Finding a space between poverty alleviation and high growth– a model for youth enterprise development in South Africa

by Jocelyn Smith

Adapted from dissertation submitted to School of Governance, University of the Witwatersrand in fulfillment of MM-Dissertation, March 2018.


Introduction

Interventions promoting youth entrepreneurship in South Africa assume that there is a central role for entrepreneurship in confronting a range of development challenges. Principal among such assumptions is the belief that entrepreneurship offers a viable pathway for unemployed young people, with the assistance of certain missing ingredients such as finance, training or mentoring, to enter into the economy and create jobs for themselves and for others.

This research interrogates such assumptions and offers an alternate approach towards systemic interventions.A qualitative case study design, comprising 24 interviews conducted in 2014, explored two enterprise support programmes in Mpumalanga and Gauteng, each comprising a majority of youth under 35. The two cases target completely different types of entrepreneurs. Timbali Technology Incubator, in Mpumalanga, seeks to assist rural, uneducated, primarily women to become successful small-scale commercial farmers.

At the other end of the economic spectrum, the high-tech innovative space of the Maxum Incubator at the Innovation Hub outside Pretoria offers opportunity to a certain type of entrepreneur to access technology and business skills, learn from established and emerging entrepreneurs, and commercialise their ideas.

A theoretical framework of transformative learning to negotiate challenges of liquid modernity, or a society undergoing constant and rapid change, underpins the study.

The cases

Timbali’s experience demonstrates how a structured approach to farming and entrepreneurship, called the yellow brick road by the CEO, can help people with few other options enter into the economic mainstream. Successful farmers in this approach are rural,uneducated and do not own their own land or assets, factors usually considered constraints for entrepreneurs.

They are able to change the way they perceive themselves, from employee to entrepreneur responsible for their own incomes.

Timbali’s model is market-driven. A guaranteed market for what farmers grow through a Global G.A.P. accredited packhouse ensures quality products that meet the demands of high-end retailers like Woolworths and Shoprite, export markets, and the Johannesburg Fresh Produce market. The focus on entry into established product supply chains differentiates Timbali’s small-scale farmers from subsistence-level farmers who are only able to sell their produce locally.

The model requires substantial resources and investment in infrastructure and an enabling environment that provides support and specific procedures to farmers at each level of the value chain. This support is offered primarily through a cluster model that allows farmers to achieve the economies of scale needed to compete commercially, share the costs of inputs, and access training in technical farming, business and life-skills.

Through its infrastructure and environment in a technology park, Maxum seeks to produce high growth high impact technology start-up businesses rather than many businesses that operate at above subsistence levels and do not have the potential to grow significantly. It does this through a model comprising product development, market development and professional services, coupled with support infrastructure which is offered to entrepreneurs at little cost. Grants from Maxum’s Start-up Support Fund assist entrepreneurs in the developmental stages of their businesses.

The incubator creates space and opportunities for entrepreneurs to collaborate and create linkages with established players in the corporate sector, including potential investors. Beneficiaries are generally under 35, urban, black and very comfortable with technology. They are also highly educated and employable in the corporate sector.

Through Maxum’s processes, entrepreneurs make important transitions. One of these is shifting from a self-perception as an inventor to becoming an entrepreneur through the commercialising of their products. Doing so requires a mindset shift, and develops through the Maxum model and training, as well as from a hands-on model of mentoring from young, highly skilled mentors who are often entrepreneurs themselves.

Successful entrepreneurs in this space tend to be self-directed in their learning, and recognise the personal growth they have experienced, which includes the ability to adapt to uncertainty. Since they are highly employable, and probably become even more so as a result of their interactions at Maxum, they have to learn to take a long-term view for growing their businesses. Those views may be at variance with those of their peers who have been socialised into finding employment that can deliver more immediate material rewards to themselves and their families. Such changes require personal transformations for entrepreneurs.

Debunking myths about youth entrepreneurship and reframing perceptions

There is a pressing need to do something about youth unemployment in South Africa.Entrepreneurship is one strategy that, if conceived differently, could enable the inclusion of some previously marginalised people into the economy. It plays a direct role for small numbers of people but it can have a wider impact. Findings show how assumptions embedded in policies promoting youth entrepreneurship are paradoxical, contributing to their failure. Youth entrepreneurship can contribute strategies to help navigate effects of liquid modernity and develop know-how if perceived as niche activities, achieved with appropriate support. It is not for everybody.This research shows that entrepreneurship cannot contribute to economic growth, redistribute wealth, alleviate poverty, include people and create jobs all at once. Although these are all important objectives, they each present different challenges. The situation in South Africa is further complicated by redistributive legislation that mostly leads to unproductive entrepreneurship. The inclusion aims of entrepreneurship do not mean pushing young people into self-employment who are not suitable for it, or into saturated and overtraded markets where they are unable to compete effectively.

Research on employability policies for young people in South Africa, and in other countries grappling with similar challenges, such as Spain, highlights how notions of employability have been reformulated to focus more on entrepreneurship, with an almost mythical representation of entrepreneurs as having the personal qualities to make up for what they lack in financial and other systemic support. Researchers criticise the growing emphasis on individual responsibility in response to the increasing vulnerability of young people in an under-performing, changing economy characterised by growing casualisation of employment. The very skills necessary for entrepreneurship development are precisely what these young people lack. There is much to learn from Timbali and Maxum in formulating strategies for youth entrepreneurship in South Africa.The first lesson is that entrepreneurship is clearly not an escalator that moves young people not in education, training or employment (NEET) upward into the economic mainstream people en masse. The failure of many of these attempts is predictable and has many negative social and economic effects. Some of these effects are the increased indebtedness of young people who obtain loans for unsustainable businesses, unwillingness to engage in other ventures and anger at an economic system that excludes them. They need to create conditions for a rope ladder which individuals can climb, rung by rung.

Effective policies on youth entrepreneurship in South Africa should stand independently of job creation or poverty alleviation, and even of youth unemployment strategies. The state’s responsibility to rectify structural challenges to the economy is a different challenge to exploring an alternative approach to systemic intervention in youth entrepreneurship development. Systemic policies and interventions can make a difference if they are reframed to draw on more realistic assumptions about entrepreneurship, and if they factor in the role of the individual.

The vague assumption of an entrepreneurial continuum does not apply to this study, and probably not elsewhere. Possible niched approaches include structured ones for levels above subsistence, such as Timbali’s, and one for potential high-growth technology start-ups, such as Maxum’s. There is an important role for the high-tech start-up sector, which presents an opportunity for certain young people to excel. It plays to their strengths. Although it does not offer a perfect system, Maxum is an example of this. It is a model well-suited to a segment of young people in South Africa.Young, educated, black South Africans have come of age in a technological society and are emerging from higher education to an environment of new opportunities, especially those created by new technologies.

Economies throughout the world need this type of entrepreneurial model in order to stay relevant and embrace the pervasive technological disruption of the twenty-first century.This niche requires investment in an ecosystem, or environment and infrastructure that enables people to commercialise their ideas. Such an environment necessitates partnerships between technology and innovation agencies, government agencies, funders and academic institutions. The outcomes of a high-tech high growth niche for young entrepreneurs are limited to a certain number of people, both because of the skills required from entrepreneurs, and the resources required to support them. They create economic impact through the spillover effect they have on secondary businesses and services.

The yellow brick road shows that it is possible to address poverty alleviation and unemployment fora small group of appropriate people at the lower end of the entrepreneurial spectrum by offering a franchise-type system that manages the need for innovation and investment in technology on the one hand, and access to a supply chain on the other, at least in the initial stages. This requires some kind of easily replicable approach, with high levels of infrastructure and support. This niche offers a more developmental approach, helping largely uneducated, unskilled individuals take advantage of existing opportunities by creating a structured environment that helps to incorporate them

Recognition that entrepreneurship development must help transform individuals underlies both. These examples strongly suggest that simply making economic opportunities such as entrepreneurship available for young people will not succeed unless they are accompanied by the type of personal growth that enables people to ultimately view themselves differently.

Timbali farmers’ self-identity needs to transition from employee to entrepreneur, Maxum entrepreneurs’ from inventor to entrepreneur. Niches for young entrepreneurs should help them to navigate constant and rapid changes, or liquid modernity through a process of transformative learning. Necessary skills to help young people to this are personal empowerment, adaptability, and the ability to embrace uncertainty. This entails the development of a more entrepreneurial mindset which is achieved by creating conditions for young people to make changes to their perceptions of themselves that occurs in parallel with other assistance.

Conclusion

This research sheds light on how the shifts in perceptions of identity and agency, experienced both by the entrepreneurs themselves and by the people who assist them in these programmes, are achieved through transformative learning. Acknowledging what in their history, culture, world-view or family beliefs holds people back from adapting to new circumstances, and then reintegrating this into a renewed sense of identity, is the goal of transformative learning.It also shows how assumptions about simultaneously addressing a range of development challenges simultaneously through the promotion of entrepreneurship, especially for young people, are misplaced and contribute to continual failure and waste of resources. Entrepreneurship development, of itself, is not a flying carpet that can transport masses of young people into the modern world or into productive lives, nor move a sluggish economy into a high-performance zone.

An alternative conception of productive youth entrepreneurship as an important contributor to inclusive growth and the development of know-how stands a better chance of optimizing the dividends of a youthful society and overcoming developmental challenges. Understanding the need for some transformative learning among young entrepreneurs can increase the potential effectiveness of youth entrepreneurship programmes. This can be done through the development of a mindset and skills such as adaptability, problem-solving and initiative. The required mindset, adaptive skills and attitudes will not only help a portion of young people to negotiate a changing world but to shape it as well.

Jocelyn Smith is an experienced Development Consultant with a demonstrated history of working in the research industry. Skilled in Strategic Planning, Event Management, Research, Management, and Non-Governmental Organizations (NGOs). Strong consulting professional with a BA, H Dip Ed, H Dip Ed Adults focused in Education, Adult Education from University of the Witwatersrand.

Editor's note: This research does not represent the original work or views of African Leadership Academy or the Anzisha Prize.All credit and copyright belongs to the author. 

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