Why Small Business is Big Business: Entrepreneurship is the Answer to Unemployment in South Africa

no picture Mr
Adrian Joseph
Member since November 20, 2018
  • 1 Post
  • Age 19

My discussions with Robert and other entrepreneurs on the ground has given me a more nuanced understanding of the challenges facing entrepreneurs in South Africa.

My discussions with Robert and other entrepreneurs on the ground has given me a more nuanced understanding of the challenges facing entrepreneurs in South Africa.

Entrepreneurship is crucial for economic growth as it is the entrepreneur who identifies opportunities, combines factors of production, takes risk and creates employment. Political and economic uncertainty in South Africa before 1994 hardly provided an environment suitable to the development of entrepreneurial skills or opportunities. Post-1994 South Africa’s entrepreneurial landscape has seen rapid development due to a number of white South Africans leaving government to start their own ventures and a number of black South Africans receiving new business opportunities as a result of black economic empowerment. While South Africa has made significant progress on a number of fronts, it still remains a country of contradictions 24 years after the dawn of democracy.

A large number of young people in South Africa are structurally unemployed meaning they lack the necessary education, training or skills to find employment as there is a severe mismatch between the youth’s qualifications and job requirements. Structural unemployment is a difficult problem for which there is no immediate solution as young people often have to be trained which is costly and time-consuming. I strongly believe that young, high-impact entrepreneurs are the answer to the challenges we face both as a youth and a country as a whole.

Half of South Africa’s population is under the age of 24 with youth unemployment around 50% according to the Quarterly Labor Force Survey. Furthermore, a report by the International Labor Organization shows South Africa to be the nation with the highest youth (15-24) unemployment rate amongst the developing BRICS nations. However, the large youth population also provides an opportunity to channel untapped entrepreneurial potential to develop small businesses which will serve as the necessary catalyst to create employment and reduce poverty and inequality in South Africa.

A report commissioned by the Global Entrepreneurship and Development Institute (GEDI) placed South Africa as one of the continent’s entrepreneurial front-runners only second to Botswana. Despite positive readings, a number of factors continue to hinder progress such as: administrative barriers to entry, large private and state-owned enterprises who stifle market competition and a failing education system. Research conducted by South Africa’s United Nations Development Program showed that two thirds of business fail within the first year of operations. This is evidence of the fact that the majority of young South Africans do not possess the necessary experience and skills to sustain a successful business venture.

In response to the above-mentioned challenges, there are a number of policy avenues which may be considered and implemented. Firstly, education orientated towards innovation and entrepreneurial activity should become a priority to curb youth unemployment. In addition, government should encourage businesses in the informal sector to become part of the formal economy by incentivizing entrepreneurs looking to do so.

Thirdly, South Africa must mimic its African counterparts in actualizing the power of mobile banking to give a greater number of young people access to finance. Furthermore, investment in the development of crowd funding sources for small businesses with a focus on young entrepreneurs in search of start-up capital is essential. In my capacity as a first-year student at the University of Cape Town, I have had the opportunity to discuss with other students the various constraints to starting a successful business. The main issue which I had picked up on was a lack of necessary funding to finance capital investment. I am therefore in the process of setting up a crowd funding platform for student businesses where the local university community can contribute to see students flourish in their business endeavors. I am of the opinion that it is essential to align South Africa’s young talent today for the jobs of tomorrow by encouraging more students to consider entrepreneurship as a viable alternative to traditional employment.

Finally, with the Fourth Industrial Revolution on the horizon, South Africa is in a unique position to expand its technological inclusion to create disruptive platforms which leapfrog development gaps by catering to the demands of large growing populations. It is important for government and the private sector alike to take stock of successful employment programs both at home and abroad in order to learn the appropriate lessons and provide evidence-based proposals going forward to ensure sustainable development. Small business must be vigorously promoted as the sector is able to provide the sort of labour-intensive employment desperately needed in the economy. It is not enough to only bring more entrepreneurs into the economy but the type of innovative, high-impact entrepreneurs who can compete on the continent and across the globe.

I am convinced that the adoption of policies similar to these will help reverse the negative perception of entrepreneurship in South Africa and combat youth unemployment by creating inclusive economic growth. The time is right for young people to make small business their business.





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