Entrepreneurship as a Solution to Unemployment and Economic Growth

The road to 2030 - a year set aside by development partners as the deadline for eradicating extreme poverty - looks very much uncertain for many African countries. The confluence of rapid demographic growth, digital transformation, and weak human resource base in recent years presents fresh and critical challenges to Africa’s development dynamics and global competitiveness.

According to the World Economic Forum, Sub-Saharan Africa is home to 13% of the world’s working-age population. By 2030, this number will increase to more than 17%, making many African countries resource-rich, labor-abundant economies. Yet, only about 3 million jobs are created on the continent annually. Many African governments have struggled to translate economic growth into improved sustainable economic opportunity for their citizens. The International Labour Organization records that young people are the most affected segment of people without jobs.

Nevertheless, youth entrepreneurship has the potential of providing the much-needed solution to Africa’s unemployment challenges, and spur economic growth on the continent. Africa’s youth could be in the driving seat of global development in the next decades thereby catalyzing economic growth through entrepreneurship (UNDP).

Historically, entrepreneurship has been a tool for helping people take ownership of their aspirations. Initiatives like Startup India and Make in India helped to spur economic growth and attract Foreign Direct Investment into the Indian economy. According to a study by IDRC Canada, youth entrepreneurship, in particular, is an option to create employment for the youth.

Why?

Youth entrepreneurs are more likely to hire fellow youths, are particularly responsive to new economic opportunities and trends and are active in high growth sectors, amongst others.

In the words of Tony Elumelu, founder of The Tony Elumelu Foundation, entrepreneurship is the cornerstone to African development and the key to local value creation in Africa. If properly harnessed, Africa’s burgeoning youth population could translate into a dividend for the continent through the creation of enterprises that will not only contribute towards economic growth but also create jobs for their fellow youth (OECD).

However, to properly harness and unlock entrepreneurial potentials of Africa’s youth, the following pieces need to be put in place:

Funding for startups

Although there has been a remarkable improvement in venture capital funding in Africa, undercapitalization is still one of the major reasons why many startups fail. The road to startup funding in Africa is a long one, and 9 out of 10 ventures never make it. With an incredibly skewed ecosystem and lack of local funding pipeline in many African countries, the hope for venture capital funding for startups often lies outside the continent. There is, therefore, a need for more financial instruments to provide the pre-seed and seed capital to early-stage businesses.

Access to market

Without the opportunity to access markets, obtain market-based prices and meet demands, business owners cannot capture economic opportunities on the continent. In spite of the tremendous economic prospects of regional integration, intra-Africa trade has remained horrendously low. It is estimated that intra-African trade costs are around 50% higher than in East Asia, and are the highest of intra-regional costs in any developing region. Not only is there a need for trade and market information to entrepreneurs, but there is also a need for inclusivity.

We must create systems, processes, and platforms to connect buyers and sellers from across the continent, as well as minimize post-harvest losses for smallholder farmers. Hopefully, initiatives like the inaugural Intra-African Trade Fair will provide the pathways to advancing trade and economic conditions of people across the region. The FAO estimates that on-farm and post-harvest activities account for US$4 billion tons in losses per year. To curb this, the African Development Bank (AfDB) committed to invest US$24 billion in agricultural transformative projects in Africa over the next decade. But that’s not enough, the use of data at the farm and value chain levels could potentially transform African agricultural systems and lead to greater access to markets.

Mentorship and skills development

Despite the media celebration of African business icons like Tony Elumelu, Strive Masiyiwa, Rebecca Enonchong and so on, entrepreneurship on the continent, in practice, is a long, arduous journey that requires stamina, education, and community support. According to a Venture Capital for Africa survey, of all the different reasons that might cause an African-based business to fail, respondents selected poor execution as chief. This, essentially, means poor entrepreneurship skills.

As a Tony Elumelu entrepreneur, I can attest to the transformative power of top-tier mentorship and skills development as prerequisites for entrepreneurial success. Access to entrepreneurship support systems, especially for women and youth in rural areas, could spur more opportunities for innovation on the continent.

A policy with a purpose

Young people often face numerous challenges when trying to establish their businesses. Among these bottlenecks are high banking fees, inadequate youth-friendly products and lack of financial literacy. Governments need to create policies and programs that facilitate an enabling entrepreneurial ecosystem and access to investment stacks to turn ideas into innovations.

There is also a need for private sector support in enhancing the capacity of youth development organizations at the local level. And, the financial sector must create special products to serve youth-led startups and provide young people with access to relevant financial services. Rwanda’s Private Sector Driven Agricultural Growth (PSDAG), Ghana’s National Entrepreneurship and Innovation Plan (NEIP), Nigeria’s N-Power and The Tony Elumelu Foundation serve as case studies for some of the answers we need in creating systems and platforms that turn passion to profit.

Conclusion

The economic case for unlocking the potentials of young people through entrepreneurship is simple: it is one sure way of actualizing the sustainable development goal of eradicating poverty on the continent by 2030. In other words, the biggest business opportunities on the continent in the coming decade will be created by young innovators. The impact of development institutions like the Tony Elumelu Foundation is proof positive that if governments, institutions, and private sector organizations collaborate in “democratizing luck” and setting young people up for entrepreneurial success, the social and economic dividends are tremendous! The future of Africa lies in youth entrepreneurship. Therefore, investment in youth is not just the right thing to do, it is the smart thing to do - and the time is now!