Tackling Africa’s Youth Employment Challenge: Can Social Enterprise Play a Role?
In recent years social enterprise has become an increasingly popular business model in African economies. The rise of social enterprise is illustrated by events like the Africa Social Entrepreneurship Summit, as well as the Social Enterprise World Forum, which was held in Addis Ababa, Ethiopia last year (the first time the Forum has taken place in an emerging economy).
The growth of social enterprise across Africa is an important trend, and it offers a number of potential alternatives to traditional aid-based models of development. Indeed, many view the shift towards social enterprise as a shift in the African narrative of development more broadly: a clear sign that this narrative is gradually shifting from aid-led solutions to enterprise-led solutions.
Yet despite their potential for supporting Africa’s development objectives, social enterprise markets and ecosystems remain in their infancy, and they are very different from their counterparts in the more developed economies where the model was first popularized. Therefore, a number of important questions remain unanswered on how social enterprise can best address development challenges in emerging markets – and how stakeholders can support these efforts. In this article, I’ll focus on how social enterprise can play a role in addressing one of Africa’s key development challenges: employment and job creation for young people.
Social Enterprise for Youth Employment in Africa: Does the Approach Work?
In principle all social enterprises should create jobs by virtue of being market-oriented, and there are a number of social enterprises that already deliver great job creation initiatives. Nonetheless, social enterprises that make an impact on employment can be split into two types: those that do and do not consider it part of their social mission.
Among businesses that view job creation as their specific social mission, many enterprises currently focus on delivering supply-side service functions. This refers to interventions that focus on the supply of labour, such as providing young people with skills training and/or promoting social entrepreneurship education in schools and universities. Fewer organizations concentrate on specifically addressing broader demand-side barriers to employment, e.g. via interventions that stimulate greater demand for labour by removing specific constraints to business development and expansion. Indeed, while many demand-side barriers can be addressed by creating linkages to markets, such as improving market channels and developing infrastructure, the social enterprise sector often fails to understand which business models work best for addressing these barriers to job creation. Among other things, this often leads either to interventions that do not create jobs (such as standalone training programmes), or to an excessive focus on reporting quick results and impact – even at the expense of longer-term commercial sustainability.
Further complicating the picture, there is currently a lack of specific data or evidence available on the types of social enterprise business models that work best for youth job creation across emerging markets (see below). Moreover, the question is not necessarily only about the effectiveness of business models, but also about the scale of job creation, the types of jobs that are (or can be) created, and the best ways to leverage social enterprise ecosystems to foster sustainable employment opportunities for young people.
To help direct some of this discussion, below I highlight some of the key messages about these data gaps, and outline important lessons for anyone involved in growing social enterprise to boost employment in Africa.
Can Social Enterprise Create Jobs?
The short answer is: yes, but we do not really understand its reach or potential. Social enterprises are commercial ventures, so they will create jobs by leveraging market opportunities in order to sustain their growth and mission. However, in terms of youth job numbers and types of opportunities in emerging markets, there is still very little specific data on the impact of social enterprise. There is some evidence available on this from Organization for Economic Cooperation and Development (OECD) countries and more developed markets (which paints a mixed picture), but the context and challenges of lower- and middle-income markets are very different. Understanding how specific approaches in social enterprise support the employment challenges in these types of markets is an important task that needs to be built up.
The key lesson here is that more research needs to be done to understand which social enterprise models can work best to support youth employment and job creation in Africa. Some of the possible areas for further research can be garnered from the discussion below.
How Can Jobs and Employment Opportunities be Created?
According to recent reports by the British Council and the Global Entrepreneurship Monitor, the main forms of social enterprise in Africa to date are sole proprietors (i.e.: individual business owners) and micro, small and medium enterprises (MSMEs). This mirrors the types of enterprises and start-ups growing in emerging markets more generally, and these MSMEs are also a key sector where African youth find work. While this segment of the economy tends to be quite volatile, Africa also has very high rates of nascent and early start-up social entrepreneurship. So from this we know (at least broadly) that many jobs and employment opportunities for young people from social enterprise will be in the MSME sector, either directly as social entrepreneurs or indirectly through employment in these enterprises.
Crucially, among youth there is a greater representation of nascent social entrepreneurs than nascent commercial entrepreneurs in Africa. Yet, while youth might be more inclined towards social business, such MSMEs can face very high failure rates. In fact, Africa generally experiences very high rates of business failure among commercial MSMEs, and the added pressure of delivering social impact can further increase the risk for their counterparts in social enterprise. Illustrating the challenge these enterprises face globally, a study on social enterprise failure rates in Mexico found that 83.5% of social enterprises failed within three years, with 40% failing in the first year. Therefore, supporting socially focused MSMEs and addressing their unique risks is crucial. In addition, supporting the MSME sector more broadly (such as by fostering better infrastructure, regulation and access to finance) will improve the ecosystem for all MSME enterprises to succeed more widely.
As economies grow, social enterprises should target the sectors that mirror the broader economic trends of a country, to maximize their impact on youth employment. They should also focus on sectors where barriers to employment are lower for the majority of lower-skilled youth, including agriculture, service provision, skilled trades (like carpentry and welding), and light manufacturing. Importantly though, jobs in these sectors for young people tend to be informal, precarious and often poorly paid. Given that the current evidence from other OECD countries suggests that many social enterprises create more precarious and vulnerable forms of employment, it cannot be stressed enough that social enterprises must be given sufficient support to mitigate and avoid these risks.
Practical Ways Social Enterprise Can Support Youth Employment and Job Creation
In light of the above trends, there are several ways social enterprise can more effectively boost youth employment:
Target the MSMEs: This segment of the economy is (and will remain) the largest employer for young people. Addressing barriers to the growth, sustainability and survival of commercial and socially focused MSMEs will be crucial for creating employment opportunities for youth.
Ensure youth are “work ready” (for opportunities that exist): There is a significant gap between the skills possessed by young graduates and the skills demanded by the labour market. However, current employment interventions targeting young people often prioritize (social) entrepreneurship (e.g. setting up new enterprises as a pathway to creating their own jobs), or focus on running standalone skills training programmes which are not necessarily linked to existing industry opportunities. This is a key criticism of existing youth employment initiatives. Supporting social enterprise initiatives that create better linkages to industry and address skills mismatches among youth for existing industry opportunities would be a better use of resources.
Reduce the education barriers of existing and nascent social enterprise owners: Most commercial and social enterprise owners across Africa have low levels of education. Addressing this barrier will be essential to fostering both social enterprise growth and employment.
Address the supply-side bias of social enterprise service functions: In line with data from the Global Entrepreneurship Monitor and British Council, most commercial enterprises and social enterprises supporting job creation and youth employment focus predominantly on equipping the supply of labour through education, skills training, mentorship, and by “creating social entrepreneurs.” In addition, most social enterprises in Africa are low revenue-producing enterprises, and are not addressing demand-side issues. This mirrors the similar trend among the broader youth employment initiatives in Africa, especially as it involves fostering entrepreneurship.
While the creation of social entrepreneurs is key to the growth of the sector – and social enterprise education plays an important role in this – we must also take account of the broader evidence base on youth employment and entrepreneurship programmes. To date, the majority of initiatives (like entrepreneurship, skills training, mentorship, microcredit schemes, and employability programmes that mirror social enterprise service offerings) have had little to moderate lasting impact in emerging markets, according to a number of recent systematic reviews from across Africa and globally. To improve upon this record, the social enterprise sector must take stock of best practice, and better address barriers to employment. This can be achieved by improving the business performance of existing social enterprises, and focusing on sectors which are likely to be high-net employers for youth, such as agriculture and services.
Though the challenges facing social enterprise in Africa are substantial, and the impact of these businesses on employment can and must be improved, their promise is clear: As Africa moves into the next decade, social enterprises are primed to become a significant driver of youth employment on the continent.
Photo courtesy of Russell Watkins / DFID.