The only good thing that can be said about South Africa’s high unemployment rate is that it is so dire that it might finally spur the society-wide entrepreneurial movement needed to fix them, says David Morobe, executive general manager for impact investing at Business Partners Limited.
With 25 million South Africans who are supposed to be economically active unemployed, against 14.9 million employed, joblessness is no longer the problem of the poor – it is clearly everyone’s problem. “This situation is untenable. If we don’t change it, something will have to give,” says David, who believes the solution lies in a holistic programme of entrepreneurial development aimed at the youth that will require participation from all sectors – including government, corporates, schools, unions, communities, and business owners.
It is a movement that cannot wait for our education system to improve, load shedding to stop or municipalities to fix and expand infrastructure. It must happen alongside these improvements, or despite the lack of them. It has never been clearer that government, although being the single biggest employer, is in no position to create the required number of jobs, says David. Of the 14.9 million employed South Africans, 2 million work for government already. If anything, government will need to implement measures that create enabling environment to grow the economy and create jobs.
Likewise, looking towards the corporate sector for job creation is unrealistic. Worldwide, corporates seek out productivity improvements, not more workers, and emphasise automation to drive their growth.
The answer is to unlock the talent and energy that are present in South Africa’s youth, including among the 63.9% of them who are unemployed.
David points to Lekau Sehoana who, as an unemployed school dropout from Tembisa, one day fixed and spruced up a pair of torn sneakers to sell, launching the Drip sneaker brand and retail group that has so far grown to twenty stores countrywide. If such examples can spring spontaneously from the fertile soil of innate South African talent, then it can be identified, nurtured and scaled to make a significant impact on the unemployment rate.
For David, such a movement must start at the community level with recognition from local leaders, teachers, business owners, workers and households that required jobs will not be forthcoming from big businesses and government, that we need an entrepreneurial movement, and that it will require input from everyone.
The basis of an entrepreneurial movement must be the development of skills that will allow young people to start producing goods or providing services around which they can build businesses. For this, you need doing skills, business skills and entrepreneurial skills, says David.
Doing skills are technical abilities such as carpentry, plumbing, building or coding. Business skills include basic competence in fields such as bookkeeping, planning, marketing and price calculation, and entrepreneurial skills include the knowledge of where to look for business opportunities, how to spot them and where to find resources to exploit them.
Where schools and colleges already teach these skills, they can be strengthened by, community support and the encouragement of enrolment and course completion. Where such training is not available, community participation can lead to the establishment of night schools and learning clubs for entrepreneurial education.
Unemployed youths who are already trying out some form of business activity must be identified and mentored. The role that successful local business owners can play here is vital. Mentorship can range from occasional advice and encouragement to intense interventions such as apprenticeships. Small orders placed at their businesses can propel young entrepreneurs to the next level and enrich the supply chain of established businesses.
Funds aimed at financing youth enterprises need to be revitalised and expanded, and bank as well as non-bank financial institutions can be incentivised to lend to youth entrepreneurs, says David.
The brunt of South African youth unemployment is borne by the underdeveloped economic nodes, says David. It may be natural for entrepreneurial development programmes to gravitate towards urban areas where resources and markets are concentrated, but deliberate efforts must be made to boost entrepreneurship in the countryside.
If anything, says David, the underdevelopment of the rural areas is an opportunity where certain businesses that struggle in overtraded cities can thrive. The success of major retail chains’ ventures in far flung rural centres such as Thohoyandou illustrate there is still untapped and underestimated potential of the rural economy.
Starting any business is a complicated project that can take years, and many tries to come to fruition. So is the creation of an entrepreneurial culture of resilient, self-reliant individuals. There is no easy fix. It will take whole communities, many attempts, and contributions from everyone to succeed, says David.
What young entrepreneurs can do to plug the experience gap
To start and grow a business you need huge amounts of energy. You need to be quick and flexible in your thinking, and you need to be able to learn constantly. It also helps to be unencumbered by family responsibilities and financial commitments. On the face of it, therefore, it seems that entrepreneurship is suited for young people.
Yet most entrepreneurs start their own businesses in their late thirties and forties. One reason is that it takes a while to save up the capital needed to start a business, although a lack of money and resources can be overcome by starting small, hustling, and growing organically.
A much bigger obstacle for young entrepreneurs, however, is their lack of experience. Working as an employee for several years, especially if you move up through the ranks, teaches you not only the technical aspects of an industry, but also how teams and organisations work, how to manage people, how organisations interact, the formal and informal rules of business – in short, it teaches you how the world really works.
Young entrepreneurs must learn all of this on the trot. Many do so by trying, failing, and starting over. There are, however, several ways in which you can limit the number of errors and failures that will stem from your lack of experience (For experienced business owners, this is the advice you can share with young entrepreneurs around you.):
- Keep your day job for a year or two longer: When starting their own business as a weekend or evening side-hustle, most entrepreneurs use revenue as the main indicator of when to step out of formal employment. As soon as it looks like the business can sustain them, they resign and become full-time entrepreneurs. Or the prompt might be reaching a certain level of savings that will become their start-up capital. Another consideration, often overlooked, is to aim to reach a certain level of competence. It is difficult to measure, and there is also the danger of becoming trapped in employment if you stay too long, but work experience must be part of your decision making. Where possible, set a clear goal – like twelve months in a new position or the completion of a work project – before you resign. Work experience is good capital.
- Study part-time and do your assignments on your business: Book learning and course work can only teach you so much about the world, but it can certainly fill in some of the gaps related to a lack of experience. As difficult as it is, many successful business owners have done business-management courses at night. They invariably find it most useful when they can base their course assignments on their own business.
- Recruit experience: Many successful entrepreneurs are not intimidated by people who know more than they do and seek out experienced workers in fields where they lack knowledge. A well-known example is Mark Zuckerberg of Facebook, who appointed the vastly more experienced Sheryl Sandberg as his chief operating officer. Together, they oversaw the fastest growth in the history of Facebook, and of any company ever. Experienced workers are expensive, though, so make sure they have very clear performance targets that fit in with the revenue growth of your business.
- Partner with experience: One way to overcome the problem of the high cost of recruiting experienced managers is to partner with someone with lots of experience, especially in the field about which you know least. Obviously, it is not a decision to make lightly. All the factors of a good business partnership must be present – a shared vision, shared values, good chemistry, and the ability to communicate well.
- Seek out mentors: You can tap the wisdom of experience without having to employ or partner with someone if you actively seek out mentors. Mentorship relationships can range from formal paid-for consultations to informal chats over coffee or beer. Informal mentorship sessions can lead to formal ones or vice versa. Don’t be shy to approach experienced people for advice. Many retired business people enjoy being the expert, and derive great satisfaction in seeing their ideas make a difference. But be willing to pay for it where appropriate – it can be a great investment.
- Read widely, travel widely and network widely: When you start a business, you are most probably not going to have much time for anything else, and your focus is likely to narrow down on your business and its immediate surroundings. Make an effort, however, to keep a view on the wider world. Scan reliable sources of news regularly to stay informed and build your general knowledge. Look for opportunities to travel for your business, or for pleasure if you can. And make time to meet people. Lots of helpful ideas and information can come from far outside of your business and your industry.
Don’t be afraid to start over: Accept the fact that you might fail because of your lack of experience. A statistic often quoted is that the average business owner in the US has failed four times before becoming successful. Even if the number may not be completely accurate, the general principle is true: failure happens often when you start a business, and it can be an important part of your success story when you start over again