Education

The case for job creation hubs to reduce youth unemployment in Africa

Youth unemployment remain a significant problem across Africa, with the rising population adding new layers of complexity to the challenge. Indeed, across Africa, estimates are currently as high as 60 percent for youth unemployment, and, not surprisingly, COVID-19 has exacerbated the issue.

As businesses continue to recover from the economic disruption and devastation caused by the pandemic, many companies have paused their hiring due to limited resources to take on additional manpower. Some have suspended efforts to rehire those who were let go over the past year to reduce personnel costs as sales slowed. In addition to finding good-quality jobs harder to come by, African youths have also faced disruptions to education and training.

In response, governments must make a concerted effort to improve business opportunities to support employment, foster innovation, and improve economic performance. That 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—at both the national and municipal levels—can explore is the development of job creation hubs.

WHAT IS A ‘JOB CREATION HUB’?

A job creation hub is a structure in which businesses that offer the same or similar services can utilize common infrastructure to provide these services to different clients. This structure can help reduce startup costs, ease the challenges around launching a business, improve business efficiency, provide networking opportunities, foster knowledge exchange, and increase revenue—thereby improving employment opportunities for young people.

These hubs should be targeted at nano- and micro-businesses to stimulate productivity, improve inclusion for underserved businesses, and encourage informal-sector service providers to formalize their operations. It allows more microentrepreneurs access to startup infrastructure and incubation with mentoring along different value chains. The concept has the potential to reduce barriers to entry for decent jobs.

BRIEF CASE STUDIES

Expanding and applying these and similar structures across various sectors and cities can help increase the supply of services with low barriers to entry. The growth in supply can reduce the cost to the end-user and increase patronage and savings. In fact, this structure already exists in different sectors in different forms around the world to increase efficiency and reduce costs. Co-working spaces for tech startups are an excellent example of the job creation hub structure in action.

China. In China, “Taobao Villages” are hubs that house at least 100 businesses involved in e-commerce in the same location. In 2009, roughly three villages met this status. A decade later, more than 4,000 such “villages” exist across China.

The government and private companies provide these villages with targeted programs to support entrepreneurship, enhance logistical connections, and improve learning outcomes. Some initiatives provided women with additional business development training and child care services. Notably, according to the World Bank, the creation of Taobao Villages has helped decrease urban migration across the country and lifted many rural areas out of poverty. It has also enhanced rural infrastructure, increased employment opportunities, and boosted productivity.

United States. In Washington, D.C., the Shared Kitchen Concept is a good example of a job creation hub. These kitchens come in different sizes and offer the infrastructure for budding caterers or food vendors, and they also provide training programs and jobs. The infrastructure is provided by private individuals or social entrepreneurs, and different caterers rent working or storage space to provide their services.

While the LA Kitchen shut its doors recently, its parent company the DC Central Kitchen, first launched in 1989, is expanding to a larger location.

Lighting 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, investment, and implementation support.” This concept is very similar to the job creation hub concept.

First launched in 2005, this initiative, funded by the International Finance Corporation (IFC) and the World Bank, supported the development of a market for off-grid lighting systems in Africa. Member companies were able to access advice on product design, testing services, and training support. Over 2,500 companies were registered by 2012, and this targeted support helped to significantly expand the market for and supply of lighting products. The program is now in more than 20 African countries.

While a job creation hub involves a physical space, the Lighting Africa initiative shows how policy, 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 business.

Nigeria. The Nigerian government has introduced a number of major investment strategies to generate employment, increase exports, and grow the industrial sector—with varied success. Nigeria’s free trade zones (FTZs)—particularly Lekki (Lagos) and Tinapa (Calabar), export-processing zones (EPZs), and the Agege Technology Incubation Centre (TIC)—have received a lot of targeted investment. However, many of these projects are not delivering on their potential.

The TIC was set up in 1993 by the federal government to promote entrepreneurship, based on a model that has been credited with strong business development in BRIC countries (Brazil, Russia, India, and China). However, it lacks the necessary infrastructure such as power, broadband, machines or equipment, and capacity development to support startup.

In contrast, structures like the Co-Creation Hub Nigeria (technology) and 360 Creative Hub (fashion) show the job creation hub initiative can be harnessed to create vast opportunities for young Africans. In fact, in 2016, over 55 early-stage ventures were supported by Co-Creation Hub through its incubation unit, leading to the creation of over 300 jobs. More recent data provided shows they have supported over 650+ startups and created over 7,300 jobs to date.  Similarly, 360 Creative Hub has expanded, trained, and provided infrastructure for over 300 creative entrepreneurs including designers, photographers, makeup artists, and hairstylists to further their understanding of the “fashion ecosystem.” As many as 30 unique designers from this initiative have been given platforms to showcase their products at international fashion shows.

POLICIES FOR SUPPORTING JOB CREATION HUBS

As policymakers consider pursuing job creation hubs as part of their strategies to boost employment, they should ensure that the policies, especially those outlining public-private partnerships, carefully and clearly state the separate roles and responsibilities of the government and private player at the national and subnational levels.

Government’s role or support should include an economic needs assessment, tax breaks for startups, and low interest rates on loans to participants. Governments and relevant agencies must also create a friendly regulatory atmosphere to facilitate collaboration with private sector players. Private sector partners can provide expertise, particularly sector-specific knowledge or experience, to each job creation hub. Those partners can also create awareness of the hub more broadly in their networks and further develop other partnerships to make the hub successful.

Setting up a successful job creation hub requires strong investment and funding. Governments can provide incentives to partners such as information technology and telecoms firms, for example, to provide operational services for broadband and e-commerce platforms.

Once built, job creation hubs can function as social enterprises that are self-sustaining, managed by the private sector and charging affordable rent for office spaces and rental, equipment leasing, or membership fees. Member benefits 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 key, such as links to enterprise development or training institutions that can provide coaching and educational support to aspiring and existing entrepreneurs.

Partners and experts involved in a job creation hub development must also be dedicated to fostering community development and knowledge sharing. By providing discounted memberships for young people and startups, job creation hubs can also provide an environment for learning and skills development.

CONCLUSION

There is no quick fix for generating employment opportunities for young people in Africa, for creating an environment for innovation or spurring economic growth. However, through targeted policies and investments—such as investing in job creation hubs—governments can certainly get on the right path. As we seek to build back better and stronger from the pandemic, government at all levels must embrace this opportunity for renewed investment into our economies and our young people.

Source: https://www.brookings.edu/

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