African Youth Want to do Business in Fast-growing Economy

Africa’s growing economy is meeting head-on an optimistic young population keen to start businesses. At least that is what a new poll of African youth says, finding that one in five Africans between the ages of 15 and 24 without a current business wants to start one in the next 12 months.

The Gallup surveys (www.gallup.com) of 27 African countries and areas also found young women were just as keen as young men to start a business.

Throughout the decade of the 2000s, Africa experienced an average economic growth rate of 5.4 percent (World Bank) – a big gain from the poor growth rates of the 1980s and early 1990s.

The turnaround in Africa’s economic growth prospects was the product of a number of trends and factors. One has been better policies and easier trade. Other factors include rising tourism, a growing service sector, rising commodity prices, greater demand for African exports in emerging economies and rapidly improving communications: the surge in mobile phone usage during the last five years has surprised many. Africans are also avid spenders on goods and services, spending US $860 billion on them in 2008, more than India’s US $635 billion or Russia’s US $821 billion (Economic Report on Africa 2011).

The African Development Bank predicts Africa’s growth rate for 2011 will decline to 3.7 percent from 2010’s 4.9 percent, largely as a result of turmoil in North Africa. East Africa is projected to grow the fastest this year at 6.7 percent, with West Africa close behind at 5.9 percent.

Africa as a continent collectively had a gross domestic product in 2009 of US $1.6 trillion: equal to Brazil’s or Russia’s. The continent is considered among the fastest-expanding economic regions in the world (McKinsey & Company).

In fact, while economic prospects are grim in many developed countries, Africa joined Asia as the only continents to grow during this recession.

But major problems still confront the continent, among them youth unemployment. Those between 15 and 24 make up more than 60 percent of the continent’s population and are 45 percent of the total labor force (African Economic Outlook). Sub-Saharan Africa is experiencing a youth explosion, with the proportion of youth there to rise to 75 percent of the population by 2015. Demographers forecast this rising youth trend will not stop for the next 20 years.

Getting these youth actively engaged in the economy and society is a major challenge for the continent. Already, 133 million African youth are illiterate. They have few skills and are marginalised from more productive sectors of the economy.

Even those with an education find their skills often don’t match the needs of the labor market. In sub-Saharan Africa, youth unemployment is believed to be 20 percent.

So even with better economic prospects and growing economies and incomes, youth unemployment looms large.

The Economic Report on Africa 2011 (www.uneca.org/era2011/) finds the “persistent high youth unemployment rate is a cause of concern and a potential source of political instability.” Job creation is still not adequate: “The growth rates are still below the levels needed to make a significant impact on unemployment and poverty reduction.”

While Africa will experience higher growth in 2011, for youth it is looking like a “jobless recovery,” according to the report. Overseas investors are mostly throwing their money at the resource sector, which doesn’t create many jobs in the economy.

But for young Africans looking to start a business, the opportunities are there in sectors such as retailing, telecommunications, banking, infrastructure-related industries, resource-related businesses, and all along the agricultural value chain.

The booming communications industry has added 316 million new subscribers since 2000, for example. And all those people now connected need new services.

And once a business is up and running, it is possible to make higher profits in Africa than on other continents, according to the UN. Africa leads the emerging market economies for returns for businesses. This is because competition isn’t as intense and there is still plenty of built-up consumer demand that needs to be met.

All of this means young people willing to start a business and put in the hard work, will have a better chance of reaping the rewards.

By David South, Development Challenges, South-South Solutions

Published: July 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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