The 2022 African Youth Survey, sponsored by the Ichikovitz Family Foundation, found that 78 percent of youth surveyed from 14 countries want to start their own businesses, and two-thirds believed their nation is in the process of creating a culture of innovation and entrepreneurship. The new survey was released on Africa Day at the end of Africa Month (May).
But only 46 percent were even aware that the 57 nations had signed onto the 2018 African Continental Free Trade Area, originally brokered by the African Union. Only 22 percent claimed to be very or somewhat familiar with the opportunities the AfCFTA presents, and sizable numbers were either skeptical or pessimistic about the pact improving their nation’s economy.
Given that lack of access to capital is the largest single obstacle to African youth starting their own businesses, and that in many cases the needed capital is as little as US$1,000, it is clear that African nations have a big job in educating their own citizens and easing their access to capital before the continent can fully benefit from this giant liberating trade pact.
One goal of the AfCFTA, according to the African Union, is to increase Africa’s share of world trade from the dismal 3 percent (in 2023) by eliminating internal trade barriers. The AU predicts the pact will have an enormous positive impact for the continent’s 1.3 billion citizens, increasing continental GDP by $3.4 trillion, raising average incomes by 9 percent, and lifting 50 million directly out of extreme poverty.
But that won’t happen unless national – and local – governments, lenders, and investors both inform eager, young would-be entrepreneurs of ways they can take advantage of this big change in economic potential. The AfCFTA is now five years old, but a huge majority of young Africans know little about how they can leverage the free trade agreement to their economic advantage, and fewer still have acquired the capital to take advantage. That’s not good enough.
Youth in Rwanda, Ghana, and Kenya (followed by Malawi) were the most enthusiastic about their country’s efforts on behalf of entrepreneurship, innovation, and digital access. Not surprisingly, the highest levels of knowledge of and support for the AfCFTA came from Rwanda and Ghana. The most pessimistic were in war-torn Sudan and the Democratic Republic of the Congo (where children work in cobalt mines).
The perceived lack of local opportunity to get a better education or start a business is a leading reason that 52 percent of young Africans surveyed believe their lives would be better if they left their home country. Yet the highest emigration anxiety is found in violence-torn Nigeria and war-torn Sudan.
The 2021 UNICEF report, “Transforming Education in Africa,” found that, despite recent progress, many African children remain unschooled and that some who are in school are not acquiring basic literary and numeracy skills. Even sadder, this report does not even take into account the devastating impact of the COVID pandemic on African education. UNICEF has called for a more equitable education system after reporting that the poorest children are the least well served.
Meanwhile, UNESCO has been supporting upgrades to technical and vocational education and training in a number of African nations. A major goal has been improving the match between vocational training and employer demand – a key factor as 100 million African youth will be entering the labor market by 2030. Today, over 40 percent of African unemployment is among young people aged 15 to 24.
McKinsey reports that between 2020 and 2021, the number of tech startups across Africa tripled to about 5,200 companies, about half of which are companies providing financial services to low- to moderate-income Africans unable to interact with traditional banks. African fintechs had estimated revenues of about $4 to $6 billion in 2020 and average penetration levels between 3 and 5 percent (excluding South Africa).
McKinsey also estimated that Africa’s financial services market could grow at 10 percent a year, reaching $150 billion in revenues by 2025 (excluding South Africa), as “nimble” fintech players have wasted no time in carving out market shares. Fintech has become the fastest growing startup industry in Africa, thanks in part to increasing smartphone ownership, declining internet costs, expanded network coverage, and the young, fast-growing, and rapidly urbanizing population.
While that is a significant improvement, the total capitalization of the entire fintech industry in sub-Saharan Africa is nowhere near large enough to finance the number of business startups that young Africans are desperate to begin. Cash is still king in Africa, used in nearly 90 percent of all transactions, but African fintechs are now providing a variety of services – even healthcare and auto loans.
Western capital has typically had strings attached that make for poor partnerships, even though the odds of picking a winner among young African entrepreneurs are likely much higher than those of winning in Vegas. As a result, most African fintech firms are content to grow largely by investing in their own clients – even as their capitalization often cannot meet the demand.
For that reason alone (though there are others), Ichikowitz Family Foundation Chairman Ivor Ichikovitz stated that, “Our leaders present and future are quickly coming to the realization that we must look inward for economic opportunity; inward to fuel the entrepreneurial prowess which will catapult our startup continent forward; and inward also to address the lingering challenges which continue to motivate our brightest and best to leave our shores.”
This call – for Africa’s own wealthiest and most successful to reach down to lift the boats of their fellow Africans – and the response from Africans of privilege could turn the “dark continent” into the guiding light of the 21st Century. Or young Africans just might do it without their help, unless they are betrayed by their leaders’ selling the continent’s future to foreign neocolonial powers.
About the Author
Duggan Flanakin is a senior policy analyst at the Committee For A Constructive Tomorrow who writes on a wide variety of public policy issues.