Answer to youth unemployment? Making the formal informal

Across Africa, the shift from rural to urban-based economies is creating more opportunities for the youth.

Recent research from the McKinsey Global Institute estimates Africa has more than 500 million people of working age (15 to 65 years). The institute predicts that by 2040, Africa will be home to one in five of the planet’s young people, and will have the world’s largest working-age population.

The continent’s labour force is expanding more rapidly than anywhere else in the world, which means that youth unemployment and the critical initiatives needed to deal with the issue are now more important than ever.

In Kenya, a sharper focus on youth entrepreneurship backed by deliberate policy and fiscal support is needed.

Small and Medium Enterprises (SMEs) currently constitute at least 90 per cent of Kenya’s businesses, with statistics indicating the informal sector increases the employment growth rate by 12 per cent annually.

The engine

The fact that Kenya’s informal sector has been largely ignored over the years as the engine for economic growth has played a part in the rise of unemployed Kenyans from 12.7 per cent to 40 per cent in a span of 10 years.

The World Bank estimates that nearly one in five Kenyan youth of working age has no job, against one in every 20 in Uganda and Tanzania.

The reasons vary, from Kenya’s inability to create new formal jobs, to the widening gap between population growth and entry-level opportunities for young people. If our youth can get the education and skills they need, this demographic goldmine will be realised as a significant driver of consumption.

But drastic action needs to be taken.

For starters, more public and private sectors partnerships are needed to address the issue of youth unemployment. Public sector strategies powered by the private sector are increasingly taking centre stage, as the youth are offered life skills and opportunities in entrepreneurship training.

The Government’s Youth Access to Government Procurement Opportunities (Yagpo) programme has ensured that 30 per cent of all public sector tenders are allocated to the youth, women and those living with disabilities. The absorption rate of this programme is growing, with more youth getting the opportunity to define their economic destiny.

Still, access to finance and adequate training for the youth remain huge stumbling blocks. The lack of collateral and short credit histories limit the extension of loans to this group.

Equally important is the need to offer trained expertise to create employment and improve the efficiency of Kenyan SMEs. The informal sector is no longer just about the roadside mechanic or neighbourhood tailor. It now spans innovative sectors in IT, agribusiness, manufacturing and green energy.

That is the reason an increasing number of Kenyan organisations continue to support the informal sector, rolling out initiatives towards youth entrepreneurship by creating various platforms for their growth.

Youth empowerment

In March, KCB launched 2Jiajiri, a youth empowerment programme that seeks to benefit at least 500,000 entrepreneurs in the next five years. Under this project, KCB has rolled out a business challenge — the Lions’ Den — that is open to all Kenyan youth who have a desire to change the face of the employment landscape.

There is also a mentorship programme where the youth will have a community of mentors to engage with online through chats and blogs.

As a bank, we believe in giving dignity to the informal sector. The challenge of the 2jiajiri initiative will be to ensure youth from across Kenya are able to nurture their ideas or small businesses into meaningful start-ups.

But this journey of a thousand miles will only begin if our youth believe in the vision of credible economic empowerment. That empowerment is embodied in the spirit of entrepreneurship that will turn the expanding youthful labour force into Kenya’s future middle class.

The writer is retail banking director, KCB Bank Kenya.

bizbeat@standardmedia.co.ke