African Youth Want to do Business in Fast-growing Economy

By David South, Development Challenges, South-South Solutions

Africa’s growing economy is meeting head-on an optimistic young population keen to start businesses. At least that is what a new poll of African youth says, finding that one in five Africans between the ages of 15 and 24 without a current business wants to start one in the next 12 months.

The Gallup surveys (www.gallup.com) of 27 African countries and areas also found young women were just as keen as young men to start a business.

Throughout the decade of the 2000s, Africa experienced an average economic growth rate of 5.4 percent (World Bank) – a big gain from the poor growth rates of the 1980s and early 1990s.

The turnaround in Africa’s economic growth prospects was the product of a number of trends and factors. One has been better policies and easier trade. Other factors include rising tourism, a growing service sector, rising commodity prices, greater demand for African exports in emerging economies and rapidly improving communications: the surge in mobile phone usage during the last five years has surprised many. Africans are also avid spenders on goods and services, spending US $860 billion on them in 2008, more than India’s US $635 billion or Russia’s US $821 billion (Economic Report on Africa 2011).

The African Development Bank predicts Africa’s growth rate for 2011 will decline to 3.7 percent from 2010’s 4.9 percent, largely as a result of turmoil in North Africa. East Africa is projected to grow the fastest this year at 6.7 percent, with West Africa close behind at 5.9 percent.

Africa as a continent collectively had a gross domestic product in 2009 of US $1.6 trillion: equal to Brazil’s or Russia’s. The continent is considered among the fastest-expanding economic regions in the world (McKinsey & Company).

In fact, while economic prospects are grim in many developed countries, Africa joined Asia as the only continents to grow during this recession.

But major problems still confront the continent, among them youth unemployment. Those between 15 and 24 make up more than 60 percent of the continent’s population and are 45 percent of the total labor force (African Economic Outlook). Sub-Saharan Africa is experiencing a youth explosion, with the proportion of youth there to rise to 75 percent of the population by 2015. Demographers forecast this rising youth trend will not stop for the next 20 years.

Getting these youth actively engaged in the economy and society is a major challenge for the continent. Already, 133 million African youth are illiterate. They have few skills and are marginalised from more productive sectors of the economy.

Even those with an education find their skills often don’t match the needs of the labor market. In sub-Saharan Africa, youth unemployment is believed to be 20 percent.

So even with better economic prospects and growing economies and incomes, youth unemployment looms large.

The Economic Report on Africa 2011 (www.uneca.org/era2011/) finds the “persistent high youth unemployment rate is a cause of concern and a potential source of political instability.” Job creation is still not adequate: “The growth rates are still below the levels needed to make a significant impact on unemployment and poverty reduction.”

While Africa will experience higher growth in 2011, for youth it is looking like a “jobless recovery,” according to the report. Overseas investors are mostly throwing their money at the resource sector, which doesn’t create many jobs in the economy.

But for young Africans looking to start a business, the opportunities are there in sectors such as retailing, telecommunications, banking, infrastructure-related industries, resource-related businesses, and all along the agricultural value chain.

The booming communications industry has added 316 million new subscribers since 2000, for example. And all those people now connected need new services.

And once a business is up and running, it is possible to make higher profits in Africa than on other continents, according to the UN. Africa leads the emerging market economies for returns for businesses. This is because competition isn’t as intense and there is still plenty of built-up consumer demand that needs to be met.

All of this means young people willing to start a business and put in the hard work, will have a better chance of reaping the rewards.

Published: July 2011

Resources

1) iHub Nairobi: iHub Nairobi’s Innovation Hub for the technology community is an open space for the technologists, investors, tech companies and hackers in the area. This space is a tech community facility with a focus on young entrepreneurs, web and mobile phone programmers, designers and researchers. It is part open community workspace (co-working), part vector for investors and VCs and part incubator. Website: http://ihub.co.ke/pages/home.php

2) The Other Side of Innovation: Solving the Execution Challenge by Vijay Govindarajan, Chris Trimble: On how businesses need to follow through with execution if they really want to innovate. Website: http://hbr.org/product/baynote/an/13219-HBK-ENG?referral=00505&cm_sp=baynote-_-featured_products-_-13219-HBK-ENG

3) “The Globe: Cracking the Next Growth Market: Africa” by Mutsa Chironga et al, Harvard Business Review. Website: http://hbr.org/2011/05/the-globe-cracking-the-next-growth-market-africa/ar/1

4) 2011 Global Youth Economic Opportunities Conference: This 5th anniversary conference will provide a learning platform for the world’s leading funders, practitioners, technical assistance providers, policy makers, and academics working to increase and improve economic opportunities for young people. Join 400 professionals from over 60 countries to share lessons learned, promising practices, and innovative ideas through technical workshops, engaging plenary sessions, and interactive networking. The result? Higher-impact programming, breakthrough solutions, and proven approaches. This year’s theme, Breakthroughs, reflects the focus on the innovative ideas, proven practices, and visionary insights that are taking this emerging field to new heights. Website: http://www.youtheconomicopportunities.org/

5) Dutch Design in Development: DDiD is the agency for fair design, sustainable production and fair trade. They work with Dutch importers and designers and connect them to local producers in developing countries and emerging markets. Together products are made that are both profitable and socially and environmentally sustainable. Website: http://www.ddid.nl/english/index.html

6) Francophone Africa Hackathon: Taking place on 24 September 2011, a ‘hackathon’ to develop mobile phone applications will take place for Francophone Africans. Website: http://www.mobilehackaf.com/