Bold initiatives needed to tackle youth unemployment

By Catherine Wijnberg

One of the biggest persistent challenges facing South Africa is youth unemployment. In the first quarter of 2024, youth unemployment rose by 1,3% to 45,5%, from 44,3% in the fourth quarter of 2023, according to Stats SA. It’s an alarmingly high figure with significant economic and social consequences including poverty, a reduction in human capital, and social unrest. 

While youth unemployment is not confined to South Africa, the number of unemployed youth in the country is significantly higher than in many other emerging economies. In Brazil, for instance, youth unemployment was 16,8% for those aged 18 to 24 in the first quarter of 2024.

“South Africa needs to address the fundamentals underlying youth unemployment. These are the lack of economic growth which limits all job creation, and the lack of preparedness youth have for employment and entrepreneurship,” says Catherine Wijnberg, Founder and Group CEO at Fetola, a small business development agency that works with partners to help start and grow successful small businesses. Fetola is best known for its national business accelerators that have graduated over 2,000 thriving SMEs.

Entrepreneurship is widely slated as the solution to youth unemployment in South Africa. International data shows that the ideal age to start a business is 28 years old, according to a global survey of millennials and Gen Zers. At this age, aspiring entrepreneurs have work experience, networks, and exposure to the world of business.  Similarly in South Africa, 49% of applicants applying to Fetola’s business acceleration programmes in 2023 were between the ages of 26 and 35, while 9% were between the ages of 18-25.

Entrepreneurship success rates also increase with post-matric education, which encourages advanced thinking, organisational skills and inner resilience, or grit. Young people with work experience and education are more likely to have the insight needed to identify a niche market for their business and the confidence to launch it.

Whilst economic stimulus is beyond the reach of this article, understanding how to optimise these foundations for successfully launching thriving SMMEs is critical if we are to successfully work together and enable their full potential. As work experience and higher education are both highly beneficial for successful entrepreneurship, how best can we enable this?

“Successfully addressing youth unemployment requires unlocking economic growth, coupled with effective small business development solutions such as business accelerators, to empower young people to create their own opportunities,” says Wijnberg.

“Ultimately it is the partnerships between the private sector and small business accelerators that are needed to build businesses that thrive, create long-term beneficial societal impact and more inclusive economic growth.”

One such programme is the FNB Youth Start-up Accelerator, a 12-month accelerator designed by Fetola to equip the youth of South Africa with the tools they need to become thriving entrepreneurs. Aimed at unemployed youth and aspiring entrepreneurs between the ages of 18 and 35, the programme addresses some of the biggest barriers facing young entrepreneurs, including a lack of business skills and access to mentors, by providing training, mentorship, and support to committed young first-time entrepreneurs. The online programme is supplemented by mentorship, monitoring and evaluation. FNB distributed grant funding of R977 500.00 to the first intake of participants of the Youth-Start Up Accelerator Programme in 2022.

“The programme is geared towards individuals who demonstrate a keen interest in starting a business, ideally motivated self-starters,” reveals Wijnberg. “The accelerator aims to provide participants with a comprehensive understanding of launching a business from scratch. It equips them with practical business skills, improves their soft skills, communication, and leadership capabilities, and provides tools to manage the challenges and opportunities of business growth.”

“The high rate of youth unemployment in South Africa is not something that government initiatives alone can address. And while the private sector has the necessary will in place, job creation is not usually a core competency which is why partnerships between the private sector and quality business growth agencies such as Fetola with the proven expertise make so much sense,” says Heather Lowe, SME Development Head at FNB. “As a bank established by entrepreneurs, FNB has long been committed to offering entrepreneurs meaningful support. Our intention with the FNB Youth Start-up Accelerator is to create a supportive ecosystem for young entrepreneurs, via an investment which has the potential to scale exponentially and make a lasting impact.”

Wijnberg adds that the programme, now in its third year, has been extremely successful, creating purposeful impact and long-term sustainable returns. In the latest cohort, 12 youth businesses saw growth above 200% while participating in the programme. Outlier Leafprint Herbals experienced 1024% growth, and MV Muhali Holdings and The Rambo’s Shisanyama both reported over 600% growth, illustrating what is possible with the right support. “More than 90% of the SMEs that have gone through our programmes are still active today, despite a disruptive and challenging environment. Not only have participants increased their turnover and profitability, but they have also proved that with some assistance and direction, small business entrepreneurs can achieve impressive results,” she concludes.