The State of Entrepreneurship in South Africa: Youth Entrepreneurship


Youth unemployment and under-employment have become key concerns for both the developed and developing world.

The 2011 census puts the South African population at 51 770 560 million people. Of these, 19 466 346 million are currently between the age of 15 and 34 (37.6%) and a further 15 100 086 million are between the age of 0 and 14 years old (29%). This means that just under two-thirds (66.6%) of the South African population are under the age of 34 years3.

It is imperative that effective solutions regarding the youth unemployment crisis, as well as any other issues facing the youth as a grouping, are addressed, as these issues are not only going to affect young people who are currently in the 15 to 34 year old bracket. The issues will be compounded as the 15 million young people under the age of 15 years complete their schooling and wish to join the labour market in search of a sustainable livelihood.

South Africa has extremely high official rates of youth unemployment, ranging from almost two thirds (64.5%) of youth between the age of 15 and 19 years to over a quarter (27.5%) between the age of 30 and 34 years. The official rate of unemployment includes people who are without work and are looking for work and are available to take up employment or open a business. Of even greater concern is the expanded rate of unemployment, i.e. including individuals who have given up looking for work.

The expanded rate for 15 to 19 year olds is 20% greater than the official rate, and the expanded rate for 30 to 34 year olds is 30% higher than the official rate.

Studies have shown extremely negative long-term penalties affecting young people who are either retrenched or unable to find work early in their careers. This negative impact was also noted in Indonesia, Argentina and Brazil. The research suggests that the negative effect of early unemployment is more severe in stagnant economies has shown that people can start a business at any time in their life, although this activity tends to be more prevalent among those in the 25 to 34 age group.

The reason for this is possibly due to the fact that these individuals have had more time to develop their skills and knowledge through education, as well as through work experience. An important factor is that they may have accumulated other resources such as networks, personal savings and access to other financial resources. In addition, they may be a little less established in a career that may offer high salaries and perks (less opportunity costs) or they may have fewer financial obligations, such as families to support and loan

A quarter of young people in South Africa between the ages of 18 and 34 years old believe that they have the skills and knowledge to start a business and that there are good opportunities to exploit.

The rate of potential youth entrepreneurs in South Africa is substantially below the average for sub-Saharan Africa (60%).

Sixty percent of young people surveyed believe that lack of knowledge of how to start a business is a substantial barrier to entrepreneurship, while more than half of the youth think that becoming an entrepreneur in South Africa is difficult or very difficult.

Only 13% of the non-entrepreneurial youth, i.e. not currently involved in setting up or running a business, indicated an intention to start a business in the next three years.

61% of young people believe that most young adults that start their own business have to work too hard for little money. A similar percentage believe that most young adults who have started their own businesses did so because they could not find a job.

This negative perception of owning a business is likely to act as a deterrent to young people.

Young men are 1.3 times more likely than young women to be potential entrepreneurs and 1.7 times more likely than young women to indicate an intention to start a business.

Almost half (49%) of the youth agreed with the statement “Where I live, young men are more likely to start a business than young women.”

The perception that young men are more likely to start a business than young women, if not countered, can act as a deterrent to young women. It is important that the media and educational institutions promote small business ownership as a valid choice for both young men and women.

Some of the key challenges facing new as well as established youth-owned businesses includes high operating costs (including red tape and stringent labour regulations), corruption/bribes, limited access to technology and internet and high competition (50% of youth businesses are in the retail sector, which can offer low barriers to entry with respect to start-up capital and the level of business skills).

Some positives relating to youth entrepreneurs in South Africa are also highlighted:

While sub-Saharan Africa, as a region, may have a considerably higher youth TEA rate than South Africa, only 17% of these businesses offer employment for more than one employee and they therefore add relatively little to job creation.

By contrast, in South Africa 65% of the youth businesses offer employment to more than one employee and therefore add relatively more to job creation. Of particular interest is the significantly higher rate of youth businesses in South Africa offering jobs to six to 19 employees (7%) and the higher rate of youth businesses offering employment to 20 or more employees (2%).

South Africa’s youth also considers itself more innovative than most other efficiency-driven countries, with the exception of the youth in Chile (55%) who have the highest percentage of business owners that perceive their businesses as having a product or service that is new to some or all customers and where few or no other businesses offer the same product. South Africa is rated as the second most innovative African country, with Tunisia rated as the most innovative.

In contrast to the two-thirds of young people who believe that working for the government is the best way to earn a good living, 61% of young people believe that most young adults that start their own business have to work too hard for little money.

This negative perception of owning a business needs to be changed. The media should be more active in promoting successful young business owners.

The media coverage is important in local, provincial and national newspapers, as well as radio. It is important that young people have a realistic understanding of the amount of work required to start a business, as well as the potential rewards the business could offer.

However, with over 60% of the youth seeing the choice of starting a business primarily as one of necessity and perceiving businesses as a vehicle to do little more than merely survive, it is unsurprising that South Africa has such a low rate of young people with the intention of starting a business.

South Africa, it seems, is failing in its bid to promote entrepreneurship as a viable option for a sustainable livelihood.

This is clearly shown, not only in the youth’s perception of why young people start businesses and of the potential success of the businesses, but also in the attendance at events such as the 2013 Global Entrepreneurship Week (GEW).

The attendance figures of various GEW events in a country, as well as media interest, show stark contrasts between the 1.6 million people in Brazil, the 199 000 people in Barbados and the paltry 2 309 people attending events in South Africa.

What is of further concern is that the Small Enterprise Development Agency (SEDA), a key vehicle in the government’s entrepreneurial policy, was notable in its absence.

The only way we can create jobs is to create an environment for business. Small business matters. It should matter that young people set up their own businesses. We must create an inclusive economy and look at restraints for the economy.


2 thoughts on “The State of Entrepreneurship in South Africa: Youth Entrepreneurship

  1. This article is spot on.What I have also come to learn is most funding or finance institutions are full of so much red tape.Not just red tape but people who have no relevant knowledge of any industry or business experience to begin with and as such they don’t offer an real solutions or aid to.The simple understanding of how important running capital is or the importance if choosing the right location not the cheapest for your business doesn’t make sense to them.All they want to do is always have you start up a big manufacturing plant so you can hire while they have no regard for how you will sustain the business.Or the silly notion of going to tones of expos while you don’t have a simple thing like a store to sell your merchandise.
    Being an entrepreneur is frustrating most days.As building a business in this economy isn’t easy.Some days you do work hard for very little money due to not having excess to the right market.

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