Sub-Saharan African Youth Among World’s Most Entrepreneurial

Written by Dana Sanchez

Don’t underestimate the ability of millions of young Africans to empower themselves and their communities economically, Mike Herrington writes in a report in BusinessDayLive.

More than half the youth in some African countries are starting their own businesses, according to new research from the U.K-based Global Entrepreneurship Monitor (GEM). Herrington serves as GEM‘s executive director.

Unfortunately, most of these businesses support just the owner financially and never go on to generate much-needed jobs for others. Without significant job creation, their efforts aren’t expected to make sufficient impact on the wider economy, according to Herrington.

Compared with youth in other regions of the world, sub-Saharan African youth lead the way with 52 percent saying they intend to start a business and 28 percent running their own businesses.

European countries, by comparison, perform the lowest with 19 percent of youth expressing entrepreneurial intentions and 8 percent engaged in entrepreneurial activity.

Financing is a significant factor in limiting sub-Saharan African entrepreneurship. Without credit history to satisfy bank regulations, the vast majority of African youth entrepreneurs use their own funds or get help from family. Men generally have more access to banks than women, but even so, the numbers are low, BusinesDayLive reports.

When it comes to financing, Angola performed best out of nine countries surveyed in the GEM report — 35.6 percent of young men reported that they used official financing. By comparison, Malawi reported the lowest use of financing with just 1 percent of men using banks or other institutions to finance their venture.

The GEM African Youth Report studied the circumstances, behaviors and attitudes of 20,000 young entrepreneurs age 18 to 34 over three years in Angola, Botswana, Ghana, Malawi, Namibia, Nigeria, South Africa, Uganda and Zambia.

Results show that there is ambition, desire to succeed and no fear of hard work among African youth. What is missing, however, is government support, or the awareness of existing government support, and infrastructure to grow these businesses.

Uganda has the highest regional rate of entrepreneurial activity, with 56 percent of youth involved in starting or running their own business, but 63.8 percent of these businesses do not create more than one job (for the owner) and just 34 percent create between one to five jobs, BusinessDayLive reports.

This is partly because many businesses are selling undifferentiated products and services in over-traded markets, making it difficult to generate a profit or lead to viable business creativity over the longer term.

In the GEM study, 68 percent of entrepreneurs polled said their product or service was not new to some or all of their customers. Hospitality and retail sectors account for 64 percent of youth businesses in sub-Saharan Africa.

One surprising finding of this new research is that many government initiatives exist for entrepreneurs, but most entrepreneurs are unaware of them.

Governments must do a better job of getting information out in the public about these programs, and of targeting existing and potential young entrepreneurs, Herrington said.