Entrepreneurship as tool for job creation
By 2030, over 40 per cent of the global youth population will be African while the number of African youths is expected to reach 830 million by 2050. The growth trend is exciting, given the demographic dividend the country stands to gain. Unfortunately, Africa’s youth bulge may not drive the economic growth and wealth creation that is expected because more than one in four young people in the continent are not in employment, education or training ( NEET), reports GLORIA NWAFOR.
THE lack of productive, formal employment is increasingly pushing Africa’s youth to start their businesses as entrepreneurs. Africa boasts the world’s highest rates of entrepreneurship, with more than one in five working- age Africans starting a new business and more than three- quarters of the youth planning to start one within five years.
The challenge is that this entrepreneurship is mainly selfemployment in the informal sector, which the International Labour Organisation ( ILO) classifies as “vulnerable employment.” According to the ILO, 95 per cent of Africa’s working youth fall into this category, compared to less than 50 per cent in the Americas, Europe, and Asia. It said vulnerable employment is reflected in low productivity, low earnings, and difficult working conditions.
The Guardian gathered that whether in the informal or formal sector, entrepreneurship in Africa is often plagued with problems including but not limited to lack of access to appropriate funding instruments required to start, maintain and grow a business. Also, the high cost of operations due to inadequate infrastructure, poor macroeconomic conditions, and government policies are unsupportive to business. Coupling these issues with low levels of economic growth and poor social protection schemes, African economies are expected to experience even more youth employment challenges in the future.
The African Development Bank ( AFDB) estimates that each year, up to 12 million youths in Africa enter a workforce that has only 3.1 million jobs available and consequently, 1.7 million new jobs need to be created each month to meet employment needs.
A Nigerian entrepreneur, founder and Managing Partner, Agrolay Ventures and the Nuli Juice Company, Ada Osakwe, shared how she experienced most of the hurdles in 2016 when she launched Nuli Foods, a medium- sized agribusiness that manufactures nutritious beverages with locally grown fruits and vegetables.
According to her, Nuli has contributed to Nigeria’s economic landscape by creating jobs for youth, reducing post- harvest losses, creating steady incomes for smallholder farmers and giving Nigerians access to better nutrition. However, she said that building the business has come with significant challenges, including difficulties securing financing from banks and public institutions, high operating costs, crippling inflation rates and instability in government policies. The Guardian reports that despite the myriad challenges facing anyone trying to build a business in Africa, African youth continue to have a strong entrepreneurial spirit, leading to entrepreneurship being considered as the solution to Africa’s job malaise.
This, The Guardian gathered, is partly fueled by the increasing influence of digital technologies that provide new opportunities for innovation across sectors. Consequently, over the last decade, billions of dollars have been committed to developing Africa’s entrepreneurs. However, most public and donor- funded youth projects are failing to adequately provide systemic support Africa’s young entrepreneurs need. For example, a recent Voxdev report states that approximately $ 1 billion is spent yearly on entrepreneurship training in developing countries.
The report also notes that the returns from these investments are not yielding economic and social impacts.
Stakeholders believe that by rethinking entrepreneur- led job creation in Africa, economies must begin to reconsider the models of entrepreneurship support that exist in Africa to ensure that young people are not being blinded by a false narrative of future wealth and stability.
Osakwe said academic institutions, governments, donors, and capital providers should be more intentional about promoting a more enabling environment for entrepreneurship to thrive to create jobs on a massive scale in Africa.
To achieve this, she said an approach to consider was providing focused support to “SME Eagles.”
She noted that micro, small and medium enterprises ( MSMES) account for 80 per cent to 90 per cent of jobs on the continent, making them significant contributors to socio- economic development.
“Among these are enterprises that have demonstrated remarkable resilience because they have perfected their business models, created strong operational structures, grown revenues, and expanded their businesses, despite being faced with the Africa- specific challenges outlined above. These businesses can be referred to as SME Eagles. SME Eagles can provide stable, wage employment for millions of young people, serving as anchors that create and sustain jobs.
“An example is a 150- tons- per- day milk processing factory in northern Nigeria, owned by a 30year- old entrepreneur. To meet the needs of the factory, this entrepreneur developed an effective “outgrow” model with milk collection centers where rural pastoralists, the majority of whom are youths and women, deposit their milk daily in return for an income. Today, 18,000 farmers are part of this SME Eagle’s network, after only one year of operation. That’s 18,000 new, stable jobs, with the potential for thousands more as the factory expands production. Catalysing entrepreneur- led job creation with SME Eagles will require providing affordable capital through blended finance mechanisms,” she said.
In her submission, Executive Director, FATE Foundation, Adenike Adeyemi, said accelerating productive MSMES was the much- needed catalyst for Nigeria’s socio- economic recovery.
She said that Nigeria’s recent national growth plan and the Renewed Hope Agenda of the Bola Tinubu- led administration, highlighted the opportunities that MSMES create for the achievement of development objectives. She said the support for MSMES was critical for Nigeria to return to a path toward a prosperous, sustainable and equitable economy.
Noting that young people are the fastest- growing age segment and those between the ages of 15 to 29 account for 42 per cent of MSME entrepreneurs, according to the Fate Foundation.
Adeyemi said with high unemployment and underemployment rates being a challenge in Nigeria for that age category, it was encouraging to see more young people take on the opportunity to build their own economic pathways and create a job for themselves through entrepreneurship.
“With business growth being one of our strong indicators of entrepreneurial performance, Women entrepreneurs— who make up 43 per cent of MSME employees— showed better productivity output as they outperformed their male counterparts within that indicator level,” she said.
She expressed the foundation’s belief that Nigeria’s MSMES could become the main drivers of economic recovery and inclusive growth only if there is a strong emphasis on enabling productive enterprises in 2024.
According to her, “2023 was a challenging year for Nigeria’s MSMES. Despite the “green shoots” Nigeria experienced following the re- opening of the economy in 202122 after the pandemic, economic development in late 2022 and 2023 was negatively impacted by the flawed implementation of the naira redesign policy, the impact of fuel subsidy removal, which increased operational costs, and the slowdown of economic activity due to the national and state- level elections.”
In the foundation’s 2023 State of Entrepreneurship Report, Adeyemi, noted a deterioration in entrepreneurial performance with over 90 per cent of entrepreneurs surveyed indicating that the fuel subsidy removal had and continues to hurt their businesses. She said while they contribute over 90 per cent to entrepreneurial activity in Nigeria and make up 87.9 per cent of the country’s labour force, she said over 90 per cent of MSMES are micro- enterprises with suboptimal productivity and low growth.
“When we apply a youth and gender lens, however, we do see some very bright spots,” she said. In charting the pathway for a better Nigeria in 2024, Adeyemi made the following key policy priorities to stimulate the entrepreneurial ecosystem and enable inclusive and broad- based growth for MSMES.
According to her, changing measurement indicators for MSME investments to be age and gender disaggregated and reflect socioeconomic impacts like decent jobs created, revenue growth, and ability to transition across segments ( from micro to small or medium levels).
She called for the removal of regulatory bottlenecks and harmonising multiple taxations to galvanise business startup, growth and sustainability. She said that digitising required regulatory processes and procedures as well as creating virtual and physical one- stop shops at Local Government levels ( Nigeria has 774 LGAS) can enable it at scale.
The Fate Foundation chief mentioned the need to accelerate the dual transition of youth and women- led MSMES ( digital and green) to enhance their pathways to growth and improve their ability to attain entrepreneurial success.
Additionally, she said domesticating the African Continental Free Trade Area ( AFCFTA) agreement was key to improving Nigeria’s MSME competitiveness ( currently at 47 per cent) and fast track its participation in regional and global trade. According to her, Nigeria’s small and growing businesses need to be more productive to contribute effectively to the growth and development of the country.
By rethinking entrepreneur- led job creation in Africa, economies must begin to reconsider the models of entrepreneurship support that exist in Africa to ensure that young people are not being blinded by a false narrative of future wealth and stability.