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Public procurement opens doors for youth-led firms
Finding jobs for young people in the formal economy is a pressing challenge in African countries where youth make up the largest share of the population but are largely without work.
Most of the jobs on offer are low-wage opportunities. According to “Empowered Youth, Sustainable Future,” a 2014 report by United Nations Development Programme (UNDP), more than 40% of youthful workers in sub-Saharan Africa are unpaid.
Unable to find work in the formal sector, young people find jobs largely in informal economies, particularly in agriculture and household enterprises where they tend to be underpaid. While the informal sector is critical to their survival, it does not offer enough opportunities that could lead to full participation in national economies.
Public procurement, whereby government and other public agencies procure goods, services and construction from private companies, can be a boon to job creation and the economic empowerment of youth. The World Bank estimates that the global public procurement market is worth a whopping $9.5 billion.
With this in mind, governments and public institutions are increasingly purchasing goods, works and services from youth-owned or youth-led enterprises, thereby expanding youth employment and empowerment.
Some governments have reserve targets of government contracts for businesses run by youth. For example, the government of Kenya has reserved 30% of all government tenders for youth, women and persons with disabilities, through the public procurement law passed in 2015. It has launched an online platform, the Access to Government Procurement Opportunities (AGPO) to register and pre-qualify companies owned by youth, women or persons with disabilities.
In South Africa, the Gauteng provincial government launched an initiative in 2013 designed to increase procurement spending on youth-owned companies, setting a target of 10% of all procurement contracts to be allocated to youth-owned enterprises.
Similarly, the province actively seeks goods and services from a government database of youth-owned enterprises. Procurement officers check required specifications against the database, says Sifiso Ndaba, the deputy director for youth development in the office of the premier of the Gauteng provincial government.
“As we allocate business or buy services, we actively make sure that the youth are prioritized and mainstreamed in procurement activities,” says Mr. Ndaba.
A multi-dimensional challenge
Increasing procurement from youth requires facilitating access to finance, information and other resources that are often lacking for youth and women who are traditionally marginalized from formal markets.
“One of the hurdles that remain in all actors in this race is capacity,” Zeinab Hussein, Kenya’s principal secretary in charge of gender affairs, told a panel hosted by the UN Development Business (UNDB) in New York last year.
Ms. Hussein stressed the need for training and mindset shifts, not only among women and youth, but also among government officials, in business management. This entails strengthening the skills of young entrepreneurs through training and mentorship as well as providing financial support.
In South Africa, for instance, capacity building is managed through a local government agency called Gauteng Enterprise Propeller (GEP), which supports young entrepreneurs entering the public procurement market and general enterprise management. As young people would be at a disadvantage when matched against companies with more experience in bidding for large government contracts, GEP provides financial and non-financial support to help make their bids more competitive.
“We have learned that most small businesses collapse within three years,” said Mr. Ndaba, in an interview with UNDB. He explained the rationale behind GEP’s mentorship programme: “If you manage to break this [three-year] period, you are most likely to succeed.”
By creating business-friendly environments for under-represented groups and providing access to resources that enable young people to participate successfully in markets, governments can make public procurement more inclusive. There is no doubt public procurement can be a crucial factor in empowering the youth of Africa.