SOUTH AFRICA ECONOMY, POLITICAL ENVIRONMENT AND ENTREPRENEURSHIP
3.1 Youth Enterprise Development Strategy (YEDS) 2013-2023
The unequivocal negative statistics on youths’ unemployment rate and minimal participation in the economy prompted the Department of Trade and Industry (DTI) come up with YEDS as a response of government initiative to identify the cause of the anomaly and to proffer suitable solutions.
YEDS statistics put unemployment rate in South Africa at 25%, this significantly rose to 36%
considering discouraged job seekers and youth unemployment is put at 73% of the total unemployment in the country (YEDS, 2013) Factors adduced to this includes, lack of skills needed by the economy, discouraged job seekers, lack of work experience, employers considering youths as inexperienced and the related cost of training new recruits, mismatch in the exponential growth rate of the population compared to the ability of the economy to absorb the growing job seekers, lack of business acumen, lack of finance, lack of collateral to secure facilities from financial institutions.
Pragmatic response to change the anomaly necessitated the development of this policy document, underlining the intention to provide support, structures, and enablement to young entrepreneurs; to create sustainable and efficient businesses capable of providing decent and long-term jobs. Other mediations included training and guidance, business gestation, removal of bureaucratic-red-tape in business registration and regulations, infrastructure supports, youth entrepreneurship collateral fund and development of system capable of tracking progress for evaluation purposes (Rogerson, 2011; Morrow et al., 2005).
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The policy document highlighted some factors responsible for youths’ seemingly lack of interest in entrepreneurship:
a. High income inequality measured by generalised inequality index (Gini coefficient):
This is measured varying from 0 to 1, with the understanding that, the closer to 1 the more the inequality in income distribution. World Bank Gini coefficient report of 2007 rate South Africa with second highest Gini index, 0.67 in the world, surpassed only by Namibia with 0.74. In 2015, World Bank gave a new report on South African Gini index to be 0.59 from the initial 0.67, although this is still a challenge but it is an improvement on the initial report. One of the factors considered to have caused the decrease in the index, apart from the pro-welfare fiscal policy in South Africa is the ability of the wealthy opting out of utilising public services like health and education.
With reference to YEDS report, the effect of high Gini index is compounded by the parallel growth between GDP and Gini, translating to an uneven wealth distribution among South Africans, despite economic growth. This income inequality is a major factor impeding youth economic integration and development of entrepreneurship (Turok, 2017).
b. Low GDP growth: Stunted and unstable growth rate of the economy is another factor contributing to youth’s low participation in the economy. Pursuing vibrant economic policies tailored towards growing the economy to generate business opportunities for youths and bringing down unemployment is of utmost importance. An analysis of South Africa GDP growth in the recent past showed a growth rate of 3.3% in the second quarter of 2016 a modest increase from the first quarter of 1.2%. The growth can be attributed to mining, manufacturing and real estate accomplishments. GDP growth rate averaged 2.9% from 1993 to 2016, with the highest growth of 7.60 in 1994 and lowest negative growth rate of 6.10% in 2009 (Stats SA, 2016).
48 Figure 3.2: South Africa GDP growth rate 2013-2016 Source: www.tradingeconomics.com /Stats SA
c. Youth’s lackadaisical attitude towards Economic Involvement: The high rate of unemployment among youths in South Africa and the antecedent net loss in business creation can be adduced to youths’ seemingly lack of interest in entrepreneurship.
Stats SA, (2016) report showed 36% of the population as youths. This can pose catastrophic effects on the country with youth’s improper integration into the economic mainstream. Improvement in youth’s economic well-being through employment or business ventures creation is of paramount importance. It is therefore important to address the socio-economical needs of this section of the population.
The parody is that after many years of abolishing apartheid, black youth’s improper economic integration still persists. It is pertinent therefore, for government to look beyond external factors, and channel resources into understanding the psychological impediments to youths’ economic participation. Total early-stage entrepreneurial activity Index for youth (TEA index) and youth unemployment rate are the two main factors used in measuring youths’ low level of economic participation. TEA index increased from 8.9% in 2010 to 9.2% in 2015 (GEM, 2016). This is low compared to the expected 15%. Furthermore, South Africa TEA of 9.2% is inferior related to other efficiency-driven economies.
d. Entrepreneurship and geographical dichotomy: Entrepreneurial activities is widely divided and skewed in the direction of three major provinces, Gauteng, Eastern Cape and Kwazulu-Natal, leaving the remaining provinces with little or no entrepreneurial activity. The uneven spread is another factor responsible for youths’ low level participation. Mpumalanga and Northern Cape has the least activity. Mpumalanga, a
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province with 38.4% youth population (Stats SA, 2016), will most likely be affected by low entrepreneurial activity, with greater effects on the youths.
Figure 3.3: Geographical spread of small businesses in South Africa Source: Youth Enterprise Development Strategy 2013-2023 /FINSCOPE
e. Lack of Administrative, Technical know-how and Business Skills: Large percentage of black South African youths suffered from inferior education, lack of training and business technical know-how as a result of apartheid policy on Bantu education.
Offering of deliberate inferior education contributed in no small measure to black youths’ lack of interest in entrepreneurship. Lack of exposure to entrepreneurial activities at the formative stage is another contributing factor. African youths do not have the opportunity to learn the rudiments of entrepreneurship from home, unlike their white counterparts that gained these necessary skills by assisting folks in the family business. The lop-sidedness in entrepreneurship has been largely addressed post-apartheid era, as entrepreneurship has been added to the General Education and Training (GET) curriculum, however, business skills is far more learned by practical engagement. Figure 3 and 4 showed race and gender profile of small business owners as well as their educational profile. According to this policy, 83% of small business owners are black and more than two-thirds do not have grade 12 certificates,
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emphasising the importance of practical skills as a major contributory factor to entrepreneurial success (Fatoki & Chindoga, 2011).
Figure 3.4: Race and gender profile of small business owners
Source: Youth Enterprise Development Strategy 2013-2023 /FINSCOPE
Figure 3.5: Educational profile of small business owners
Source: Youth Enterprise Development Strategy 2013-2023 /FINSCOPE
51 3.2 National Youth Policy (NYP) 2015-2020
This is a policy document enacted in line with the South African constitution. Enshrined by the United Nations World Economic Programme for Youth to the year 2000 and beyond, supported by the African Youth Charter (2006), the National Development Plan (NDP) 2012 and many other relevant policy documents developed to assist in creating enabling political environment to boost entrepreneurship. South Africa constitution anticipated a country that can be regarded as all-inclusive, flourishing, independent, non- racist and equal society by the year 2030, with a chart to produce a capacity and competence building citizenry.
It is based on this premise that National Youth Policy was developed to ensure the realisation of this projection with emphasis on youths as they occupy a huge percentage of the population. The policy seeks to build competence as a long-term solution among youths to foster their economic participation. The major impetus driving NYP is the ability to create a youth–targeted intervention programmes required to encourage active participation in the economy (Graham & Mlatsheni, 2015; Filmer &Fox, 2014; Rankin & Robert, 2011).
The challenge associated with unemployment among youths is not limited to South Africa but a global phenomenon. The International Labour Organisation (2013) reported that 73.4 million youths are in active search for a job.
Figure 3.6: Youths global unemployment rate 1995-2015
52 Source: ILO, Trends Econometric Model, April 2015
Youth unemployment rate hovered around 11.7% in 2007 shortly before 2008 global meltdown, but rose to 13% in 2010 and has remained within 13% threshold, the increase was as a result of a significant addition in the number of unemployed youths which rose from 70.5 million in 2007 to 75.6 in 2010, and stood at 78 million in 2015.
South Africa, as part of global community, is not immune to this challenge as Labour Force Survey of 2014 placed youth unemployment at 36.1% while adult labour absorption rate stood at 57.8% youths absorption rate stood around 30.8%. Young women are most affected with 34.5% unemployment rate compared to 29.9% for young men (Labour Force Survey, 2014). The psychosocial effect of youths’ inability to secure decent jobs has put enormous burden on the society, and the economy at large. Parents are saddled with responsibilities of taking care of young adults with their pensions and youths cannot move out of their parents’
houses, not to talk of starting a family of their own. This breeds many social vices as a way of expressing their frustration, indiscriminate sex, drug addiction, violent behaviour, diseases, poverty and general menace to the society.
Institute for Security Studies (2013) report gave credence to how unemployment contributes in no small measure to youths’ social ills, putting crime rate at its peak between the age of 12-21, 69% and 59% of death due to assault and self-harm occurred mostly among 15-34 years, HIV prevalence at 36.8% most especially among women between age 30-34; transport related accidents and deaths among youths at 2515 of the total 5698 representing 44%;
assault related deaths at 69% and self-harm at 59% among age 15-34 (ISS, 2013).
National Youth Policy strives to respond to psycho-social and health related issues concerning youths. NYP provides opportunities for previously disadvantaged youths, through inclusion into the system by empowerment and second-chance policies to assist them overcome the conditions that initially put them in that situation.
National Youth Policy 2009-2014 achieved one major feat, it changed government mind-set and emphasised the importance of youth development. It also enables deployment of government resources into planning and development of youth-related policies and programmes. The implementation of this policy in conjunction with other related policies showed an improvement in youth welfare in the last 5 years. The importance of NYP is the framework it provided for other policies within the period under review. However, one major hole was noticed in the policy-minimal private sector participation. It is a global standard that government alone cannot drive the economy in the present-day economic system; mixed-
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economy requires both government and private sector participation. Therefore, the focal point of NYP 2015-2020 is the active involvement of private-sector driven youth development strategy.
Other impairments identified in NYP 2009-2014 include: (a) Youth entrepreneurship involvement strategies lacked impact. (b) There has been an improvement in health-related issues, especially reduction in teenage pregnancy. However, prevalence of HIV/AIDS is still a concern, increase in substance abuse, violent and risky behaviour, all undermined government effort in re-directing youths into the productive sector of the economy. (c)Youth participation in sport has brought about some needed social cohesion, but lack of adequate funding has minimised efforts to foster better racial relations. (d) Inability to finalise the Integrated Youth Development Strategy, assigned to provide blue-print for public sector, civil society and private sector to implement youth development programmes, is responsible for the lacklustre impact of NYP 2009-2014. (e) South African youth’s orientation and treatment of political and economic participation as a prerogative of older people contributed to the minimal success of the policy.
National youth policy 2015-2020 aims to achieve the following: (a) to define and develop more effective interventions by coordinating government’s strategies with private-sector and civil society participation, (b) to consolidate the core of youth development programmes in the country, (c) to develop evaluation procedures to monitor progress (d) and to develop improved interventions.
Intervention strategies of National Youth Policy 2030, among others involve: (a) to improve school system, with focus on entrepreneurship training and development, (b) to strengthen youth service programmes and encouraging youths to engage more in community service, which offers life-skills training, entrepreneurship training, social development training and enhancement of moral uprightness, (c) to place special focus on Technical and Vocational Education Training (TVET) by increasing the number and participation rate-increasing enrolment ratio to 25% and graduation ratio to 75%, (d) to provide funding assistance to children from poor families to enable them pursue their dreams through community centres, thereby, preventing them from going into crime, (e) to encourage employment of youths and inexperienced job seekers by companies through tax incentives to reduce the cost of hiring, expansion of apprentice-ship programmes and increases the capacity of graduate recruitment institutions for public service to attract skilled workforce, (f) to integrate ostracised youths’
and ex-delinquents into productive sector by creating a special avenue void of status
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discrimination to forestall re-offending tendencies (Graham & Mlatsheni, 2015; Filmer
&Fox, 2014; Rankin & Robert, 2011).