Africa was experiencing this phenomenon for the first time, and in the next two decades it would be home to a large number of youth of working age. “We are already the youngest continent if you take the ages of 16 to 24; 70% are within that age gap.”
By 2050, Africa would have 1,1 billion people of working age and would be supplying the rest of the world with labour.
South Africa needs quality education
Another solution offered during the discussion was mending the failing education system, particularly in South Africa. Maasdorp said that though there was a lot of money invested in education, the outcomes were “still pedestrian”. Current education models needed to be redeveloped. “It does not, in any way, prepare people for the world of work.”
But Lebogang Mokwena, the director of youth development programmes in the Department of Higher Education and Training, claimed the government did provide students with a clear outline and less problematic transition into the working environment. She also questioned the need to teach entrepreneurship and whether it could enhance a person’s capabilities and innovation. “Perhaps it could be embedded – socially and culturally – in a subtle way.”
Raiz said the education system was not practical and the skills gap between what was being produced and what was needed was getting wider. ”No one is coming up with solutions in terms of how to create a youth who can apply what they have learned.”
Foster-Pedley believes part of the problem is that South Africans have been confusing education with intelligence for a very long time. “It does not mean that because someone is educated that they are intelligent and just because they are not educated it does not mean they are not intelligent.” South Africans’ underachieving ways were related to their lack of confidence, which was partly linked to the past. “If people deeply know they are intelligent, they will build the confidence that drives them forward.”
There was a schism between private and public schooling, Maasdorp pointed out, calling for better collaboration between the two. Though public education was considered the main deliverer of that service, he explained that private schooling was growing fast and fulfilling particular gaps within the education system.
Mokwena’s response was that the government intended on protecting the more vulnerable children from inferior private education. “Some of the more marginalised rural learners have access to inferior private schooling. We want to protect them.”
Getting expats back to Africa
Jinghao Lu, an analyst on the China-Africa desk at Frontier Advisory and audience member at the discussion, was curious about what Africa was doing to attract expats back to the continent. He said the majority of African expats living in the United States were highly educated, tech savvy and very entrepreneurial. “Those I met are very talented but there is no reason for them to come back to Africa.”
Raiz responded that there were efforts to bring back African expats. He referred to Angel Jones, who established Homecoming Revolution, an independent non-profit organisation that encourages and assists South Africans living abroad to return home. She has now taken the service to the rest of Africa.