South Africa’s Youth Unemployment, Vulnerabilities and Lessons from China’s National System of Innovation and Incubation

Chinese President Xi Jinping

Chinese President Xi Jinping

Published Mar 5, 2024


Jaya Josie, Adviser, Zhejiang University International Business School (ZIBS), Adjunct Professor, University of the Western Cape (UWC) and University of Venda (UniVen)

The National Minister of Finance presented his Budget Speech in South Africa’s National Parliament on 20 February 2024. This year the Budget Speech was awaited with much anticipation as on 29 May South Africa will have its national and provincial elections. The country was looking for signs of optimism.

By and large the Budget Speech was well received by the markets and the business community but criticised by the opposition and some political analysts . However, on the same day Statistics South Africa also released its Quarterly Labour Force Survey (QLS) for the last quarter of 2023. The negative unemployment data from the QLS put a damper on the positive reactions to the Budget Speech.

South Africa has one of the highest unemployment rates in the world, with youth unemployment and youth vulnerabilities a significantly worrying phenomenon for all South Africans. The QLS reported that the unemployment rate for the fourth quarter of 2023 increased from 31.9% in the third quarter to 32.1% in the fourth quarter. Of all population groups and communities in South Africa, the youth, that is persons between the ages of 15 to 34 years of age, were reported to be the most vulnerable in the labour market.

The youth unemployment rate increased from 43.4% in the third quarter of 2023 to 44.3% in the fourth quarter, an increase of 0.9%. In an election year this is indeed bad news for the government as South Africa has one of the largest and growing youth demographics on the African Continent. Most of this age cohort were born after the 1994 post-apartheid elections and will not have any loyalty to the liberation struggles before 1994.

In 2017 while working for the Human Sciences Research Council (HSRC) in South Africa, together with colleagues in the HSRC BRICS Research Centre, we undertook a research project into Youth Unemployment and the Cycle of Poverty and Inequality in BRICS. The project was a case study using data from South Africa from a youth risk behaviour survey (YRBS) undertaken by the Medical Research Council (MRC) in 2007/08/10. The findings from YRBS and subsequent HSRC research project were indeed significant.

South Africa was found to have the highest youth unemployment amongst the BRICS countries. The youth unemployment was evenly spread across all nine provinces of the country and had increased alarmingly whether from the narrow or expanded (discouraged) definition it had increased respectively 32.7% and 42.5% in 2008, to 36% and 48.8% in 2015.

The HSRC 2017 research report concluded that there was an associative relationship between youth vulnerability and youth unemployment in South Africa. Furthermore, the report elaborated South Africa’s current struggle to mitigate the worsening socio-economic crisis will continue to enable risky conditions in communities, lessen their capabilities and result in a more vulnerable youth population. This could mean that the post-Apartheid generations of South African youth from disadvantaged communities will be condemned to a life of poverty, working poverty, and exposure to exploitation and abuse.

The latest data for the fourth quarter of 2023 youth unemployment at 44.3% only seems to confirm this trend. The big question for the government is how to address the challenges of high youth unemployment and the concomitant vulnerabilities such as youth risk behaviour in what will become a watershed moment in the 2024 national elections.

Recent data suggests that more than half of South Africa’s population is under 30 years and yet the country has not been able to benefit from this demographic leaving 60% of youth unemployed.

Labour market studies have shown that youth unemployment is largely due to the mismatch between the needs of the labour market and the qualifications of young people and poorly skilled workers. In 2010 Government introduced the National Rural Youth Service Corps to target disadvantaged rural youth. The aim of the program was to equip youth with vocational and technical skills and abilities to create businesses.

An outcome of a recent program evaluation was that participants successes were largely due to improvement in soft skills, problem solving, networking and leadership. For those who started businesses soft skills proved more effective than technical skills. Although a key success of the program was an increase in the participation of women, one of the weaknesses of the program was the inability of the organisers to place their graduates into employment.

A key recommendation from the evaluation was that success can only be achieved with synergy between stakeholders in rural development and employment creation. This is also true for youth unemployed in the urban townships. The evaluation also recommended alignment between skills taught and the needs of employers. In addition graduates should be assisted with resources such as land and start-up capital. Programs in other developing countries have shown significant positive impacts in increasing emphasis on soft-skills in employment support programs.

Researching into mobilising soft-skills for the unemployed in South Africa is Mr Krish Chetty, Senior Research Manager at the HSRC. Mr Chetty’s current research focuses on AI, Fintech, the Digital Divide, BRICS Research, and SDG achievement.

Mr Chetty was one of the principle researchers in the HSRC research project on youth risk behaviour in 2017 and, recently posted several online LinkedIn blog posts. In blog post 17 Chetty examined the hurdles of navigating the financial maze in the quest for sustainable incubation in South Africa and explored the challenges faced by incubators in the financial environment. He showed that incubators in South Africa rely essentially on government funding and are faced with the complexity of securing private investments, and bureaucratic obstacles.

He highlighted several challenges facing incubators in South Africa including government funding impacting on incubator autonomy; the paradox of private investment in a risk averse market and, the importance of funding diversification and greater public sector support. In the blog he also explores strategies for developing a sustainable incubation model in a challenging environment. In subsequent blogs Chetty explores the example of China’s National System of innovation incubator development for South Africa and Africa in general.

In Blog Post 18 Mr Chetty posted specifically on navigating the Startup Ecosystem in Shenzen China. In this post he illustrated how Shenzen developed from a quaint fishing village to a modern day tech giant that is called the Silicon Valley of China and has become a beacon of innovation.

This example offers valuable lessons for African entrepreneurs and policymakers. While the post focuses on opportunities in manufacturing, and efficient supply chains that Shenzen presents, it also highlights some of the more significant challenges. Included in the list of challenges is the high levels of competition, the rapid pace of innovation, a complex regulatory framework and intellectual property rights issues.

Awareness of the challenges provide important building blocks for startups in Africa as they attempt to draw on local strengths, foster government-industry collaboration thus cultivating an African culture of innovation. This theme was further developed in blog post 19 where Chetty considered the possible lessons for South Africa and Africa in general on “Unleashing Innovation – Lessons from China’s National System Innovation for Africa’s incubators (Blog Post(19). In this blog he shows how China’s National System of Innovation powers IP (Intellectual Property) commercialization.

The post highlights key lessons for Africa’s entrepreneurship development and growth and shows how China’s approach of integrating government policies with research institutions and contrasts this with the current approach in South Africa. The post suggests that we may learn from China’s strategic focus on university-industry-government relations, their investment in science parks, and their high-quality and sustainable innovation. What can we learn from these lessons in China and how can they point the way to address the issue of youth unemployment in South Africa?

In his blog post(15) on building incubator partnerships between Africa and China on 13 February 2024 Chetty considered the value of international partnerships drawing on lessons from China’s Suzhou Industrial Park (SIP) started in the 1990s. He describes the collaborative effort of the international partnership between China and Singapore.

Some of the key lessons for issues of youth unemployment in South Africa, and dealing with the challenges of funding and investment in South Africa and Africa from the SIP model, are the issues around attracting investment, environmental sustainability, global connectivity and expertise in park management. In their efforts for economic transformation South Africa and Africa could strategically engage and collaborate with international partners such as Singapore and China and accelerate the learning from the experience of the successes of these nations.

Such partnerships will also enhance the attractiveness for international investments, strengthen the regulatory and policy framework and promote the development of an innovation ecosystem. In South Africa there are many provinces where industrial parks will provide a suitable environment for government to embark upon international partnerships that will attract investment and create opportunities for young people to not only find employment but also engage in small business startup partnerships with companies from other countries.

Public and private sector investment in training in soft skills and innovation can be the key to addressing youth unemployment in particular and unemployment in general. The meetings in August 2023 between South Africa and China and, President Xi Jinping’s summit meeting with South Africa’s president set the stage for consolidating strategic international partnerships. With the looming impending crisis in youth unemployment and the possibility of the negative effects from youth risk behaviour it is time for South Africa to act with urgency to avert a political economic crisis.