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South Africa’s youth unemployment problem: What we need to know

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South Africa’s youth unemployment problem: What we need to know

28th May 2015

By: In On Africa IOA

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Youth unemployment in South Africa has reached critical proportions: it was measured at 53.6% in 2013, and in 2014, youth comprised 41.8% of the total national unemployment rate of 25.4%. Socio-economic inequality and inadequate education are two factors that drive such high unemployment rates; rates that disguise how the situation disproportionately affects black youths.(2) Youth unemployment is a chronic problem too, which dates back two decades under ANC leadership. Between 1995 and 1999, unemployment for high school graduates entering the job market jumped by 10 percentage points, from 28% to 38.4%,(3) and the youth unemployment rate was actually a shade higher in 2005 (48.4%) than it was amid the global financial crisis in 2009 (48.2%).

Another contributing factor to the alarming youth unemployment figures, and unemployment overall, is the jobless growth occurring in South Africa’s economy. As the national economy now creates fewer and fewer jobs and top-down government job creation initiatives have proven ineffective, policies geared towards bolstering youth employment through alternative means are essential. Youth job creation will require a mix of policy tools and levers to create opportunities for this demographic and take advantage of new and neglected markets. Given how the trend in youth unemployment intersects with jobless economic growth in South Africa, a concerted effort should be made to shift the focus toward fostering entrepreneurship among youths. Doing so could be one of the most effective means to mitigate both unemployment and social affliction in disadvantaged communities.

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Who exactly are the unemployed youth and what is at stake?

Unemployed youth are defined as those able to work and seeking employment, but unable to secure a job. Although youths are understandably less economically active in the traditional sense at the onset of their eligibility to enter the labour force, employment in these formative years is nevertheless crucial for nurturing one’s career development. Young people in employment gain the soft-skills – confidence, discipline, work ethic, accountability, interpersonal skills – necessary to navigate the challenges of the modern job market. It is equally a time to harness the advantages of being young, idealistic and driven to succeed. However, with South Africa currently forecasted to achieve only modest GDP growth of between 2.2% and 2.7% for 2015-2017 — growth well below the 5.4% level envisioned by the government in its National Development Plan necessary to meet its target of creating 5 million jobs by 2020 and 11 million by 2030 — a growing number of South Africa’s unemployed and marginalised youth will not benefit from the economic status quo. Instead, this generation of South African youth, especially those with lower levels of education and in locations less accessible to infrastructure and services, face diminished chances for social mobility and employment. If this trend continues it will translate into increased social inequality and alienation, an underperforming economy, and lower tax revenues for the government in the future.

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The risks of long-term unemployment are dramatically higher for black youths, as they must often contend with adverse living conditions and social circumstances on top of the lack of availability of employment opportunities. With many black youths living on the outskirts of economic centres of activity, travel and administrative costs involved in a spirited job search quickly become expensive and unaffordable to those most in need of employment.(4) Youths – black youths in particular – must be able to access job opportunities where they live. However, at the moment, for those in poverty the informal economy typically presents itself as an unavoidable first rung on the economic ladder to employment and financial independence. More often than not this entails low wages, unsafe working conditions and no social security. Such inadequate employment is unable to meet the needs of individuals either monetarily or through providing a means of sustained productivity. Like the unemployed, the underemployed also experience lower levels of health and exhibit a tendency to engage in high risk behaviours due to forced idleness, leading to negative outcomes such as involvement in crime, substance abuse and early pregnancy. The higher incidence of these situations in poor communities – those with the greatest number of unemployed – creates a vicious cycle whereby outside businesses are less inclined to enter into these communities, further depriving the youth that live there of job opportunities. South Africa’s youth unemployment crisis thus calls for solutions that consider the effects of poverty and social afflictions on black youths’ chances of securing gainful employment.

Furthermore, youth employment matters beyond macro-economic indicators; South Africa’s current generation of youth represent its next generation of leaders in business, government and civil society, and if too many remain unskilled and semi-literate, socio-economic inequalities will persist and intensify. More specifically, as black youths experience exclusion from the mainstream economy, not only are their skills progressively devalued, but their capacity to exercise citizenship is simultaneously diminished. For the generation dubbed the “Born Frees”, this is a cruel paradox: despite political enfranchisement, far too many of South Africa’s black youth now currently look forward to only a meagre chance at a prosperous future.

Looking ahead

Economic growth should, in theory, engender the conditions necessary for creating jobs. However, the reality in present day South Africa is that restrictive economic policy, a bloated public sector and rigid labour regulations are placing a drag on growth;(5) and whatever benefit is accrued from present (and backsliding) growth remains inaccessible to the demographics most in need (i.e. black youth). To counter this, the market, entrepreneurs and formal, and even informal, businesses need to be enabled to fulfil their potential. They are the economic agents that are best designed to spark inclusive job creation and economic growth – the type that benefits the communities in which businesses and entrepreneurs are embedded. With this in mind, the appropriate combination of policies by government, together with partnerships between private businesses and the non-profit sector, could lend a coordinated approach more capable of solving the issue.

Top-down initiatives such as the government’s Extended Public Works Programme (EPWP), launched in 2004 and sold to the public as an means of short to medium-term labour absorption and income generation for poor households, have proven they cannot adequately address youth unemployment. The function of government should rather be to create an economic environment for business and entrepreneurs that has fewer barriers to entry; more effectively incentivises the private sector to implement skills development programmes for youth; and fosters attractive legislative and economic conditions that attracts levels of foreign direct investment that can be parlayed into a more sustainable and diversified economy. The way to create job opportunities within impoverished communities lies not in relying on imposing external economic schemes, but in providing the means through which aspiring entrepreneurs within these communities can launch their own business ideas and gain access to the formal economy.

There is also a large role to be played by social enterprises in solving youth unemployment. These are businesses that are able to turn a profit while concomitantly providing products, services and work experience opportunities that are lacking in the surrounding community. The classic example is a community food garden that takes on local labourers and sells its produce to local families. In South Africa, social enterprises – largely focused in the community development sector – are able to generate work while also using the time participants are involved in work-related programmes to broach underlying personal issues that emerge out of the inherent effects of poverty.

Existing South African non-profit organisations (NPOs) such as Etafeni, (6) Learn to Earn (7) and Sparrow Schools (8) are three examples of NPOs that understand the necessity of essential life-skills training and engage in community-based social enterprise activities to be more self-sustaining. Through their programmes, they absorb youth who must deal with the personal effects of disability, teenage pregnancy, alcohol and drug addictions, dysfunctional family situations, or semi-literacy deriving from poor public education, and offer them skills-training programmes and income-generation schemes that cater to their specific psycho-social needs. As social enterprises grow and establish a more physically rooted presence in their communities, they also create job opportunities for local community members – not only through their need for direct staff members, but also through their need for the services of builders, caterers, security guards, cleaners, couriers, and the like. In this way, these enterprises act as feeders for the formal economy, positioning youths to be more successful as entrepreneurs and helping more youths transition out of the informal economy, all the while stimulating economic activity in the surrounding community.

To encourage youth entrepreneurship in an economy experiencing jobless growth, the trick is to properly incorporate youth with the requisite skills and work experience into the mainstream economy and provide them with the support necessary to overcome early obstacles and challenges. One option to consider – and a role government is well-suited to play – is to accelerate funding and coordination to further the establishment of entrepreneurship incubation programmes. These incubation programmes can help to increase success rates of new businesses by providing aspiring entrepreneurs with start-up capital and micro-loans, skills-training, professional development and mentoring, and by exposing their ideas to outside investors. Successful examples of such incubators include i-CRE8 South Africa, an idea innovation incubator created by YouthLab that targets 18-30-year-old youths, and Shanduka Black Umbrellas, an NPO that offers targeted support for 100% black-owned businesses. Entrepreneurship incubators offer networking opportunities as well as legal and financial advice; but more than that, they help to “close the skills gap” by providing young entrepreneurs with the pragmatic skills necessary to launch their ideas, and they expand a national dialogue and positive culture around youth entrepreneurship.(9) Incubators, moreover, help the youth believe that their entrepreneurial ideas are achievable.

An encouraging government policy in this regard is the Youth Enterprise Development Strategy (YEDS), a programme launched in November 2013 by the Department of Trade and Industry (DTI) to “promote youth self-employment and youth-owned and managed enterprises.”(10) Also, startUP&go, a joint initiative begun by the International Labour Organisation (ILO) and over 60 secondary schools in the Free State province, offers a curriculum meant to cultivate learners’ interest in entrepreneurship and has led to a “statistically significant increase” in learners wanting to start their own business after graduation compared to those that did not participate in the course.(11) Although top-down government job creation schemes have proven ineffective, these are two examples of the way that government can play a leading role in the support and promotion of youth entrepreneurship. Doing so would encourage more youths to create and pursue their own entrepreneurial ideas and create their own businesses rather than relying on government or third parties in the private sector to extend job opportunities their way.

Youth employment matters

Entrepreneurship in an economy experiencing jobless growth does two things: It can cultivate a strong work ethic and develop life and professional skills among youths with no employment opportunities elsewhere; and it stimulates economic activity without resorting to inefficient top-down job creation schemes from government. Entrepreneurs take advantage of market gaps by developing goods and services to the benefit of consumers and, in the case of social enterprises especially, wider society. This is the key to re-engineering jobless growth: creating new markets and stimulating economic activity in a way that leads to a rise in employment levels in the communities that require it the most. Therefore, the solution for this category of unemployment does not lie in public sector-driven job creation, but rather in supporting aspiring entrepreneurs to put their innovative ideas into action. In South Africa, entrepreneurs and social enterprises – with the support of government and help of start-up incubators – can act as feeders for the formal, mainstream economy. Furthermore, they can address the socio-economic challenges present within impoverished communities while also aiding in their development through job creation for community members. Making this happen will increase the participation of South Africa’s youth, and black youth in particular, in the labour market — something crucial to South Africa transcending the socio-economic inequality that still persists in the country despite being more than two decades removed from the end of apartheid.

Written by Motlalepula Mmesi (1)

Notes:

(1) By Motlalepula Mmesi. Contact Motlalepula through Consultancy Africa Intelligence’s South African office (officesa@consultancyafrica.com). Edited by Liezl Stretton. Web Publication Manager: Claire Furphy.
(2) Moreover, among black youths, women experience higher levels of unemployment than black males.
(3) Lehohla, P., ‘The South African labour market: Selected time-based social and international comparisons’, Statistics South Africa, 2002, http://www.statssa.gov.za.
(4) Banarjee, A., et al., ‘Why has unemployment risen in the new South Africa?’, 25 June 2008, http://www.mit.edu.
(5) ‘OECD economic surveys: South Africa’, Organisation for Economic Co-operation and Development (OECD), March 2013, http://www.oecd.org.
(6) Etafeni runs a Fit for life, Fit for work programme that mentors youths in Cape Town. The programme first addresses evident psycho-social issues and then readies participants for the job market with relevant skills training and guides the search process. For more information on the programme, visit http://www.etafeni.org.
(7) Learn to Earn takes on a holistic approach to mentorship and skills training. The organisation independently conducts community and market research and analysis and programme participants are encouraged to personally contribute to the costs of the training they benefit from, creating a sense of ownership. To learn more about the organisation, visit http://www.learntoearn.org.za.
(8) Sparrow Schools provides a holistic approach to education and work experience for learning disabled children and youth to cultivate an interest in and desire to pursue vocational disciplines vital to the national economy, but typically labelled as menial work—carpet laying, welding, cooking, carpentry, mechanics, etc. For more information on the organisation and its programmes, visit http://www.sparrowschools.co.za.
(9) Pinelli, M., ‘Part 2: Avoiding a lost generation: Ten key recommendations to support youth entrepreneurship across the G20’, EY, 2013, http://www.ey.com.
(10) ‘Strategy to boost SA youth employment’, South African Government News Agency, 12 November 2013, http://www.sanews.gov.za.
(11) ‘Short-term impact of the startUP&go entrepreneurship education programme in South Africa’, International Labour Organisation (ILO), 12 February 2015, http://www.ilo.org.

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