Old Wine in New Bottle

Entrepreneurship Provides an Answer to Youth Unemployment in South Africa

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Julius Sematla's kiosk.

Student Reporter

Julius Sematla’s kiosk.

LIMPOPO, South Africa — Meet 34-year-old Julius Sematla from Mentz village, Limpopo province. Five years ago, he was staying with his parents and jobless. Out of desperation, he bought a few packets of candy to resell, just to get a bit of pocket money. After realizing that he could sell the candy quickly, he thought of increasing his stock and set up a small table, under an umbrella, to sell it.

From selling the candy, Sematla gradually built a small grocery business from the ground up. Today, he owns a small kiosk, a shop and a small farming plot, and he employs six people, three of whom are his younger brothers. He has moved out of his parents’ home into one he built for himself, and he’s built another for his employees. Sematla now lives with his wife and is able to take care of his children, enrolling them at an affluent school. He has even bought himself two vehicles, a family car and a truck for work. He has also been able to afford to buy his parents a car and one for his youngest brother, who is in school. His three younger brothers who work with him have also bought their own cars from their earnings from the shop.

Sematla is now an entrepreneur and is, in his own words, “comfortable and doing well.” Stories such as his have led to the belief that the answer to unemployment is a new paradigm positioning entrepreneurship as themainstay of economic activity. South African government statistics show that small businesses currently contribute 57 percent to the country’s gross domestic product and account for 56 percent of employment, 77 percent in the “informal sector.”

The unemployment rate globally is very high. From the United States to Europe and Asia, and even in rural Limpopo,the number of jobs available is not sufficient for the numbers of people who seek them. According to the International Labour Organization, young people are the most affected segment of people without jobs. The unemployment rate in South Africa is the third highest in world, according to the “Global Risks” report by the World Economic Forum. About 71 percent of all unemployed people in South Africa are between the ages of 15 and 29.

Brand South Africa CEO Miller Matola believes entrepreneurship presents the best solution to solving youth unemployment in South Africa. Amy Rosen, a contributor to Forbes.com, agrees with this, saying that youth entrepreneurship could be the long-term solution to youth unemployment globally as well. The idea of youth entrepreneurship as way to restrain swelling unemployment is not an old one, but perhaps it is now being reinvented to entice not just urban young people but rural youths as well.

Entrepreneurship has become a major priority for South Africa’s government, which created the Ministry of Small Business Development in May. Lindiwe Zulu, the small-business development minister, says that her ministry prioritizes “creating an environment where it is easy to start and sustain businesses. This will help us all because it will grow our economy and create jobs that this country sorely needs.” The new ministry, dedicated to supporting small businesses and entrepreneurial opportunities, is supposed to play a key role in reaching the country’s goal of 11 million jobs created by 2030. Anna Mnguni, a director of the Department of Trade and Industry, a sister department to the Ministry of Small Business Development, told Student Reporter that to promote youth entrepreneurship the government has put in place a Youth Enterprise Development Strategy. “The aim of the YEDS is to promote youth entrepreneurship, youth self-employment and to increase the number of youth-owned and -managed businesses in South Africa. There are 10 programs which are geared towards assisting young people in business and aspiring young entrepreneurs.”

Media Club South Africa believes that the new ministry has the potential to address the considerable socioeconomic challenges that are holding back economic growth and development, such as crippling unemployment, inequality and extreme poverty in many communities across the country.

The South African government has agencies—such as the National Youth Development Agency (NYDA) the Small Enterprise Development Agency (SEDA), the South African Black Entrepreneurs Forum (SABEF) and theSmall Enterprise Finance Agency (SEFA)—that have been created to assist youth entrepreneurship by providing loans and grants, skills development, mentorship, networking contacts and markets for young entrepreneurs. In rural areas, agencies such as the Limpopo Business Support Agency (LIBSA) focus on assisting youth with business opportunities locally. The agency has also identified co-operatives as a key form of entrepreneurship. Through these agencies, 2.7 billionrand ($252 million U.S.) in funding is available to youth entrepreneurs.

Although South Africa has structures, agencies and even a ministry to support youth entrepreneurship, it is important that the funds get to the intended recipients. Sematla says that although he knew there were such agencies that fund young and aspiring, as well as established, businesspeople, he did not have enough information on how to access the funding. “It would be nice if government also invested in communication strategies that make this information easy to get so we have complete knowledge on how to get the funding,” he says.

Entrepreneurial training is also an element that he cites as an important part of entrepreneurs’ success in South Africa. Phistos Mabula, a 40-year-old entrepreneur who runs a small photography business, says that “instead of just government funding only, training is very helpful, because if I get money to start or expand a business without proper know-how, then I will lose all that money to bad planning.” A transformation audit by the Institute for Justice and Reconciliation (IJR) says that a lack of attention to entrepreneurship skills development has led to a significant number of funded projects going bust.

Furthermore, allegations of maladministration have rocked some of these government agencies that help with funding for young entrepreneurs. A bad reputation may lead to a lack of trust in such agencies by those they need to assist.

With the government significantly investing in agencies to fund and support youth entrepreneurship as a way to curb high unemployment, the success of these initiatives depends on both the government and the youths it intends to fund. In rural areas, perhaps more attention is required since there is a huge market base, with almost half the country’s population residing in those areas. The idea of entrepreneurship is not new, just packaged differently: old wine in new bottle.

2 thoughts on “Entrepreneurship Provides an Answer to Youth Unemployment in South Africa

  1. Well, the story of Julius is one of the successes we celebrate in this country. An ordinary citizen standing up for themselves and raising a finger up in a way out of the poverty mud.

    Phistos is on point, training is needed, however, certain questions can’t go unanswered. If the agency that is/will be responsible to train ordinary entrepreneurs on ways to avoid mismanagement of funds is guilty of mal-administration, where are we going?

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