South Africa faces an economic crisis that is hard to ignore. While the current crisis is one of faltering growth amid a slowing global economy, the more pressing issue is youth employment.
Imagine for a moment being one of the 3.8 million young people, aged between 15 and 36 years, who find themselves unemployed at the present time. To put this figure into context, consider that the official youth unemployment rate was a staggering 36.8% in the second quarter of this year, compared to 26.6% for the economy at large.
Sadly, this figure has been climbing steadily, and the disenchantment is evident wherever you look. The violent protests at universities around the country are but one sign of young people expressing deep concern over their future participation in the economy, especially considering the weak prospects for job creation, at least in the shorter term. And let there be no doubt - education is the cornerstone of any successful career, whether undertaken in pursuit of a technical or artisanal career or in order to follow a professional services route.
Many of South Africa’s youth are expected to continue struggling to find employment due to low skill levels, skill mismatches relative to market requirements and a general lack of work experience.
International experience has shown that increasing the skill levels of the youth and/or assisting them to obtain, or possibly even providing, initial employment experience are crucial in improving the employability of the youth. Obtaining a tertiary education certainly increases the ability to find work, as reflected in the 21.1% unemployment rate for youth with a tertiary education, which is far lower than the 36.3% for youth that completed secondary schooling only, and half of the rate for young people that did not manage to complete their secondary education.
So what can be done to address this situation – one that has been termed “a ticking time bomb”? The challenges outlined above are multi-faceted and, therefore, the solution cannot be over-simplified.
Yes, we need to get the economy growing at a faster rate so that new jobs can be created. And the government has introduced the youth wage subsidy to encourage employers to create jobs for the youth. However, what is urgently needed is a concerted, sustained effort to create an environment that produces jobs, allows young people to acquire skills and allows them to branch out on their own through entrepreneurship.
Naturally, this cannot be achieved overnight, as a career - especially a successful entrepreneurial one - is built over time and through experience. However, entrepreneurial training is increasingly being recognised as an important strategy for reducing unemployment, particularly if embedded in school and college curricula, as it can create a culture of innovation and business formation that enhances employment outcomes.
Entrepreneurial development lies at the very core of the Industrial Development Corporation’s mandate. Youth economic participation in the formal economy is an important dimension of our strategies and actions. We are passionate about enhancing the contribution of youth to our economy, now and well into the future.
Over the past three years, the IDC has committed more than R1.2 billion in support of youth-owned businesses, and we are making an additional R4.5 billion available during the next five years to finance these types of businesses.
It is no secret that access to funding is one of the major stumbling blocks for new businesses. Because of the IDC’s mandate of stimulating the economy, we are able to take a more patient approach and, within specific funding schemes, offer preferential lending rates compared to commercial banks.
This does not mean we are not thorough. We wish to help businesses grow so that they can support not only the founders, but that they can flourish in order to stimulate jobs. This demands a stringent assessment of entrepreneurs’ ability to build sustainable and compliant businesses (meaning that all the necessary processes and practices are in place to ensure they pay their taxes and treat their employees fairly.)
Given our role as a development finance institution, we take these businesses under our wing to ensure that they receive all the necessary non-financial support to help them achieve success. Ultimately, our success is measured by the success of the businesses that we fund.
These measures and support mechanisms are all good and well. And we have a strong record of success. But in order for South Africa to truly benefit and address this tremendous challenge of youth unemployment, initiatives such as the #SAunder36 opportunity platform have to be emulated by more than one single institution.
I put this challenge to our partners in the private and public sector - let us join hands to actively seek workable solutions.
And to the youth - your responsibility is to work tirelessly to improve your skills so that the business sector looks forward to employing you due to the knowledge, confidence, energy and value that you will bring to their business.
Young voices talk business
Four young entrepreneurs in very different sectors of the economy – energy, mining, film and manufacturing – share their perspectives on the challenges of starting a business.
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The IDC is helping young people jump through startup funding hoops.
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