Small businesses a viable path to youth employment but equity obstacles need to be addressed

Youth from various organisation across south Africa holding up posters during a Youth day Parade for justice and change organised by The Ahmed Kathrada Foundation, held in Pretoria on June 16 2022. They were demanding that Government do all in its power to combat youth unemployment, gender based violence climate change and crime. (Photo: Denvor De Wee)

By Alinaswe Lusengo

22 Feb 2023

SMMEs can play a critical role in addressing South Africa’s youth employment crisis. However, a lack of education, opportunities and experience and an ailing economy can significantly impact the ability of young people to gain employment with SMMEs. Participants on a Daily Maverick webinar panel this week discuss the challenges faced by small businesses and the young people vying to be employed by them.

Over 9 million people aged 15-34 are unemployed, in education or in training, according to a report released by Youth Capital. This means that four out of 10 young people are struggling to find work or unable to access the education or training needed to find work. In an economic climate where tertiary education is no longer a guarantor for employment and many students protest in the face of steep financial burdens and debt, looking for solutions to high youth unemployment is a complex matter.

Read more in Daily Maverick: “South African students still battling ballooning debt despite protests and promises”

On Tuesday, 21 February, Daily Maverick hosted a webinar with Professor Lauren Graham and entrepreneur Michael Jordaan that was moderated by Business Maverick journalist Ray Mahlaka. The webinar, titled Now hiring: the role of SMMEs addressing the youth unemployment crisis, delved into the ways that small, micro and medium enterprises (SMMEs) can serve as vehicles to address and help solve youth unemployment.

SMMEs and employment

Though there is no standardised definition, Jordaan explained that SMMEs are typically understood as businesses with a small number of employees and a low annual turnover. In South Africa, an SMME is a business that has between 1-200 employees and an annual turnover of less than R100-million. Jordaan went on to reveal that over 60% of all employed people in South Africa are working for businesses that have fewer than 50 employees. This highlights what an important sector SMMEs are, seeing as they employ so many South Africans.

When asked what makes it possible for SMMEs to provide employment opportunities, Graham noted that SMMEs often rely on their employees as opposed to being more capital-intensive like bigger businesses.

“The question, then, is how do we make sure that we can best support [SMMEs] so that they are able to bring young people into their businesses in a way that is both good for the SMME and good for the young person,” she remarked.

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Challenges facing unemployed youth

Graham added that many SMMEs are recruiting through social networks and many South Africans find their work through social networks as opposed to formal channels of recruitment. The problem with this is that many unemployed young people fall outside these social networks, and over 40% of people not in employment, education or training come from households where nobody is employed. Graham suggests that SMMEs need to work with youth employability programmes to encourage formal recruitment channels and support young people seeking employment. Harambee is an example of a youth employability programme that ensures young people can not only find jobs but are adequately prepared for the workplace.

Another key challenge is work experience requirements for jobs, where entry-level jobs often seek several years of work experience as a prerequisite, which many applicants do not have. It feeds into a cycle where one cannot acquire a job because one needs work experience yet in order to gain work experience, one needs to get a job. Graham explained that being able to attain work experience is a matter of privilege. Young people who have access to social networks that can get them internships or vacation work are able to acquire the work experience the labour market seeks.

Challenges facing SMMEs

Not only are young people struggling to find employment, but the SMMEs who are meant to be employing them also face their own set of challenges. Jordaan emphasised that the problems South Africa has on a national level are affecting SMMEs. Rolling blackouts, for example, are a major concern as they are stunting economic growth and forcing some SMMEs out of business. When the economy displays growth, it is an indicator that employment levels will grow too and Jordaan hopes that the government can take economic growth seriously — especially with the upcoming Budget Speech — for the sake of employment levels.

Bureaucratic processes, or red tape, were flagged as another challenge facing SMMEs. Jordaan believes that we need to minimise red tape in order to make it easier for SMMEs to employ people, especially younger people. Graham added that complex bureaucratic processes are hindering SMMEs as they discourage or even obscure important policies that can provide relief to SMMEs such as the Employment Tax Incentive (ETI). The ETI encourages businesses to hire young and less experienced job seekers by reducing the cost of hiring this demographic.

There is still hope

Both Graham and Jordaan acknowledged that the journey of tackling youth unemployment will be an arduous one. It is a complex issue that requires nuanced solutions. They can both testify to how much is being done to try and intervene and create jobs for the youth. Graham and Jordaan stated that despite the issues at hand, they are both still hopeful that there is a future in South Africa where young people will be employed. SMMEs are incredibly important in helping facilitate a country where that future is possible. DM

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SMMEs and employment

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Challenges facing SMMEs

There is still hope