Youth entrepreneurship, not foreign investment, key to Zambia and Africa’s inclusive growth and job creation

By Mwansa P. Chalwe Snr

This article was generally motivated by the comments of the African Development Bank (AfDB) President Dr. Akinwumi Adesina. In his recent statement, while presenting 2020 African Economic Outlook(AEO) report, the President of the African Development Bank, stated that people cannot eat Gross Domestic Product (GDP) – which is not in dispute. However, his proposed solution to the problem of non-inclusive growth through addressing the mismatch of workers skills to the needs of employers cannot be left totally unchallenged especially in the short to medium term.

There are those of us on the ground, and in the private sector, who understand the major causes of why African countries have problems of non-inclusive growth. And we know the practical and priority solutions that are required by African governments and the AfDB. The solutions to inclusive growth are available, if only the private sector were sufficiently consulted, because we are the creators of wealth, jobs and the drivers of economic activity.

The Africa Development Bank’s 2020 African Economic Outlook (AEO) report has estimated that Africa economic growth rates as: 3.4% in 2019, 3.9% in 2020 and 4.1% in 2021 which are well above World average. The AfDB president rightly pointed out that people cannot eat GDP and these growth figures are not trickling down to the ordinary people and poverty levels are still very high in Africa.

“Growth must be visible. Growth must be equitable. Growth must be felt in the lives of people,” The President of African Development Bank argued, in his 2020 African Economic Outlook report.

Kenyan Professor Patrick Loch Otieno (PLO) Lumumba did agree with the AfDB Chief while addressing the Mining Forum in Tanzania recently. He advised African countries to stop relying on lucrative Gross Domestic Product (GDP) figures in defining the mining sectors contribution to the African economies but rather assess the sector’s contribution on the basis of how it is impacting on people’s lives.

“GDP and per Capita income means nothing if you have no money in your pocket. Nobody eats GDP because it is not edible at all and what matters is the money in people’s pockets,” Professor Lumumba observed.

The question to pose is: why is there non inclusive growth in Africa. I will address the major reasons which are not exhaustive by any means, but if addressed, will have maximum and discernible impact.

Why inclusive growth is lacking in Zambia and Africa

The AfDB chief’s argument that Africa’s inclusive growth has been held back by a mismatch between young workers’ skills and the needs of employers; and addressing the human capital development by African countries is a panacea to solving the problem, is a misdiagnosis of the problem. It is only a minuscule cause of the problem at hand. The skills mismatch does not entirely apply to most of the African countries’ economies including Zambia, apart from South Africa which has a fairly developed economy by sub Saharan Africa standards.

In most of Sub Saharan Africa today, even skilled young people cannot find jobs as their economies are backward. The scarce skills mismatch Dr. Adesina talked about is more applicable to the developed countries at the moment. In developed countries, the jobs that are in demand are in the STEM ( Science, Technology, Engineering and Mathematics) area. These include jobs in Software engineering, biomedical engineering, biochemistry, geology, computer science, artificial intelligence, environmental engineering, applied mathematics, statistics, mathematics etc but how many brilliant youths in Africa with such qualifications are roaming the streets without jobs – nepotism, tribalism and racism notwithstanding in job selection? There are just not enough industries for these jobs in Africa.This is one of the reasons why some of the young Africans are taking life threatening risks by attempting to migrate to the Western world.

The three main causes of non-inclusive growth in Africa are: one, African economies are natural resource driven without much value addition to create manufacturing industries to create more jobs. And two, the natural resources are exploited by foreign investors with little local participation as home grown entrepreneurs are not involved in these economic activities. The result is that most of the proceeds from the sales are remitted to the western world and more recently to China, with little left to host countries for multiplier effects. It is crystal clear that the current economic model with regard to promotion of foreign direct investment by African countries like Zambia has not produced the desired results and need to be revisited and changed. Three, African countries are not utilizing the demographical dividends by aggressively promoting Youth entrepreneurship which should be the source of innovation by facilitating the incubation of new business start ups.

Africa’s resource sector or primary sector of the economy entails the extraction and collection of natural resources without further processing and that is what drives most of the African growth .In 2018, this sector comprised more than 15% of GDP of Sub Saharan Africa and only 1% of North America. We are talking of forestry products like Zambia’s Mukula trees, farming products like cocoa, cotton etc, and mining products like copper, gold, silver, crude oil etc which are all being exported raw to the West and China.

It is common knowledge that most of the resource related economic activities are dominated by multinationals companies from the West and China, facilitated by corrupt Africans, who live very little in host countries for multiplier trickle down effects. The local population do not participate as joint venture partners like the Chinese insist with foreign investors in their own country. In the final analysis, the host countries populations are mere spectators in the extraction and enjoyment of their resources by foreigners. Zambia is clear cut text book case study. The Zambian Minister of Finance Dr. Bwalya Ng’andu alluded to this anomaly when briefing journalists on the State of the economy on February 12, 2020 as quoted by the Mast Newspaper.

“I want to see a greater participation of the Zambian people in this economy. As you know, we are a mining country but we don’t have Zambians who own mines or who have equity interest or financial interests in mining companies. This is something that has to change. This is 55 years after independence, we should be building our own roads, we should be building our own bridges,” The Minister lamented by the lack of participation and ownership of the economy by Zambians.

It is,therefore, crystal clear that the answer to the lack of inclusive growth, is the involvement of local investors and the youth in productive economic activities, otherwise, Africa is shooting in the dark. Foreign investors in resource-rich countries should be encouraged or compelled to engage in value addition like Botswana has done with its diamonds as well as compelled to enter into joint venture (JVS) partnership with Zambians. As an example of the contribution by locals to the JVs, value must be placed on the land and minerals and used as equity. There should be some objective and innovative valuation methods that could be used as local contribution. There is need to get better deals with foreign investors through negotiations and not be so desperate when at the end of the day the foreign investors are not making much difference to our economy.

Youth entrepreneurship is the answer to job creation

The immediate solution in the short to medium term to inclusive growth and job creation which will have the highest impact, therefore, is the aggressive and bold promotion of youth entrepreneurship as well as home grown investors.

Africa in general, and Zambia in particular, has the youngest population in the World. Africa has over 200 million people aged between 15 and 24, but it also has the highest unemployment rates. The continent has millions of young people who are unable to secure formal employment opportunities. The total unemployed youth in Africa is currently about 40 Million and boosting entrepreneurship is critical in order to utilize this resource to advance the continent’s economic transformation and industrial development.

Youth entrepreneurship in Zambia and Africa is still very low and there is a lot that needs to be done by governments and the youth themselves to change this by addressing the constraints to the development of youth entrepreneurship. There is a need for mindset change across board. There will be no development in Africa until and unless there is promotion of entrepreneurship and the strengthening of home grown business leaders. Foreign direct investment is not the answer to Africa’s development challenges.

If Africa is to fast track its development and enjoy inclusive growth, promotion of local entrepreneurship, especially among the youth is the key. Entrepreneurship has a critical role to play in sustainable development and poverty eradication. It has the potential to stimulate inclusive economic growth through job creation; help formalize businesses; create opportunities thereby empower disadvantaged groups such as youth and women. African governments need to work hard by reducing the size of the informal sector (Street venders as they are called in Zambia) as a proportion of employment and increase the size of the formal sector through practical interventions.
Challenges of Zambian Youth entrepreneurs

Zambian youth face insurmountable problems in becoming entrepreneurs unlike their counterparts in the developed countries. Among the barriers they face is the culture in our society that does not encourage entrepreneurship. The society expects a young man or woman to look for a formal job on completion of their studies. The other barriers include the lack of information and knowledge among the youth on how to go into business, the absence of affordable finance, the lack of management skills and experience as well as absence of mentorship. The discrimination and political patronage in the disbursement of empowerment funds is also a major drawback to job creation as only a meritocratic system will have the desired impact. Zambia‘s Youth Development Fund failed because of this.

In order for youth entrepreneurship promotion to succeed, countries need to adopt both short term and long term strategies. These should include providing information and knowledge to the widest population of young people about entrepreneurship using modern technology so as to unearth potential entrepreneurs, conversion of necessity entrepreneurs in the informal sector to the formal sector, providing business development services for out-of-school youth, supporting access to cheap finance for young entrepreneurs and introducing entrepreneurship education in schools so as to change mind-sets and cultural attitudes towards entrepreneurship.

Conclusion

In a nutshell, the government of Zambia and other African countries ought to change by mainstreaming locally grown entrepreneurs especially youth entrepreneurs. Governments need to facilitate Young entrepreneurs to overcome the barriers to entry that have been outlined above instead of solely relying on foreign direct investment. In addition, the current FDI economic model and incentives ought to be revisited by changes including ensuring some uniformity in policies towards foreign direct investment especially in the mining sector through cooperation between African countries especially in regional blocks so the multinationals do not play Africans against each other.

The promotion of youth entrepreneurship should be approached boldly, comprehensively and with political will rather than political expedience, for it to achieve desired results and lasting impacts. The basis of my passion for promoting youth entrepreneurship is that they have been the source of innovation throughout the world and as Africans we have not utilized this resource. There would have been no personal computers, cell phones, google, apple, Facebook, WhatsApp etc without Youth innovation. It should also be noted that the initiatives to promote entrepreneurship and job creation for the youth will not produce the desired results until governments team up with progressive private sector players. The Private Sector have the knowledge for solutions begging for implementation if only African governments recognized this and utilized them.

The Author is a former financial specialist advisor to the multi-million dollar USAID funded Botswana Private Enterprise Development Project (BPED). He is the Co-founder of Prosper Knowledge Solutions, a start up virtual hand holder incubator, and developers of the new Youth Employment Creation App (YECA). He has a passion for solving the Youth unemployment problem through sharing knowledge using his 35 years local and international private sector experience. (For further information and comments go to: www.youthemploymentcreation.com)