More than a decade of economic growth in Africa has failed to generate sufficient opportunities to absorb the large numbers of young people entering the job market each year. The question of how to create employment is on the agenda of every African leader, in the political, social and economic spheres. But it is one to which there is no ready answer.
And this will be a growing challenge in the wake of the Covid-19 pandemic, which has led to massive job losses across the world. South Africa’s unemployment rate reached an all-time high of 30,80% in the third quarter of 2020, while Nigeria’s climbed to 27% in the same quarter. Of particular concern is the large and growing number of young people not just without jobs, but lacking quality education and skills.
As policy makers and others grapple with how to address the problem, many have embraced the idea that entrepreneurship will save Africa as this growing force edges into the centre of development efforts in Africa, after spending years as the poor cousin of corporate employment.
Big money is lining up behind small businesses and individuals with good ideas. Many large companies are competing to acquire or hire the best and brightest of Africa’s new business leaders to drive innovation as they seek increased reach and relevance in dynamic markets.
The Covid-19 pandemic has given this trend more than a nudge. Innovation and creativity have characterised the African business response to the pandemic, with agile entrepreneurs moving quickly to take advantage of new business priorities that emerged during lockdowns across the continent.
New online products and services were supported by fintech product solutions to move money and goods on a locked down continent. Others quickly found ways to fill the needs in the health space of anything from protective clothing, to mobile track-and-trace apps and even to move oxygen at speed across congested cities using technology to match supply and demand.
The confidence in African entrepreneurs has been boosted by media coverage of success stories. A recent one is that of Paystack, a fintech product started by two young Nigerians in 2016 and was sold in 2020 for $200 million to global financial services and software company Stripe.
The deal has drawn attention to the space increasingly held by entrepreneurs in Africa. Paystack, which has more than 60,000 customers across Ghana and Nigeria, is one of hundreds of start-ups that have scaled their products and services and built an impressive client base by solving longstanding problems faced by Africans.
Fintech is a clear leader in this new space, with global giants such as Mastercard and Visa as well as China’s Tencent funding new ventures or taking stakes in growing companies to leverage the benefits for their own expansion. The estimates for venture capital funding for fintechs vary widely but in some cases, exceed $1 billlion.
While fintech is out in front, funding is also lining up behind start-ups in health, education, logistics, renewable energy and other sectors.
Start-ups led by savvy entrepreneurs may be part of the solution to the employment conundrum, but they are unlikely to create the scale that the continent needs, even at the current pace of growth. Most are relatively small companies, relying heavily on technology to build scale at home and across borders, rather than building teams of staff and infrastructure.