To Tackle Youth Unemployment, Finance is not the Only Solution

According to the 2014 population data from the Central Statistical Agency, the youth aged between 15 and 39 years constitute 42Pct of the Ethiopian population. This is a huge resource and force for the country that must be nurtured through the creation and provision of the right conditions and supports.The two most important policy tools used for developing the potential of the youth are education and skills (ES) development and micro and small business (MSB) development. On the ES development front, two decades ago the Ethiopian government made a conscious decision to create access to education to as many young students as possible at the cost of quality of education. The result predominantly was creation of tens of millions of ‘half-cooked’, mostly unemployed and not easily employable, and frustrated youth. In the MSB development front, the government created a subtly politically tied MSB development scheme that made a few hundred thousand youth beneficiaries while it left the majority millions out of the equation. There can’t be a debate in this because after 25 years of implementation the inferior results have spoken for themselves.
No wonder then that tens of thousands of youth – with no jobs, no hot skills and creative capability, and no business – recently participated in destructive and blood political protest. After this event, the government was quick in its diagnosis of the problem related to the youth and the solution to it. That led to allocation of an ETB10 billion for the youth alone to give them a better chance to be ‘economic powers’, not destructive powers. The reactions of ordinary citizens to this are mixed. The optimists admired the initiation and expect good results; the sceptics say we ‘don’t know if it could be good or bad’; and the pessimists consider it youth-bribe-plan at a grand scale to keep the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) more years in power.
If the government’s intent for the youth is to make the greatest impact, then it must redesign both policies with a completely different perspective; namely, long-term view, comprehensive approach, and unpoliticized execution.
As a citizen and stakeholder, I suggest that the government should consider the following three interrelated foundations on which to base the new youth-oriented policies and programmes. As a person close to the business world, I prefer well experienced Ethiopians to contribute on the ES development side; I will focus on the MSB development part of the issue.
The first and most important foundation has to do with the creation of a world-class start up and operational environment. One of the most important reasons why Ethiopia, after almost 80 years of existence of a private sector, still doesn’t have a vibrant MSB economic sub-segment is the prevalence of a stifling start up and operational environment. Unless this is changed, providing billions to the youth to establish their own businesses will simply result in the same old unimpressive outcome.
To craft a world-class business environment, the first thing to do is to create a new national business classification system (NBCS) that clearly defines which businesses fall under micro, small, medium, and large groups. MSBs are different in many ways from medium and large private businesses and hence they must be treated differently almost in all start-up and operational processes; the starting point for such a separate treatment is to create an NBCS. Next, develop a new national MSB support system which will provide politically-unbiased and comprehensive ‘before-and-after establishment’ support, not just facilitating shades, credit, and market linkages only.
One of the main reasons for the powerlessness, bankruptcy and closure of many MSBs in Ethiopia is the lack of a good all-round support and follow up. It is high time that the government steps up to the next level now in this regard. The other thing to do is to completely revise the existing business start-up and operational rules, regulations, and requirements to make them totally MSB-friendly by giving operational license in a day or two, making the use of the cash register machine (which has brought plethora of problems and subsequent burdens on MSBs) optional, cutting business tax rates for MSBs down to 10 to 15Pct so that they get a better chance for reinvesting and growing, exempting MSBs from a number of mandatory requirements and harsh penalties, etc. The final action area within the first foundation is to create a new well resourced, freely working, and highly result-driven executive organization that will coordinate, implement, follow up, and sustain the new MSB development direction at national level.
The second foundation has to do with building industrial parks for MSBs just like it is being done for large scale manufacturing businesses. One of the key challenges the government will soon be facing while implementing the new MSB development plan is getting affordable production space. It cannot solve this problem by continuing to provide shades the way it has been doing for so long, which seems to have no well thought-out and long-term oriented basis. The best solution is to plan and build several multi-story industrial parks in many semi urban locations to be leased at low fees both for existing and new MSBs, especially those engaged in manufacturing, thereby achieving the good dream to industrialise the country.
The third foundation is to use the new money judiciously. Allocating the intended ETB10 billion for the youth is one of the good decisions the government made after the recent political turmoil. A good portion of this valued money will most likely be spent on the development of MSBs. But bear in mind that all youth necessarily can’t be business owners. Identifying and investing only on those who are fit-for-business (which is those youth who exhibit a workable level of inborn entrepreneurial talent that can easily be developed to maturity) must be the primary rule of engaging them. Applying this will definitely have its own challenges but ignoring it and providing money and support for unlikely candidates is also reckless. The other portion of the money must be spent on ES development so that those groups of youth that may not be fit-for-business acquire or develop saleable skills so that they become skilled labour power hotly needed by employers. The government must also avoid the trap of distributing the money as seed capital to as many youth as possible just to please most of them temporarily; as pointed out before, this time the government must work to bring maximum, lasting, and long-term oriented results, not for short-term political gains.
In conclusion, by committing ETB10 billion to make the Ethiopian youth economically more beneficial, the government on the one hand has made the right political decision and on the other hand has once again set itself on the weighing scale for the people of this nation. If it designs and implements new policies and programmes based on long-term oriented foundations, such as suggested here, the chances of registering the highest level outcomes are high. Otherwise, most of this big money will not make as much lasting impact as it should. The country will also lose another priceless decade.

5th Year • January 16 2017 – February 15 2017 • No. 47


Leave a Reply

Your email address will not be published. Required fields are marked *

Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.

2Q69+2MM, Jomo Kenyatta St, Addis Ababa

Tsehay Messay Building

Contact Us

+251 961 41 41 41