Statement: National survey confirms that small businesses need support to unlock growth. - Youth Capital

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Statement: National survey confirms that small businesses need support to unlock growth.

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While Small, Medium, and Micro Enterprises (SMMEs) feel positive about the energy that young people bring to the workplace, one in two business owners emphasised that both the lack of work experience and the absence of critical skills for the workplace, stunt the hiring of young people. This is according to the national survey run by advocacy campaign Youth Capital, to identify the challenges that SMMEs face when hiring and retaining young people, in their latest report Bridge the Gap. Finding the ‘right’ young hire.

Read the report here

As youth unemployment continues to be a national crisis, the role of SMMEs has become critical in absorbing young talent. Even though they make up 40% of the GDP, and between 2016 and 2019, small businesses created more than 1,800 jobs per day, their challenges often go unseen. ‘Solving the obstacles that SMMEs face when hiring and retaining young talent is crucial in order to unlock growth’ says Kristal Duncan-Williams, Project Lead at Youth Capital.

Bridging three gaps to put the needs of SMMEs first.
Results revealed that although SMMEs have a critical role to play in combating youth unemployment, many enterprises face three main gaps: lack of the right skills amongst young hires; lack of knowledge on the correct hiring and onboarding processes to implement; lack of awareness on the government incentives that exist, and how to access them. ‘Bridge the Gap also acknowledges the role and the potential impact of an ecosystem where SMMEs, decision-makers, and youth employment programmes align their work to improve their outcomes’, adds Duncan-Wiliams.

Gap one: addressing skills mismatch
The majority of respondents struggle to hire young talent that matches both the skills profile and culture fit of the workplace. One in two respondents raised their lack of trust when hiring young people without prior work experience, or contactable references. While work-readiness has been targeted by a plethora of youth employment programmes,
there is an urgency for improved coordination and matching between the soft and technical skills promoted in work-readiness programmes and the needs of small businesses. ‘Since the Presidency’s focus has been on widening the pool of SMMES using its data-free platform SAYouth, the platform could expand to target skills mismatch to advance SMME’s ability to find the skills they need’, adds Duncan-Williams.

In the survey, business owners highlighted the critical skills that their businesses need

Gap two: prioritising hiring practices
Youth Capital’s analysis highlights that one in two SMME respondents hire through their existing network of connections. This is not unusual, as national research confirms that South African employers often rely on professional networks and past employees to find the right person for the job. While hiring through word-of-mouth can seemingly save time and promote trust, it often results in hires who might have the correct competencies, but don’t fit the culture of the workplace. Bridge the Gap confirms that there is an opportunity for youth development organisations to work as a trusted platform for hiring. ‘This would be beneficial for youth employment programmes to ensure that programmes respond to the skills needs of small businesses’, adds Duncan-Williams. At the same time, business owners need to be encouraged to create or join communities of practice to share learnings and practical tips.

Word of mouth is the most used hiring method as it underpins a sense of trust; but it doesn’t always work out.

Gap three: reassess government incentives.
While government incentives were designed to promote the hiring of young people, there is little evidence of their impact. One such example is the Employment Tax Incentive (ETI), which was introduced in 2013 and expanded to R1500 during the 2022 State of the Nation Address to share the costs of young hires between employers and the government. However, Bridge the Gap reveals that only one in 10 respondents had accessed the ETI, and only two in 10 had accessed funding by Sector Education and Training Authority. When asked about the main reasons behind this low uptake of incentives, seven out of 10 SMMEs indicated a lack of awareness of the existing options, and four in 10 complained about the red tape to access them. ‘Given the existing financial allocations for these incentives, and the role that SMMEs are encouraged to play in the economy, there is an urgency to adapt these incentives to the needs of SMMEs’ explains Duncan-Williams.
Some of the ways that the government can improve the process include aligning the value of these incentives for SMMEs, streamlining requirements for the sector, providing a support-line to ensure accessibility, and prioritising the functioning of SETAs.

‘Bridge the Gap doesn’t only highlight the shifts that the sector needs to unlock hiring potential; it also outlines the need for improved coordination between the actors involved’ adds Duncan-Williams. The recommendations from the brief will be discussed in a Twitter Space with Khaya Sithole, Luisa Iachan (International Labour Organisation), Bentolina Nnadi (Mama Money), and entrepreneur and ONE Champion Eniola Price.

Set a reminder to join the Space here

Youth Capital’s report was produced with the input of Youth Employment Service, Harambee Youth Employment Accelerator, the ONE Campaign, and Heavy Chef Foundation.

About Youth Capital
Incubated by the DG Murray Trust, Youth Capital is a campaign that advocates for youth-centred and evidence-based solutions to youth unemployment. The campaign has joined the dots between young people’s lived experiences and evidence by creating a national strategy to collaboratively tackle youth unemployment; the Action Plan prioritises ten systemic challenges that need to be addressed to ensure that young South Africans have the skills, opportunities and support to get their first decent job.

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