Shifting from Youth Startups to Youth Enterprises

There is an emerging, diverse and colorful phenomenon on the African Continent, that is youth entrepreneurship.

Youth African entrepreneurs, creative and innovative, are applying their knowledge and skills to disrupt markets and pave the path for new breed of small industry owners and service providers. According to the AfDB, micro, small and medium enterprises represent 95% of African economies and create 80% of jobs. A question we should be asking ourselves, how far can these businesses grow, without concerted support?

At the 2022 YouthConnekt Africa Summit we held a policy roundtable on building entrepreneurial ecosystems that attempted to address how ecosystems can work more effectively together to grow youth startups to fully fledged enterprise. We reflect here on some of what emerged from this and other discussions held on youth entrepreneurship.

A 2022 United Nations Conference for Trade and Development Report indicated that 83% of African countries were highly dependent on commodity export. The fluctuation in value of primary commodities leaves countries vulnerable to a considerable drop in income with impact on local jobs. With Africa’s demographics, it is imperative that African economies undertake more industrialization to increase the value of their exports, meet the demands of local markets (decreasing import dependency), and retain jobs for youth. 

Entrepreneurship for Africa should not only be a pathway to employment for creative and resilient starters. Entrepreneurship in Africa should be a pathway to industry development and economic transformation moving away from survival small businesses to growing enterprises. Concerted effort to funnel more emerging entrepreneurs into relevant industries is key. Here is a short video produced by GIZ on strengthening entrepreneurial ecosystems.

From a policy stand, therefore, how can we enable such entrepreneurship to thrive?

1. Information on Emerging Priority Industries should be made easily available: Entrepreneurs should be guided on priority industries that are garnering support at macro-level. Lowering the risk of failure of entrepreneurial ventures, Governments identify periodically which new industries should be developed, based on research and country’s positioning. This information should be shared widely, particularly with the business community and emerging entrepreneurs. This allows for various enterprises to form within the industry that feed off each other – taking a value chain development approach. This information can be made available through a web-portal, distributed through University Hubs, career centers, and entrepreneurship accelerator programs.

2. Market Research and Technology Development should be subsidized or funded by Government. Most investors get into markets with little information to advise on the risks and opportunities within industries. This is because market research is costly. Ensuring that that current information on emerging industries and the market overall is made available to entrepreneurs helps inform better investments. Additionally, the journey to developing acceptable new products is long. Africa should consider tracks of support that lower the risks and costs associated with product development in emerging industries.

3. Skills Development – Entrepreneurs need to be capacitate to manage multinational and ethical enterprises – the skills of governance, financial management, leadership, negotiation, creative problem solving are critical. They also need to have the basics skills to evaluate new business opportunities before they invest into them. Additionally, in order to succeed, entrepreneurs need skilled managers, skilled worker and technicians in order to effectively get into industry.

4. Capital – The cost of capital is incredibly higher in Africa than it is in other regions of the world. When capital is available, the entrepreneurs get into a tide where they are working for the funder rather than have the funding work for them. Progress is being made in terms of access to startup funding. However, growth funding remains scarce. This needs to be addressed strategically. Investments in industry take a much longer time to recoup, therefore there is need for the right mix of patient capital. This too cannot be left to the small enterprises to resolve alone.

What are your thoughts on this and how are you contributing to building Youth enterprise in Africa?