South Africa’s youth unemployment rate of 45.5% (among those aged 15 to 34) is alarmingly high, even in the context of widespread unemployment on the African continent. More than 72 million young people in Africa, mostly women, are neither employed nor in higher education.
And while statistics from South Africa have shown that having a degree or tertiary qualification increases young people’s chances of finding a job compared to their less educated peers, there are fewer job opportunities available than there are graduates . This was illustrated in a recent study I conducted with my colleagues that tracked the labor market experience of graduates.
Researchers around the world have recognized that entrepreneurship is an important way to address youth unemployment. But starting your own business is no easy task without support, mentorship and opportunities to develop necessary skills such as financial management, networking and accepting and acting on feedback.
South Africa’s higher education sector has introduced interventions to tackle youth unemployment, including some designed to help students find their way from tertiary education to entrepreneurship.
In another recent study, we explored the challenges faced by nascent entrepreneurs who started their businesses after leaving university. Over a six-month period, we followed the journey of 22 young entrepreneurs as they recounted their experiences of starting and growing a business in a communal space in South Africa. Townships were spaces for black people during apartheid; these areas are now recognized as crucial points for the development of small and medium-sized enterprises.
Our findings suggest that while the experience of transitioning from higher education to entrepreneurship was challenging, our participants were able to draw heavily on informal networks to build and grow. However, they expressed a desire for more formal support and mentoring.
Three main findings
We conducted our research in the Metropolitan Municipality of Buffalo City in the Eastern Cape Province. The Eastern Cape is in a recession with an unemployment rate of 42.4%.
There were three main findings.
First, all of our participants said that hardship was a prevalent feature of their journey to develop and grow their small businesses. They also said that this fight was actually beneficial in many ways. One entrepreneur put it this way:
From my context of challenge my business was born. I am in the skills sector, providing facilitation and training services. First it started small and a way to give back. The more I did this, the more I realized I was on to something that could help while also helping others.” [Participant 10, Male]
Another said: “The prevailing challenges in the townships and rural communities we come from give us the experience to become entrepreneurs. These are just lessons that life gives you.” [Participant 13, Male]
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Second, all participants said they struggled to find the necessary resources to launch their entrepreneurial ventures. An entrepreneur told us:
The transition from being a student to starting my own business was difficult for me. It was just a huge gap. For me I needed office space and I couldn’t get it because of the high rents. Access to physical infrastructure made it difficult. This space was crucial to expanding my product offering. Furthermore, no support, especially for start-ups, seemed to be in sight. [Participant 17, Female]
They also admitted that they did not have the necessary knowledge to meet the challenges they encountered when they started building their businesses.
Finally, our findings raise the critical role played by informal networks in supporting youth-owned enterprises during the start-up and growth phase of the business.
One young woman said: “Financial resources seem to be the most pressing of the issues affecting young entrepreneurs. So I found a group of friends that I can rely on to connect me to such resources. Informally, the idea is to create a hub where entrepreneurs and like-minded people can network. Through networks like these, I found myself able to get useful tips to cope, especially during the COVID-19 pandemic.”
These informal networks were particularly crucial because of the perceived failures and challenges encountered in navigating formal processes. A young man said:
I gave up applying for the so-called state-assisted entrepreneurship packages. Fill out form after form. Promises are made. When it matters most, you’re left high and dry. What seems to work for me is the groups and platforms I’m a part of. They can ask for help and from that a community is mobilized to try to assist.
More support is key
It is clear from our findings that young entrepreneurs face challenges despite their zeal to start their businesses. We commend the efforts of universities and colleges to introduce students to the world of entrepreneurship, particularly the work of the Entrepreneurship Development Program in Higher Education.
At a formal level, more funding is needed for such programs to help especially those students transitioning from university or university contexts to be entrepreneurs. Efforts should also be made to increase support for young entrepreneurs through their networks. This includes providing mentoring support and assisted development programs once people have left higher education. Such networks create partnerships that help young entrepreneurs.
The research on which this article is based was in collaboration with Ruth Soda, who was a master’s student at the time.
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