Solving SA's youth unemployment crisis requires multiple strategies

Anton Ressel, Strategic Head for SME Support at Fetola shares insight on how South Africa can work towards fixing its youth unemployment issues. Anton Ressel says solving the youth unemployment is a complex and serious problem that requires multiple strategies.

I was surprised when a recent announcement by the Mpumalanga government of an ambitious plan to build a cutting-edge R8 billion ‘smart city’ near the Kruger National Park, was met with a largely negative response on social media and related platforms. The importance of embracing new technologies and focusing on sustainable and integrated development is a global imperative, not just a national one. So why would citizens have an issue with it?

The essence of the detractors’ feedback seemed to be, “These new developments don’t benefit us. Our roads have potholes, inner cities need upgrading, and too many people are living in poverty. Why spend billions building something new without addressing these fundamental issues first?”

To be fair, the two issues are not mutually exclusive and the responses just highlighted the dual challenges facing our economy. We need programmes of renewal and maintenance, alongside new and future-fit development.

However, the polarised responses the announcement of this bold and exciting new city received (this is one of several similar ‘smart cities’ in the pipeline), got me thinking about arguably the biggest challenge facing our nation. The crisis of youth unemployment. Does the solution to this national pandemic – with as many as 74% of young South Africans without meaningful work – lie in embracing new technologies and the transition to a knowledge economy?

Or does this approach, as critics of the ‘smart cities’ may claim, only stand to benefit a select few at the very top of the mountain? Leaving millions of young people behind to deal with the proverbial and literal potholes, decay and poverty that permeate their jobless and often hopeless existence.

Transition to a Knowledge Economy

Increasingly, a narrative is growing around the need for South Africa to transition away from a commodities-based and low-skilled economy to an exciting new ‘knowledge economy’.  Along the lines of India and many Eastern European countries, where coding and development hubs have become major job creators. Nigeria seems to be leading the way in this area in Africa, where demand for developers increasingly outweighs available skills.

This is potentially exciting for South Africa, and many major tech players are supporting the development of coding academies and bootcamps designed to teach our young people the critical skills necessary to forge careers in the IT space. However, as commendable as this focus is, I can’t shake the nagging feeling that perhaps we run the risk of following the same path of ‘smart cities’ – choosing to focus on the shiny tip of potential at the apex, but not delivering solutions where the need is greatest.

Our education system is not geared for the successful transition towards a knowledge economy. The reason such transitions have worked in certain other developing countries is because their educational systems – starting at an ECD level – are effective, well-resourced, and strongly focused on embedding the basic cognitive concepts required to grasp the complexities of an IT-related career path in later life. Sadly, ours are not, and without a radical re-think it is unlikely that this will change in even the next decade.

Where does this leave us?  

It is critical that we fix education and earnestly develop opportunities for young people who have the aptitude, interest, and drive to develop their tech skills and build themselves a career in the space. The investment in coding academies and related IT development initiatives is a welcome and important nod towards the society that we could one day become.

Anton Ressel

In the interim, however, we urgently need to find solutions for young people who lack the foundational skills required to succeed in the IT field, few other formal skills and even fewer job prospects. It is these millions languishing in the middle or stuck at the bottom of the hill who need our help the most.

‘Massification’ of Entrepreneurship

With almost two decades of experience working for Fetola – a social enterprise that empowers people to grow the economy through job creation. I remain firmly convinced that the biggest and most immediate opportunity we have to tackle youth unemployment lies in the ‘massification’ (to borrow a term from Minister for Small Business Stella Ndabeni-Abrahams) of grassroots and emerging entrepreneurship.

The evidence is all around us: small businesses are the engine of economic growth in most societies. Globally, SMEs account for 70% of all businesses and contribute over 50% to all job creation. When one adds the informal sector to the equation, it becomes very evident that this is indeed the area with the greatest potential to get our young people into the economy.

Simply put, if we want to create jobs, we need a thriving and sustainable small business sector. So where do we start?

Are entrepreneurs born or made?

If we are to ‘massify’ our small business landscape, we need to boldly tackle a few existing constraints that have seen this sector underperform for the past two decades or so. Firstly, for a young person to conceptualise, start and run a small business, we have learned that exposure to the world of work and/or entrepreneurship – whether in the form of internships, work experience or via a family business – makes a huge difference to their success rate.

Enterprises such as Fetola promote entrepreneurship development programmes geared towards young people, such as FNB’s Youth Startup Accelerator and others. Entrepreneurship programmes are a step in the right direction but need to be ‘massified’ alongside the development of formal internship and work experience opportunities to vastly increase both the number and success rate of new small businesses.

Age and readiness are also an important factor in entrepreneurial success. An increasing number of ’millennial’ South Africans (26 – 30 years of age) are leaving their corporate or public sector jobs to venture into entrepreneurship. These slightly older and more experienced individuals tend to fare a lot better as entrepreneurs than their younger, less experienced counterparts (aged 18 – 25).

This is due to their exposure to critical business building blocks such as systems and processes, brand positioning and so on, and also have more life experience. Many of these entrepreneurs set up businesses in their local communities and employ local youths, contributing towards economic development at a granular level.

Enterprises such as Fetola are geared to give entrepreneurs access to markets, to startup and growth finance, corporate and formal supply chains, and access to high-quality mentorship and business growth support. These emerging entrepreneurs are our golden geese.

Informal is okay

Moving towards the base of the pyramid, we find immense opportunity for job creation within a thriving but undervalued informal business sector. “While the informal sector is the ‘forgotten’ sector in many ways, it provides livelihoods, employment and income for about 2.5 million workers and business owners.

One in every six South Africans who work, work in the informal sector,’ editor Frederick Fourie states in his 2018 book, titled, The South African Informal Sector: Creating Jobs and Reducing Poverty. These numbers reaffirm the massive potential of small and often informal businesses to make significant inroads into our youth unemployment pandemic.

Such businesses are the providers of jobs with low barriers to entry – car washes, small-scale manufacture and agriculture, hairdressers, and beauty salons, shisanyamas and the like. Businesses like these are an important entry-point into the local economy for many young people. The challenge here is to resist the urge to ‘over-formalise’ this sector and in so doing strangle its very essence.

We need a massive reduction in business-related startup costs, red tape and excessive regulatory frameworks to create a thriving entrepreneurial ecosystem. The business development industry-led Startup Act movement is working with the Presidency to try and eliminate many unnecessary barriers to entry and is a great step in the right direction, especially as there is a move towards increased regulation and formalisation of small businesses amongst certain quarters.

Without sufficient employment opportunities, we need to mobilise every resource we have to empower young people to create their own better future including giving them a significant break in terms of compliance and regulation as they seek to grow their businesses.

Anton Ressel

Next Steps

Our approach to solving the youth unemployment crisis needs to be looked at across all the layers in our society. We can create immediate impact at the base and the middle, through radical acceleration of entrepreneurial success at an emerging and informal level. This is where I see organisations, such as Fetola, play a critical role to create opportunities and platforms for a fruitful transition.

At the same time, we must prioritise improvement of our education system to enhance entrepreneurship and cognitive skills, equip tomorrow’s jobseekers to take advantage of the Fourth Industrial Revolution and facilitate our transition to a sustainable knowledge economy.

Solving youth unemployment is a complex and serious problem and one that requires multiple strategies, but the answers are within our grasp. If we work together and focus on the areas that will deliver short, medium and long-term returns on investment, we can create the growth and jobs our nation needs.

Anton Ressel is Fetola’s Strategic Head for SME Support.

This article appeared first on IOL.

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