Challenges faced by youth entrepreneurs in Zimbabwe
By Cuthbert Mukora
In Zimbabwe, unemployment has become one of the most pervasive challenges faced by young people due to the socio-economic and political collapse that characterized the past one and a half decades ago. Unconfirmed reports indicate that the overall unemployment rate is over 95%. In this case, many young people have responded to the unavailability of jobs by starting up their entrepreneurial businesses in various sectors, especially the major ones that underpin the economy, namely tourism, agriculture, mining, and manufacturing, as well as other sectors such as information technology, cultural industries and services. However, these young entrepreneurs face a variety of constraints that hinder the growth and development of their enterprises.
The principal areas of concern affecting the development of businesses owned by the youths are; limited access to start-up investment capital, unavailability of work space and equipment, lack of marketing skills and market information, inadequate management and entrepreneurial skills, hostile regulatory environment competition, bureaucracy and corruption, negative perceptions of indigenous youth entrepreneur’s products quality, and a difficult operating environment viz-a-viz high licensing fees, erratic utilities, political uncertainties and fluctuating exchange rates.
In most developing economies self employment is considered as the engine for economic growth and for promoting technological and social development. Self employment is a nursery of entrepreneurship, often driven by individual creativity and innovation. Youths in Zimbabwe have decided to start their own businesses as survival strategy while some have been motivated by a desire to make social impact. Youths who have joined the business community have become the main driving force behind job creation, poverty reduction, wealth creation, income distribution and reduction in income disparities.
However, the majority of Zimbabwean youth entrepreneurs have faced enormous challenges in securing venture capital due to lack of collateral and credit history (Youth Forum in Zimbabwe 2012). Youths face significant obstacles in gaining access to start-up investment capital to launch their enterprises, and to enable it to thrive and expand. While many young entrepreneurs in Zimbabwe have got promising ideas and innovations with the potential to make social impact and drive local socio economic development in the country, lenders are often uncomfortable to lend money to youths since they do not meet the minimum requirements for borrowers and also lack collateral securities required by loan givers. Thus, it is very difficult to earn confidence from banks and other finance institutions for getting a loan thereby making it difficult for young entrepreneurs to launch their enterprises.
Transport system in Zimbabwe is very unreliable and costly hence young entrepreneurs face difficulties in transporting their products and raw materials which are mainly sourced from the major cities, Bulawayo and Harare and across the national borders namely in South Africa. Most young entrepreneurs who are in business do not have transport of their own so they depend on the public transport which is costly and unreliable.
Youth entrepreneurs in Zimbabwe have limited access to the state of the art equipment and infrastructure to use to run their businesses. Some businesses are operated from dilapidated buildings and in worst scenarios under trees or plastic made shades and a notable place is Magaba Market in Mbare which is one of the oldest and dirtiest suburbs of Harare. Although youth entrepreneurs who operates in these areas are skillful and innovative, they tend to lose part of their market share since customers usually develop a negative perception and attitude about the products and services which are being produced and marketed in these areas.
Another challenge is that poor access to information regarding access to capital. Youth entrepreneurs find it difficult to get information on the available investment funds. Even for those who would have had access to such information, the processing itself is usually too long and characterized by bureaucracy and corruption. Thus, by the time loans were processed some economic opportunities would have been lost.
The pricing of equipment is also beyond many youth entrepreneurs as they often cannot afford to purchase locally manufactured pricier options and where affordable, transporting the equipment to operational points is a mammoth task. Adding to the above, the geographical location of some youth-run enterprises makes it difficult to move goods to where the markets are due to lack of the transport infrastructure, or where present; the exorbitant transport costs.
Youth entrepreneurs also face stiff competition and market acceptance challenges. Competition is mainly from well established local and foreign businesses which operate in Zimbabwe. In this case, these youth entrepreneurs who have little skill and experience may usually bring to market unpolished goods which are highly priced to cover up the production costs. These are usually out competed by imported goods or products especially those from Chinese and Indian owned businesses which are lowly priced. To make matters worse, the local market itself has low regard for local products and services offered by youth entrepreneurs who are locally termed ‘vana Museyamwa’, a description given to indigenous entrepreneurs. This results in the monopolistic behavior of some foreign companies and businesses thereby inhibiting the entry of youth entrepreneurs without critical mass.
Youth entrepreneurs face difficult operating environments as a major challenge. This include high licensing fees charged in foreign currency as being a deterrent to the formalization of businesses in terms of company registration, sector licensing and tax registration thresholds. Erratic utilities also contribute to operational difficulties, as the local power and water companies are inconsistent in supplies, and the alternatives are not economic for micro enterprises. Political uncertainties is also a challenge for youths entrepreneurs on the premise that they become reluctant to invest much into their businesses, with the fear that political and policy directions may change and impact committed investment.
Finally, due to the introduction of bond notes in Zimbabwe, it has also greatly affected youths entrepreneurs some of who source their raw materials or products across the borders. This makes it difficult to sustain or expand their enterprises.
Cuthbert Mukora is the Programs Officer of Rural Enterprise Trust Zimbabwe, an organisation that was created to sustain, strengthen, and promote socio-economic freedoms as the yardstick for pursuing the sustainable development. He writes in his own capacity.