Youth unemployment remains a significant problem across Africa, with the growing population adding new layers of complexity to the challenge. Indeed, across Africa, estimates currently reach 60% for youth unemployment, and, unsurprisingly, COVID-19 has exacerbated the problem.
As businesses continue to recover from the economic disruption and devastation caused by the pandemic, many companies have suspended hiring due to limited resources to hire additional labor. Some have suspended efforts to rehire those who have been made redundant in the past year to cut personnel costs as sales slow. In addition to finding quality jobs that are harder to find, young Africans have also faced disruption in education and training.
In response, governments must make a concerted effort to improve business opportunities in order to support employment, foster innovation and improve economic performance. In this way, they can begin to reap the demographic dividend offered by the continent’s growing young population. In other words, this challenge can become an opportunity.
One method that governments, both national and municipal, can explore is the development of job creation poles.
What is a “job creation hub”?
A job creation hub is a structure in which companies that offer the same or similar services can use a common infrastructure to provide these services to different clients. This structure can help reduce start-up costs, ease the challenges of starting a business, improve business efficiency, provide networking opportunities, foster knowledge exchange and increase income, thereby improving employment opportunities for young people.
These poles should target nano- and micro-enterprises in order to boost productivity, improve the inclusion of underserved enterprises and encourage informal sector service providers to formalize their operations. It enables more microentrepreneurs to access start-up infrastructure and incubation with mentorship along different value chains. The concept has the potential to reduce barriers to entry for decent jobs.
Brief case studies
The expansion and application of these and similar structures in various sectors and cities can help to increase the supply of services with low barriers to entry. Growing supply can lower the cost to the end user and increase footfall and savings. In fact, this structure already exists in different industries in different forms around the world to increase efficiency and reduce costs. Coworking spaces for tech startups are a prime example of the structure of job creation hubs in action.
China. In China, “Taobao Villages” are hubs that house at least 100 companies involved in e-commerce in one place. In 2009, around three villages fulfilled this status. A decade later, more than 4,000 of these “villages” exist across China.
The government and private companies provide these villages with targeted programs to support entrepreneurship, strengthen logistical connections and improve learning outcomes. Some initiatives have provided women with additional training in business development and childcare services. Notably, according to the World Bank, the creation of Taobao villages has helped reduce urban migration across the country and lift many rural areas out of poverty. It has also improved rural infrastructure, increased employment opportunities and boosted productivity.
United States. In Washington, DC, the Shared Kitchen Concept is a good example of a job creation hub. These kitchens come in different sizes and provide the infrastructure for aspiring caterers or food vendors, and they also provide training programs and jobs. The infrastructure is provided by individuals or social entrepreneurs, and different caterers rent work or storage space to provide their services.
While LA Kitchen recently closed, its parent company, DC Central Kitchen, first launched in 1989, is expanding to a larger location.
Illuminate Africa Initiative. The United Nations Development Program (UNDP) has highlighted the Lighting Africa (LA) initiative as a strong example of an “inclusive business ecosystem” that provides appropriate information, incentives, investments and support to Implementation. This concept is very similar to the concept of a job creation hub.
First launched in 2005, this initiative, funded by the International Finance Corporation (IFC) and the World Bank, has supported the development of a market for off-grid lighting systems in Africa. Member companies were able to access product design advice, testing services and training assistance. More than 2,500 companies were registered in 2012, and this targeted support has made it possible to considerably expand the market and the range of lighting products. The program is now present in more than 20 African countries.
While a job creation hub involves physical space, the Lighting Africa initiative shows how policies, funding and knowledge sharing can facilitate the growth of inclusive businesses. UNDP also encourages dialogue between governments, institutions and the private sector to create the most effective solutions to support inclusive businesses.
Nigeria. The Nigerian government has introduced a number of major investment strategies to create jobs, increase exports and develop the industrial sector, with varying success. The Nigerian Free Zones (FTAs) —in particular Lekki (Lagos) and Tinapa (Calabar), the Export Processing Zones (EPZ) and the Agege Technology Incubation Center (TIC) —have received many targeted investments. However, many of these projects are not realizing their potential.
TIC was created in 1993 by the federal government to promote entrepreneurship, based on a model that has been credited with strong commercial development in the BRIC countries (Brazil, Russia, India and China). However, it lacks the necessary infrastructure such as power, broadband, machinery or equipment and capacity development to support the start-up.
In contrast, structures like the Co-Creation Hub Nigeria (technology) and 360 Creative Hub (fashion) show that the job creation hub initiative can be harnessed to create vast opportunities for young Africans. In fact, in 2016, more than 55 startups were supported by Co-Creation Hub via its incubation unit, leading to the creation of more than 300 jobs. The most recent data provided shows they have supported over 650 startups and created over 7,300 jobs to date. Likewise, 360 Creative Hub has extended, trained and provided infrastructure to over 300 creative entrepreneurs, including designers, photographers, makeup artists and hairdressers, to deepen their understanding of the “fashion ecosystem”. No less than 30 unique designers from this initiative have received platforms to present their products at international fashion shows.
Support policies for job creation centers
As policymakers consider seeking hubs of job creation as part of their employment boosting strategies, they should ensure that policies, especially those that define public-private partnerships, carefully spell out and clearly separate roles and responsibilities of government and private actor at national and subnational levels.
The government’s role or support should include an economic needs assessment, tax breaks for startups, and low interest rates on participant loans. Governments and relevant agencies should also create a friendly regulatory atmosphere to facilitate collaboration with private sector actors. Private sector partners can bring expertise, particularly sector-specific knowledge or experience, to each job creation hub. These partners can also promote the hub more widely in their networks and further develop other partnerships to ensure the success of the hub.
The establishment of a successful job creation pole requires solid investment and financing. Governments may offer incentives to partners such as information technology and telecommunications companies, for example, to provide operational services for broadband and e-commerce platforms.
Once built, job creation hubs can function as stand-alone social enterprises, run by the private sector and charging affordable rent for office space and rental, equipment rental or membership fees. Benefits to members can then include technological and physical infrastructure, networking opportunities, business acceleration, capacity development, access to seed funding, and any licensing or registration requirements for each startup. Additional services or incentives to make the hub more attractive are essential, such as links to business development or training institutions who can provide coaching and educational support to aspiring and existing entrepreneurs.
The partners and experts involved in the development of a job creation pole must also be dedicated to foster community development and knowledge sharing. By offering discounted subscriptions to young people and startups, job creation hubs can also provide an environment for learning and skills development.
There is no quick fix for generating employment opportunities for young people in Africa, for creating an environment conducive to innovation or for stimulating economic growth. However, with targeted policies and investments, such as investing in job creation hubs, governments can certainly get on the right track. As we seek to build back better and stronger after the pandemic, governments at all levels must seize this opportunity for renewed investment in our economies and our youth.