Lucretia Khumalo is the divisional executive, client support and growth at the IDC. Photo: Supplied
Lucretia Khumalo is the divisional executive, client support and growth at the IDC. Photo: Supplied

Reflections on the huge challenge created by SA’s jobless youths

By Opinion Time of article published Jul 1, 2021

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By Lucretia Khumalo

YOUTH month has come and gone. It is thus compelling to reflect on the challenges facing South Africa’s youth – top of which is unemployment.

According to Statistics South Africa’s (StatsSA) Quarterly Labour Force for the first quarter of 2021, South Africa’s unemployment rate stood at 32.6 percent. This rate was 46.3 percent among young people aged 15 -34 years, implying that almost one in every two young people in the labour force did not have a job in the first quarter of 2021.

About a quarter, 24.4 percent, of the youth have jobs, and 45.3 percent participate in the labour market. Within the youth, those aged 15-24 are more vulnerable in the labour market with an unemployment rate of more than 63 percent, an absorption rate of about 7.6 percent and a labour force participation rate of 20.6 percent.

This scenario is dire and begs the question? How is it that the youthful segment of our population – a latent demographic dividend – has now morphed into a challenge that could result in people being left behind and the skills of dynamic and future focused young people being underutilised?

In fairness, weak economic growth averaging 1.5 percent that has characterised the local economy for the last 10 years has conspired to keep many a youth out of gainful employment. Yet from my vantage, I’m circumspect about apportioning entire blame on the country’s unemployment problem to tepid growth. While our economy has not performed well to achieve growth that absorbs the increasing youth population, the South African challenge comprises a blended mix of factors.

For its part, the Industrial Development Corporation (IDC) approved R3.9 billion in funding to youth-empowered enterprises over the past five years.

The Department of Trade, Industry and Competition’s (dtic) recent Black Industrialists report shows that the dtic in partnership with its funding agencies, the IDC and National Empowerment Fund, collectively approved R32.6bn in funding support for more than 900 black industrialists over the past five years – some of whom include youth-empowered enterprises. This figure excludes private sector funding and other support to youth-owned and empowered enterprises.

Our interface with youth whose business applications we are constantly processing gives us a glimpse into their challenges. In fairness, some of these businesses we have funded over the period have grown significantly. However, some have battled to maintain a consistent revenue momentum. We have proactively provided business support services to assist and prevent failure.

Against the number of private and public funding institutions readily available to assist entrepreneurs, it is tempting to interrogate the following: What is the state of entrepreneurship in our country, and how do our youth fair in entrepreneurship compared to their peers in middle-income and other developing countries?

Despite available public-private partnerships supporting Small Medium Enterprises (SMEs) and a range of corporate-run small business support initiatives, South Africa has low levels of entrepreneurial activity compared to other developing countries.

According to a Global Entrepreneurship report, South Africa has a 70 to 80 percent failure rate for start-ups in the first five years of business. And most local youth-owned businesses fall into this category.

This view is reinforced by Cova Advisory – a specialist business advisory service that argues that five out of seven local Small, Medium and Macro Enterprises (SMMEs) in South Africa tend to fail within the first year.

Funding constraints aside, the lack of mentorship support, business inexperience, failure to comprehend market dynamics and inability to tap into a thriving ecosystem of trending digital services rank as some of the biggest challenges facing local youth-owned businesses.

Hand-holding or shadowing established business owners that have traversed the entrepreneurship terrain is critical to aspiring entrepreneurs. Through this process, valuable lessons are taught, and the experience by the established guard is passed on to aspiring entrepreneurs. Our experience suggests that these factors are lacking on a large scale.

While great to test new ideas, it is also vital to test viability. Simply put, a product that easily sells in India or the US might not appeal to South Africa’s populace. The viability of a business is critical to maintaining revenue streams, and this factor is critical to the IDC approving a funding application.

Further to this is our secondary and tertiary education curriculum contributing positively to producing graduates that are ready to take on the entrepreneurship mantle? Producing graduates that are only ready for absorption into the workplace is different to educating a generation of entrepreneurs capable of positively contributing to resolving South Africa’s youth unemployment challenge.

Enhancing the curriculum of both secondary and tertiary education to one that provides entrepreneurial skills for the current business landscape as well as one that meets demands of the Fourth Industrial Revolution, among others, will be vital for graduates to become drivers of job creation.

As some green shoots begin to emerge and we recover from the impact of the pandemic, a synopsis of South Africa’s economy points to a transformed economy. We need to ensure that our youth benefit from opportunities emanating from government’s economic recovery and reconstruction plan. This is impossible to achieve without business experience and the requisite skills set.

Lucretia Khumalo is the divisional executive, client support and growth at the IDC

*The views expressed here are not necessarily those of IOL or of title sites

BUSINESS REPORT

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