Photo: Jono Erasmus/Shutterstock
Making entrepreneurship work for Africa’s youth
By Ada Osakwe, Founder and Managing Partner of Agrolay Ventures and Nuli Juice Company
By 2030, over 40% of global youth population will be African and by 2050, the number of African youth is expected to reach 830 million. This growth trend is exciting given the potential of young people in the workforce to unleash a demographic dividend that is positively transforming millions of lives.
Unfortunately, Africa’s youth boom may not drive the expected economic growth and wealth creation because more than 1 in 4 young people in Africa’s economies are not in employment, education or training (NEET).1 The African Development Bank estimates that each year, up to 12 million young people in Africa enter a workforce that has only 3.1 million jobs available and consequently, 1.7 million new jobs must be generated monthly to meet employment needs.
Entrepreneurship to create jobs
The lack of productive, formal employment is increasingly pushing Africa’s youth to start their own businesses as entrepreneurs. Africa prides itself on the highest rates of entrepreneurship in the worldwith more than 1 in 5 working-age Africans starting a new business and more than three-quarters of young people planning to start one within five years.2
Africa boasts the highest entrepreneurship rates in the world, with more than 1 in 5 working-age Africans starting a new business and more than three-quarters of young people planning to start one within five years.
The challenge is that this entrepreneurship is mainly self-employment in the informal sector, what the International Labor Organization classifies as “vulnerable employment”. Ninety-five percent of Africa’s working youth fall into this category,3 compared to less than 50% in the Americas, Europe and Asia. Vulnerable employment is reflected in low productivity, low wages and difficult working conditions.
Whether in the informal or formal sector, entrepreneurship in Africa is often plagued by problems that include but are not limited to:
- Lack of access to the appropriate financial instruments required to start, maintain and grow a business.
- High operating costs due to inadequate infrastructure.
- Poor macroeconomic conditions.
- Government policies do not support business.
Combining these issues with low levels of economic growth and poor social protection systems, African economies are expected to face even more youth employment challenges in the future.
As an entrepreneur, I have experienced most of these obstacles firsthand. In 2016, I started Nuli Foods, a medium-sized agribusiness that produces nutritious drinks with locally grown fruits and vegetables. Nuli has contributed to Nigeria’s economic landscape by creating jobs for the youth, reducing post-harvest losses, generating stable incomes for smallholder farmers and giving Nigerians access to better nutrition. However, building this business encountered significant challenges, such as difficulties securing financing from banks and public agencies, high operating costs, crippling inflation rates, and instability in government policies.
Despite the myriad challenges facing anyone trying to set up a business in Africa, African youths continue to have a strong entrepreneurial spirit, leading to entrepreneurship being seen as the solution to Africa’s labor malaise. This is fueled in part by the growing influence of digital technologies that provide new opportunities for innovation across sectors. Consequently, over the past decade, billions of dollars have been committed to the development of Africa’s entrepreneurs. However, most public and donor-funded youth projects fail to adequately provide the systemic support that Africa’s young entrepreneurs need. For example, a recent one Voxdev The report states that approximately $1 billion is spent annually on entrepreneurship training in developing countries.4 The report also points out that the returns from these investments have no economic and social impact.
Rethinking Entrepreneurial Job Creation in Africa
We must begin to review the entrepreneurship support models that exist in Africa to ensure that young people are not blinded by a false narrative of future wealth and stability. Academic institutions, governments, donors and capital providers should be more intentional about fostering a more conducive environment for the growth of entrepreneurship with the intention of creating jobs on a massive scale in Africa.
To achieve this, one approach to be considered is to provide focused support to ‘SME Eagles’.
Micro, small and medium-sized enterprises (SMEs). 80% to 90% of jobs on the continent, making them important contributors to socio-economic development. Among them are businesses that have shown remarkable resilience because they have perfected their business models, built strong business structures, grown revenues and expanded their operations despite facing the African challenges described above. These businesses can be referred to as SME Eagles.
Micro, small and medium-sized enterprises (SMEs) account for 80% to 90% of jobs on the continent, making them important contributors to socio-economic development.
SME Eagles have the capacity to provide stable, wage employment for millions of young people, acting as anchors that create and sustain jobs. An example is a 150-ton-per-day milk processing plant in northern Nigeria, owned by a 30-year-old businessman. To meet the factory’s needs, this entrepreneur has developed an efficient ‘stand-alone’ model with milk collection centers where rural farmers, the majority of whom are young and women, deposit their milk daily in exchange for an income. Today, 18,000 farmers are part of the network of this SME Eagle, after just one year of operation. That’s 18,000 new, permanent jobs, with the potential for thousands more as the plant expands production.
Wage employment also occurs when new businesses are created. Because SME Eagles are tried, tested and mentored by experienced entrepreneurs in a proven market, replicating their businesses prevents failure for new entrepreneurs. Socially innovative franchising programs that match youth with these businesses can be explored, particularly in sectors that have the highest impact potential. They enjoy the advantage of jumping into the trial and error stages of entrepreneurship because SME Eagles will share with them their processes and business models, as well as the comfort of building an already proven business that has existing market demand. In addition, these young people will also receive substantial leadership training, mentoring and business structure support.
Catalyzing job creation by entrepreneurs with SME Eagles will require the provision of affordable capital through blended finance mechanisms. For example, grants and other concessional funds, credit guarantees, interest rebates and other tailored financing solutions could be made available to acquire the franchise operations of an SME Eagle or to establish SME Eagle business liaison programs.
Ultimately, for entrepreneurship to live up to its job creation aspirations, SME Eagles must be enabled to thrive. Focusing financial and policy support from government, donors and the private sector on SME Eagles mitigates the high risk of entrepreneurial failure. By providing supportive business policies and institutional support, effective government regulations and incentives, workforce training subsidies and affordable financing to these already low-risk, high-impact and high-productivity local SMEs, a more resilient form of entrepreneurship will emerge, leading in stable job creation and inclusive economic development for Africa’s youth.
More from Foresight Africa 2024
Development finance
![Chapter 1 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2024/01/foresight-africa-2024-chapter-1.jpg?w=500)
![Chapter 1 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2024/01/foresight-africa-2024-chapter-1.jpg?w=500)
Development finance
In Chapter 1, our authors share policy options for addressing the economic challenges facing Africa.
Climate change
![Chapter 2 - Outlook Outlook Africa 2024](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-2.jpg?w=500)
![Chapter 2 - Outlook Outlook Africa 2024](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-2.jpg?w=500)
Climate change
In Chapter 2, our authors address the existential crisis of climate change.
Digital economy
![Chapter 5 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-5.jpg?w=500)
![Chapter 5 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-5.jpg?w=500)
Digital economy
In Chapter 5, our authors consider policy options to unlock the potential of the digital economy.
Genus
![](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-6.jpg?w=500)
![](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-6.jpg?w=500)
Genus
In Chapter 6, our authors explore the ways in which African women and girls are increasing opportunities for all.
Governance
![Chapter 7 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-7.jpg?w=500)
![Chapter 7 - Africa 2024 Foresight Study](https://www.brookings.edu/wp-content/uploads/2023/12/foresight-africa-2024-chapter-7.jpg?w=500)
Governance
In Chapter 7, our authors delve into ways in which African leaders can regain the trust of their citizens.