Making the formal informal – an answer to youth unemployment

Across Africa and indeed in Kenya, the shift from rural to urban-based economies is spurring more opportunities for the country’s young people. Recent trends show that the continent – and by extension its youthful population – is poised to play a pivotal role in the global economy. Recent research by The McKinsey Global Institute estimates that Africa has more than 500 million people of working age (15-65 years). The Institute predicts that by 2040, Africa will be home to one in five of the planet’s young people and will have the world’s largest working-age population.

This means that the continent’s labour force is expanding more rapidly than anywhere else in the world. But it also means that youth unemployment and the critical initiatives needed to deal with the issue are now more important than ever. Here in Kenya, a sharper focus on youth entrepreneurship backed by deliberate policy and fiscal support is needed.

Small and Medium Enterprises(SMEs) currently constitute at least 90 percent of Kenya’s businesses, with statistics indicating that the informal sector increases the employment growth rate by 12 per cent annually.

The fact that Kenya’s informal sector has been largely ignored over the years as the engine for economic growth has played a part in the rise of unemployed Kenyans from 12.7 per cent to 40 per cent in a span of 10 years.

The World Bank estimates that nearly one in every five Kenyan youth of working age has no job compared to Uganda and Tanzania where about one in every 20 young people is jobless.

The reasons vary from Kenya’s ability or inability to create new formal jobs, to the widening gap between the population growth and entry-level opportunities for young Kenyans.

If our youth can have the education and skills they need – a major challenge across the world – this demographic goldmine will be realized as a significant driver of global consumption.

But drastic action needs to be taken if Kenya’s growing working population will become a meaningful driver to the country’s economic growth. For starters, more public and private sectors partnerships are needed to address the issue of youth unemployment.

Public sector strategies powered by the private sector are increasingly taking the center stage, as the youth are offered life skills and opportunities in entrepreneurship training.

Take the Government of Kenya’s bold Youth Access to Government Procurement Opportunities (YAGPO) programme. This affirmative action initiative has ensured that 30 per cent of all government tenders have been allocated to youth, women and the disabled. Although the absorption rate of this programme is still growing, more youth in Kenya now have an opportunity to define their economic destiny.

Still, access to finance and adequate training for the youth remain huge stumbling blocks. The lack of collateral and short credit histories limit the extension of credit to the youth. Equally important is the need to offer trained expertise as a way of creating employment and improving the efficiency of Kenyan SMEs.

The informal sector is no longer just about the roadside mechanic or the neighborhood tailor. It now spans new innovative sectors in Information Technology, agribusiness, manufacturing and green energy initiatives.

That is the reason an increasing number of Kenyan organizations like KCB continue to support the informal sector, rolling out initiatives towards youth entrepreneurship by creating various platforms for their growth.

In March this year, KCB launched 2Jiajiri, a youth empowerment programme that seeks to benefit at least 500,000 entrepreneurs in the next 5years. Under this flagship project, KCB has rolled out a business challenge – the Lions’ Den – that is open to all Kenyan youth who have a desire to change the face of the Kenyan employment landscape. This is a platform for entrepreneurs to compete and showcase their ideas where the best of this will be funded and supported to grow.

In addition to the challenge is the mentorship programme, in which the youth will also have a community of mentors engaging with mentees online through chats and blogs.

The2jiajiri programme will be a game-changer in a country where over one million young people enter into the labour market annually without any vocational skills.

As a bank, we believe in giving dignity to the informal sector. The challenge of the 2jiajiri initiative will be to ensure that youth from across Kenya are able to nurture their ideas or small businesses into meaningful startups.

It is high time the public and private sectors collaboratively played a part in solving the perennial youth unemployment issue in Kenya. But this journey of a thousand miles will only begin if our youth believe in the vision of credible economic empowerment. That empowerment is embodied in the spirit of entrepreneurship that will turn the expanding youthful labour force into Kenya’s future middle class.

(The writer is the Retail Banking Director at KCB Bank Kenya)

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