Wednesday
March 4
2015

Stefanie Bauer

Catalyzing the Power of Africa’s Youth: Recommendations for Youth Entrepreneurship Promotion 2.0

Africa is witnessing a powerful trend that is expected to double by 2045: A growing young generation that now stands at 200 million people aged between 15–24 is creating the youngest continent[1] on Earth. But with a labor market that does not provide many opportunities for wage employment, Africa’s youth are taking matters into their own hands by exploring entrepreneurship.

Africa’s growth story, increasing middle class and deepening domestic markets are creating a trifecta young entrepreneurs are leveraging for new business opportunities. Many of these youngsters are motivated to create change in their local communities, while addressing gaps in the delivery systems behind basic services such as health care, energy, education, water and sanitation.

Enterprises like the recent Sankalp Africa Award Winner Ensibuuko, an information and communications technology (ICT) company that connects farmers to finance opportunities as well as to the market, demonstrate how young innovators are acting as drivers of Africa’s social and economic transformation. Inspired by such success stories, more and more youth choose entrepreneurship over secured white collar jobs, not only to make profits, but also to contribute to Africa’s social and economic transformation. In their local contexts, a growing number of youth entrepreneurs are acting as catalysts for social and economic development by:

  • Creating employment for themselves and others;

  • Developing solutions in mainstream high growth sectors;

  • Creating social impact through inclusive business models in sectors such as health care, energy, water, sanitation, education and agriculture

Youth Entrepreneurship Promotion 2.0: Creating Pathways for Growth

Idea and business plan competitions, hackathons and challenges have been successful in creating an entrepreneurial movement among youth and an enthusiasm to start up. However, as our recent research Catalyst for Change: Creating an Eco-System for Young Entrepreneurs in East Africa has identified, the challenge is in taking young innovators to the next stage. Youth Entrepreneurship Promotion 2.0 needs to provide a continuum of support that helps young entrepreneurs to move from an idea and business plan towards profit and eventually scale. Taking this ecosystem view might not necessarily be new for many working inside entrepreneurial support organizations. However, most youth entrepreneurship interventions have largely focused on helping youth to start up, leading to a “mushrooming” of business ideas, while neglecting what comes next: growing the business. This approach has started to lead to disappointment. A shift in youth entrepreneurship promotion is needed.

Ensibuuko Founder Opio David explained how difficult it is for young entrepreneurs to succeed.

“Uganda has one of the youngest populations in the world. The rate at which new enterprises are started by youth is high,” he said. “A startup may take up to five years to become sustainable and scale. The years that precede these are quite challenging to navigate.”

David has himself experienced how important it is to get help on the journey to growth: Ensibuuko won the 2013 ICT4Agriculture Hackathon Award, which helped the startup receive incubation support and attract investments from multiple investors. Outbox, an incubator based out of Kampala, provided office space, consultation on the business model and understanding market needs, as well as network access support. Ensibuuko also secured a $50,000 credit facility through a partnership with Kiva, a crowd-funding organization which helped kick-start the microfinance program.

But this level of support is the exception and not the rule.

Young entrepreneurs need risk-taking capital, affordable advice and accessible networks

“Almost 80 percent of startups die in the first year in Rwanda,” said Nitrampeba Sylvere of the Ministry of Youth and ICT Rwanda, who we consulted for our research.

This is true for the East African region. While young entrepreneurs are full of ideas and have little fear of failure, they find it difficult to build scalable enterprises. Our research shows that not even 20 percent of young entrepreneurs are able to access equity or debt capital; 86 percent of them use personal funds or borrow to launch a startup.

Young and without credit history or experience, they find themselves at the “Bottom of the Enterprise Pyramid” (as we refer to it in the report), facing tough challenges. Many young entrepreneurs do not pass the preliminary screening stage as they have difficulty articulating their business model or lack the background to convince investors of their viability. With a cultural context in which age brings respect, young people find it even harder to be taken seriously. As a result, young entrepreneurs struggle more than experienced peers. While networking, peer-learning and exposure, especially to investors, are perceived as important success factors, these are biased towards more mature entrepreneurs.

Around 70 percent of entrepreneurs we surveyed have cited the need for business plan competitions and startup awards to enhance their visibility. As David stresses: “To inculcate the culture of entrepreneurship in youth, it is essential to use avenues such as media, awards and conferences to celebrate successes and share the experiences of emerging entrepreneurs overcoming challenges. Such inspiration nurtures confidence and resilience among youth that are crucial for them to initiate and turn wild ideas into real ventures.”

(Above: A graphic from the report Catalyst for Change: Creating an Eco-System for Young Entrepreneurs in East Africa).

Moving away from big numbers: Rethinking success metrics of youth entrepreneurship promotion

Few support programs or service providers exist that help youth at the Bottom of the Enterprise Pyramid to grow to the next stage. Most donor or government initiatives have the objective of creating entrepreneurs as a means to self-employment. However, the needs of growth and profit-focused entrepreneurs are very different from these survival entrepreneurs. Hence, there is a need for a shift in orientation of youth entrepreneurship support: Instead of generic start-up and entrepreneurial training programs, what is needed is deep and on-going support that helps youth to grow their businesses.

Impactful youth entrepreneurship promotion will hence require success stories. But simply pushing for large numbers of businesses launched by young people might not be the right success metric, especially if most of them fail after a short time. A better benchmark for success is the number of young entrepreneurs who have moved their businesses to the next stage and reached sustainability. Instead of the number of training programs targeted at youth, the number of service providers that cater to youth on a sustainable basis could be an appropriate metric on the system level.

Inverting the pyramid: Creating an eco-system for young entrepreneurs

Collective efforts are needed to “invert the pyramid” and create an eco-system for young entrepreneurs, which provides them with a continuum of support from idea to scale. Government and donor agencies alike should move away from direct implementation, and act as facilitators of a market that provides high quality, affordable services to young entrepreneurs on a long-term basis. Those with the mandate to support young entrepreneurs can catalyse them by strengthening service providers that can offer them long-term support. A number of innovative business models of service providers exist that invest in young entrepreneurs, support them with necessary business skills and hand-holding, or give them exposure through creating networking opportunities.

Catalyst for Change is an initial contribution to engage in a conversation with like-minded organizations on innovative ways to strengthen youth entrepreneurship by creating the right eco-system of support.

Stefanie Bauer is a senior manager at Intellecap – a global advisory. She is part of a team that strengthens exchange between India and Africa on entrepreneurial eco-systems.



[1] Promoting Youth Employment in Africa. African Economic Outlook. 2012.

Categories
Education, Entrepreneurship
Tags
entrepreneurship, incubators, research