By Lucretia Khumalo
My executive role at sub-Saharan Africa’s biggest development finance Institution gives me a helicopter view of the state of youth entrepreneurship and how this ties to unemployment.
Youth unemployment in the South African context is downright scary. Statistics SA’s youth unemployment rate, which measures job seekers between 15 and 34 years old, has consistently been above 30% since at least 2013.
What’s new? In the first quarter of 2024, youth unemployment reached a record 45% – an alarming rate that should wake every stakeholder from their slumber.
Agreed, the aftermath of the global financial crisis that hit home in 2009 has consigned economic growth to tepid levels. More recently, a trifecta of challenges, the Covid-19 pandemic and the social unrest which characterised the country, including flooding in key regions of the country, have greatly impacted the economy, effectively limiting employment and entrepreneur opportunities for youth.
However, amid the challenges, I’m concerned about the pedestrian uptake in youth entrepreneurial ingenuity across key sectors of the economy. Hence my question: As the most impacted by unemployment, shouldn’t youth be the ones leading the charge in crafting innovative solutions that could help their plight?
Make no mistake, I’m alive to the conversations and contestation regarding challenges facing today’s youth, critical of which include the lack of capital which is key to venturing into entrepreneurial activity, lack of entrepreneurial and life skills education and, most importantly, the lack of mentors to handhold their entrepreneurial journey.
In no way does the question downplay the contributions by youth who are working hard to transform their socio-economic fortunes. And they are many. Further to my question: How do local youth-owned businesses fair in growth terms compared to their peers in the rest of Africa where capital and business opportunities are in short supply?
Notwithstanding challenges, I’m obliged to give an honest observation. The plethora of state-owned funding entities, including the Industrial Development Corporation (IDC), the National Empowerment Fund and the Small Enterprise Finance Agency, and various government grant programmes administered by the Department of Trade, Industry and Competition (dtic), negates the argument regarding lack of access to capital.
From my vantage position, I’m hard-pressed to find many youth who have compelling and viable business plan that have been turned away by my organisation. To qualify my viewpoint: each funding application submitted to the IDC is evaluated on its merit. Uniqueness, viability and sustainability are key considerations to approval.
The reason being, the IDC business model implores the Corporation to recover every investment advanced to applicants, hence viability and sustainability of the submitted business plan underpins approval. It’s worth noting that a key attribute of the IDC is its appetite for risk, which is why business funding applications in which applicants have demonstrated a modicum of risk appetite almost always find traction and resonance with the IDC.
For us, the skin in the game that is often referred to by traditional lenders is not always your traditional collateral, but a demonstration of astuteness, viability and sustainability of one’s business concept or plan.
Enter Theo Baloyi
In the course of duty, I have met several industrious youth who deserve to wear the “bootstrap” or self-made badge with pride and honour. Some of them prefer to operate out of the limelight yet they run successful enterprises that employ their peers and contribute significant taxes to the national fiscus.
In this regard, Theo Baloyi’s name, among others, springs to mind. A radical trailblazer, he is a cut from a rare entrepreneurial cloth. The youth identified a gap in a shoe industry dominated by heavyweights such as Nike, Reebok, Adidas and Puma, to mention a few. His Bathu shoe product holds its own turf against international brands that are supported by corporates with deep pockets.
A chartered accountant by profession, Baloyi’s entrepreneurial prowess is stitched in a shoe of resilience. Invited to speak at a recent IDC business gathering, he provided a captivating business experience that left IDC employees in awe. It’s little wonder that his shoe range, Bathu, was voted by respected branding entity Brand Africa as the most admired brand in the country – this amid fierce competition from established brands. The achievement is commendable, given the Bathu brand has barely clocked a decade in the market.
Remarkably, he is not an IDC client, yet I would argue that his success and his high-risk-high-rewards approach has certainly created several funding opportunities. Here is why: not often do entrepreneurs leave the comfort of a cushy job to venture into unchartered waters but the business maverick dumped a well-paying job, the result of which led him to creating a niche product in a fiercely contested market.
Against the temptation to pursue low-hanging fruit, Baloyi demonstrates a few but rare attributes that most youth entrepreneurs lack. His acumen, the viability and sustainability of his business model, his ability to innovate and outcompete established brands, his resilience and perseverance to succeed against odds stands out in plain sight.
You can’t help but marvel at his ingenuity, especially in the face of a skewed economic construct that would have invariably consigned him to the periphery of mainstream economic activity. To my point, youth entrepreneurs who are capable of creating game changing and sustainable employment opportunities are spread across South Africa, but many aren’t prepared to take risks. Which brings another key question to the discussion: What game changing business plans are you keeping to yourselves?
For its part, the IDC approved R3.9 billion over the past five years, in funding to youth-empowered enterprises. In addition, the dtic’s Black Industrialists report shows that the dtic in partnership with its funding agencies, the IDC, and National Empowerment Fund, collectively approved R32.6bn in funding support to more than 900 black industrialists over the past five years – some of whom include youth-empowered enterprises.
The figure excludes private sector funding and other support to youth-owned and empowered enterprises. Need I add, the plethora of funding products offered by public and private sector institutions implores the current generation of youth to embrace the economic opportunities; they certainly are masters of their own destiny. In the absence of risk-takers in the mould of Baloyi and many other youth who are working hard to transform their socio-economic fortunes, we risk reducing June to a habitual but inconsequential Youth Month.
Khumalo is Divisional Executive: Client Services Group at the IDC. She writes in her personal capacity.
BUSINESS REPORT