UCT study spotlights youth entrepreneurship

26 May 2008

The key findings of the study, conducted by the UCT Centre for Innovation and Entrepreneurship (CIE) based at the UCT Graduate School of Business, show that the youth have a positive attitude towards opportunity-oriented business activities, and a willingness to work with others towards achieving their objectives.

Dr Mike Herrington led the GEM research.

According to Dr Mike Herrington, Director of the UCT CIE and research team leader of GEM South Africa since 2001, the window of opportunity is open and ready for accelerated youth entrepreneurship development.

"The youth constitutes the majority percentage of the population and their importance in the current and future environment cannot be underestimated. With creative energy and willingness from South Africa's key players, youth entrepreneurship development can be accelerated to bring renewed socio-economic growth in South Africa," he said.

Herrington says the latest GEM report is an analysis of findings to date rather than a participation in the latest annual round of the global entrepreneurship assessment and rankings. However, new research was conducted in Gauteng, the Western Cape and KwaZulu-Natal to gain a deeper understanding of the trends among youth in these areas.

In the analysis, researchers identified six trends which point to the youth as being capable of generating much-needed socio-economic growth in South Africa.

The first shows that more youth are opportunity-seizers, rather than those starting a business because they have no other option.

The analysis focused on the Total Early-Stage Entrepreneurial Activity (TEA) rates - the primary measure of entrepreneurship used by GEM - of youth from 2004 to 2006. This showed the age group 25 to 35 years had the highest TEA rate of all the age groups researched in two of the three years surveyed, reflecting an increasing trend of opportunity orientation - meaning they want to be entrepreneurs because of an opportunity they see rather than because they have no choice.

Secondly, more female entrepreneurs are entering the market. Male entrepreneurs exceeded females in 2004 and 2005, but were equal in 2006. This is in line with international trends.

Thirdly, an increase in the total number of students completing secondary school could be a positive trend which, if they acquire the correct skills, can eventually form a sound basis for more accelerated TEA activities. However, the quality of education will need to be carefully monitored to ensure that the youth are being taught the correct skills.

"In an environment characterised by high levels of innovation, technological change and increased global competitiveness, education plays a major role. Higher levels of education are needed to compete in such an environment," says Herrington.

Fourthly, in addition to strong positive education trends for youth, the youth also believe that they have the right knowledge and skills to create new businesses. In both age categories the positive trend is evident between 2005 and 2006. In the 18 to 24 group, the percentage that believed in their abilities rose from 36.9% to 37.6%, and in the 25 to 34 group, an increase from 44.0% to 47.1% was seen. Aligned to this, it was found that "fear of failure" as a criterion for preventing young people from considering starting new businesses has decreased significantly.

Fifthly, the respondents felt that a culture for entrepreneurship is being created in South Africa. In the 18 to 24 group, 38.0% of respondents in 2006 felt strongly that a culture of entrepreneurship is created in South Africa. This is mirrored by a strong 41.8% in the 25 to 34 group. These strong sentiments are largely consistent from 2004 to 2006. There is a positive mindset regarding the possible creation of new jobs in the future.

However, there are a few worrying issues that need to be addressed. For example, there are social problems such as drug abuse and unemployment. There is an impression that entrepreneurship is for someone else, or that the government will provide a job.

Innovation is very important in any knowledge-driven environment. If a country wants to become a leader then this is critical. Those in the 18 to 24 and 25 to 34 groups are clearly using less technology over the 2004 to 2006 period.

Finally, research shows that many of the early-stage businesses started by the youth are doing the same thing. This could indicate a negative trend regarding perceptions on innovation which can manifest in negative consequences for the economy over the long term if not properly addressed.

"The issue is therefore not whether youth entrepreneurship should be supported, but rather how. Although a positive base exists, more should be done in an accelerated manner to address national challenges and to form a basis from which South Africa will be able to compete on an international level with developed countries," said Herrington.

The 2007 South African GEM study was sponsored by South African Breweries, Standard Bank of South Africa, the Western Cape Youth Commission and the National Research Foundation.

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