Viewpoints | Jan 25,2020
Ethiopia's youth finds itself caught between a rock and a hard place with rapidly narrowing prospects in the formal education route and a policy that fails to accommodate entrepreneurial ambitions.
The 24-year-old Jebril Kedir is not sure what comes next. He is among the 46 final-year students that failed the exit exams from Hope University College, following a three-year study in Information Technology.
After the introduction of an exit exam with officials hoping to revive the declining quality of education this year, only 17pc of the students from private institutions managed to graduate. More than half of the 150,000 examinees who sat for the exams have failed.
The outcome does not make much of a difference for Jebril who was not banking on employment after hearing reports that the federal government is freezing new hires in the public sector next year.
"Even if I passed, it's not like I'll get a job," he said.
All the while being an avid social media consumer like many of his peers, Jebril dabbles in content creation with over 200,000 followers on TikTok. He has been exploring several ideas to kick off a tech start-up centred on digital marketing or finance.
However, his latest endeavour to establish an online digital currency trading platform has been met with struggles to mobilise seed capital and acquire proper licenses.
"I'm constantly looking for ways to leave the country," he told Fortune in exhaustion.
Jebril does not seem to be alone in this.
Leaving the country has become a popular option with 839,000 Ethiopians having migrated to other countries in a span of five years. Over three quarters were between the ages of 15-29, according to the Internation Organization of Migration (IOM).
The survey indicates that 51,000 of these migrants who ventured to find job opportunities had gone missing, while many more are believed to have perished using dangerous land and sea routes.
Out of the survivors that chose to stay in the country and grapple with the limited opportunity, the entrepreneurial-minded ones that turn to self-employment are met with a policy and bureaucratic environment that is lagging behind.
There is no legally defined categorisation for startups in the country. This leaves most of the startups struggling to stand on their two feet while labelled under Small & Medium Enterprises (SMEs) or Private Limited Companies (Plcs) if they can pool together the funds.
A start-up proclamation drafted by the Ministry of Innovation & Technology which entails a host of alluring legal instruments, including the creation of an innovation fund, a national startup council and tax incentives, has yet to see the light of day.
According to Selamyihun Adefris, director general of innovation & development research at the Ministry, creating an entrepreneurial ecosystem is essential for a thriving start-up culture. He underscored the importance of entrepreneurial competence to champion successful businesses, as every emerging business will not have access to finance from the innovation fund.
"We're focusing on innovative ideas," Selamyihun told Fortune while remarking that higher institutions have a long way in equipping the technical capacity of the youth.
He indicated that the proclamation has to pass the Ministry of Finance as the innovation fund aids in financing these emerging companies. Meanwhile, Selamyihun emphasised that improving Ethiopia's ranking in terms of the startup ecosystem index is critical to attracting investment capital from abroad.
Addis Abeba ranks 417th in the development of its ecosystem of 1000 cities worldwide. Mauritius is the highest-ranked African country at 61st, followed by Senegal at 82nd, according to a global startup ecosystem map and research centre, Startup Blink.
Spearheaded by Selamyihun who appears passionate about changing the narrative, the Ministry has been engaging with aspirant executives for the past few months as fodder for the ephemeral startup proclamation.
Abenezer Engida, CEO of Wuijo, a digital platform for Equb (traditional fund pooling scheme) platform, was one of the attendees at the Ministry stakeholder session. He found the looming proclamation an indicator that things will improve once it sees the light of day.
"We are toiling in the trenches for now," he told Fortune.
For Abenezer, the defining moment is utilising the seed capital to grow into full-fledged businesses. He cites Wuijo's 250,000 Br capital chipped in by friends and still struggling to hit a functional stride as an indicator.
The founder of a two-year-old company has been looking at every possible avenue to inject capital into the company including taking classes in hopes of developing alternative skills.
Abenezer does not believe most startups in the country will be able to meet the requirements of foreign venture capitalists whilst sitting on flimsy legal grounds. While funding is an issue, he observes that a lack of institutional culture appears to hinder startups from success.
"Professionalism also lacks on behalf of local companies," he told Fortune.
For the past three years, the startup bill has been making rounds at the ministries of Labour, Finance and Justice. However, the innovation fund in the draft does not seem to be included in the recently ratified austere budget of 801 billion Br which rather cuts back public sector hires.
Senior officials at the Ministry of Finance expressed a see nothing hear nothing sentiment over the alleged squabble over the innovation fund as they underscored that budgetary allocations require a nod from the Ministry.
According to Getachew Negera, senior advisor at the Ministry of Finance and former head of the treasury, the establishment of funds can only be done by the federal government while suggesting that he did not know of the specific fund proposed.
The tight fiscal space that the country is in does little to appease the rage of lifelong entrepreneurs like Keremenz Kassaye, who bank on the ratification of the proclamation for an improved startup ecosystem.
Keremenz is the Ethiopian Youth Entrepreneurs Association (EYEA) Vice President with nearly 50,000 members. He feels both hope and dread over prevailing circumstances.
The agreement with the state-owned Commercial Bank of Ethiopia (CBE) signed last week to potentially provide collateral-free lending to promising entrepreneurs through a vetting process of the Association is promising to Keremenz. On the contrary, he expressed dismay over the withheld endorsement to establish an innovation fund which was included in the start-up proclamation.
"We had high hopes for the innovation fund," Keremenz told Fortune. "I hope the bill gets ratified regardless."
On the contrary, consultants such as Million Kibret do not believe the mere provision of funding in the form of seed capital will create thriving and self-sufficient companies.
The managing partner at BDO Consulting underscores the importance of creating mechanisms through which either venture capital or private equity enters companies' development.
Million argues that the government cannot actually be an incubator for startups. He indicated that most business incubators source funding in an NGO-type scheme while lacking the observational capacity and prior entrepreneurship experience to follow up on the businesses.
"They are designed for failure; only entrepreneurs can teach entrepreneurship," he said.
The draft proclamation also poses a series of incentives for startups in the form of tax holidays and customs duty subsidies. However, Million vilified the notion arguing that every business is a start-up when it emerges.
He said a complex set of factors come into play in creating an enabling policy framework, hinting that no single move will solve the country's entrepreneurial, business or labour woes.
The highly productive age group between 18 and 34 accounts for over 30pc of the total population, estimated north of 120 million. Informal career paths are increasing in the labour market of the capital city, where the unemployment rate hovers near 20pc with monthly job loss rates around five per cent.
The 97pc of nearly one million examinees that failed to join higher education institutions this year add to the fresh workforce.
Despite delayed proclamations and a fund-strapped string of emergent companies brushed off by the public sector, private capital has moved in some industries to assist the ballooning number of entrepreneurially-inclined youth sipping through the cracks of the educational system.
The Addis Abeba Chamber of Commerce & Sectoral Associations (AACCSA) has partnered with the European Union in a project dubbed Business Incubator Communities (BIC).
BIC has been providing incubation and acceleration programs for 16 companies since October allocating 5.5 million euro.
According to Amanuel Desalegn, project manager of the BIC, they accept anyone with innovative ideas with priorities for the agriculture and technology sectors while offering funds and access to discounted loans.
"We don't predicate our selection of companies on founders' educational achievements," Amanuel told Fortune.
Amanuel acknowledged that the ratification of the start-up proclamation would have served as a significant milestone in accommodating aspiring entrepreneurs. He remarked on the importance of cultivating skills for competent business management as he observed a huge gap, particularly in sales ability.
Meanwhile, a bill prepared by the Ministry of Labour & Skills that got parliament's nod last month seeks to tailor Technical & Vocational Educational Training (TVET) programs across the 1342 schools and link them to labour demand within local industries.
Since it requires minimum criteria for joining the programs, short-term training is offered for those who fail to meet the basic standards. The Ministry has given capacity-building courses for 25,000 trainers that are expected to disseminate across regional states.
Mulu Keni, deputy director of training & institutional capacity desk at the Ministry said there is a mixed output to a degree of aversion in some to engage in blue-collar careers.
According to Mulu, there is an ongoing effort to accommodate newer skills and technology into medium and long-term programs. Despite a Certificate of Conformity (COC) being issued for graduates of TVETs, the rapidly changing labour demand has limited the absorption of graduates into the industrial labour force.
A generation ill-equipped to tackle both the requirements of a formal education amidst sweeping reform and the uncertainties of a dynamically changing business landscape casts a hazy fog over the economic horizon of a country in a protracted political transition.
Kibur Engidawork (PhD), a sociologist with several publications, finds the high failure rates unsurprising since most of the prospective graduates came under a system that focused on theory rather than applied knowledge.
He endorses the reorientation of priorities in education from quantity to quality while he advises shifting the country's societal values from the canonisation of income and position to expanded virtues. He indicated that it will also lessen the pressure felt by the youth.
"Not everyone is meant to be rich or an academic," he told Fortune.
He reasons that institutional failure in politics, education and economics must collude if a growing number of society find themselves unemployed and unskilled. Revisiting social institutions becomes necessary when a growing segment of the populace fails to access education and attain employment, he said.
While past societies used to be stratified in naturally acquired traits like race and family, social class is determined by a combination of income, occupation and educational level in today's world which determines access to resources, according to Kibur.
PUBLISHED ON
Jul 22,2023 [ VOL
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1212]
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