By Prof Wim Naudé*
Until COVID-19 hit, the quality of life of youth (age 15-24) in sub-Saharan Africa had been steadily improving. According to the World Bank, by 2019 the youth literacy rate stood at 73%. Gross secondary school enrolment rates increased from 13 % in 1971 to 43 % by 2018. Youth unemployment rates have remained fairly stable, at around 9%, even below the world average of 13.6%.
Across sub-Saharan Africa, extreme poverty among young workers declined from 60% in 1999 to 42% in 2019. Moreover, the youth literacy gender parity index, measuring the ratio of females to males ages 15-24 who can both read and write, has improved significantly, reaching 93% in 2019. And for this first time, the unemployment rate of young women are similar to that of young men (9.4%).
As an economist interested in entrepreneurship and technological innovation, I recently contributed to UN’s 2020 World Youth Report. In particular, chapter 4 of the report concerns how the youth can leverage new digital technologies for social entrepreneurship to advance sustainable development. Though written before the COVID-19 pandemic, the message may have become even more urgent. This, because COVID-19 may slow down or even reverse the positive trends in youth development noted.
There are fears that the pandemic will result in a lockdown generation, characterised by structurally higher youth poverty and unemployment.
Lockdowns, by slowing down the spread of the disease, generate benefits that “accrue disproportionately to older households”. But, the costs of reduced economic activity are disproportionately born by younger households. They bear the “brunt of lower employment”.
Younger people, especially young women, are more intensively employed in sectors such as hospitality and entertainment. About 80% of youth jobs in sub-Saharan Africa are in the informal sector. These sectors – hospitality, entertainment and informal – have been among the worst affected.
Lockdowns also interrupt schooling and education. In one calculation, this could generate global future “learning losses with a present value of $10 trillion”.
The closure of schools will reinforce social and economic inequalities and exclusion. Youth from more well-off households may be less affected, for instance in having access to private internet and laptops.
While these impacts are troubling everywhere, in Africa they are magnified due to the high rate (21%) of youths who were already not in employment, education or training before the pandemic struck. The 8th sustainable development goal requires of all countries that, by 2020, they substantially reduce this rate.
Given the complications introduced by the pandemic, how can this development goal be best achieved?
With formal employment growth sluggish at the best, countries are pinning their hopes on entrepreneurship. But, entrepreneurship support policy remains a notoriously complex topic. This is especially true when it comes to young people.
Younger entrepreneurs are on average more likely to fail, and older entrepreneurs’ firms on average perform better. This is often due to market failures. Banks do not have information about the quality of younger entrepreneurs (who often lack collateral). In education, meanwhile, the market will under-supply in the absence of subsidies.
Where these market failures are prevalent, the youth may fail to obtain finance for their ventures or accumulate enough skills. Supporting youth entrepreneurship would, therefore, require not policies to focus exclusively on entrepreneurship per se, but to fix market failures elsewhere in the system.
The benefits of catalysing youth entrepreneurship could be huge in Africa. With the world’s youngest population at a time of unprecedented innovations in digital technologies across the world, the African continent has a unique opportunity. It has two key advantages: digital savvy and a willingness to take risks.
Young people may have a comparative advantage in adopting and using new digital technologies. Moreover, many African countries have not only leapfrogged in the adoption of mobile communication tech, but have been experiencing an upsurge in tech entrepreneurship.
There is a deep underlying entrepreneurial reservoir in Africa. As much as 80% of youth labour market participation is in household enterprises or as self-employed activities; only 20% in standard wage employment.
Digital entrepreneurial ecosystems
Youthfulness itself should not be a serious liability for entrepreneurship anymore.
Given the scarcity of resources on the continent, turning potential into reality and best addressing the market failures mentioned will require countries to prioritise investment in, and regulation of, their digital entrepreneurial ecosystems.
It will require redoubling efforts to expand access to new digital technology and infrastructure, including the data needed on which to build new products and services. It will also require investing in information and communications technology skills – fixing market failures in provision of public goods and education.
Increasing digital absorption in this way will pay good dividends. As I argued in chapter 4 of the UN’s 2020 World Youth Report: consider for instance, that countries that do better to absorb digital technologies also tend to have a lower share of youths not in employment, education or training.
The direction of causality between digital adoption and utilisation of the youth is likely bi-directional. Better adoption of digital technologies is likely to engage the youth in either learning, education or employment. Better engagement of the youth is likely to lead to faster adoption of digital technologies – propelling a virtuous cycle.
With the COVID-19 pandemic threatening to halt a decade of progress in youth development in Africa, at a minimum a three-pronged approach is now urgent. This entails bridging the digital divide; investing more in youth education in information and communications technology and science, engineering and mathematics fields. It also requires building digital entrepreneurial ecosystems.
Wim Naudé is a Professor of Economics, University College Cork, Ireland. He’s also a Visiting Professor, RWTH Aachen University School of Business and Economics, Germany and Fellow, African Studies Centre, Leiden University, the Netherlands.