A Diagnostic Assessment on Business Environment Constraints on Youth Entrepreneurship in Mozambique

Mozambique has been achieving seven per cent annual economic growth over the past 10 years, but the formal job market is unable to create sufficient employment opportunities for the 400,000 or so young women and men entering the labour market each year. The promotion of youth entrepreneurship can help provide opportunities in starting and growing enterprises.

BERF provided an assessment of the key business environment constraints and other barriers faced by young entrepreneurs (15-35 years) in Mozambique, and identifies potential interventions to help stakeholders address these constraints.  In addition, the report identifies a number of relevant global best practice on policies and programmes aimed at promoting youth entrepreneurship.

Key constraints:

The UN Youthstart Global report (2015) indicates that the major challenge facing young entrepreneurs in Mozambique is a lack of access to finance.  57 young women and men in rural and urban areas identified limited access to capital as a common problem. Most financial services operate within the informal economy.  Mozambique was ranked 18th in sub-Saharan Africa, below the regional average, in terms of ease of getting credit.

The design and implementation of National policies that aim to promote youth entrepreneurship is variable, such as the Innovation Strategy (2006-16), Youth Policy (2013), Employment Policy (2016), and the Financial Inclusion Strategy (2016).  While entrepreneurship is usually mentioned, it is amongst a plethora of issues relating to broader youth and employment issues. Furthermore, these policies/strategies are seen as belonging to their respective ministries, and do not have a broad interdisciplinary engagement across the economy.

There are insufficient business development service providers supporting Mozambican micro, small and medium-sized enterprises, in particular youth entrepreneurs. Youth entrepreneurs in Mozambique require more and better support in starting and running their own enterprises, but there is not a strong tradition of mentoring. As an illustration of this, Ideialab Mozambique is having to recruit and train its own mentors, rather than being able to identify experienced and volunteer mentors.

Business Membership Organisations have limited capacity. They represent youth entrepreneurs and their small-scale enterprise members can play important roles in representing the interests of their members, and providing effective advice and services to benefit their membership. However, youth entrepreneur organisations in Mozambique, such as Associacao Nacional de Jovens Empresarios de Mocambique (ANJE), are over-stretched, and lack resources.

There are also insufficient business linkages between mid-sized and large enterprises and Micro Small and Medium Enterprises in Mozambique. One shortcoming of recent investments (both domestic and foreign) and the government’s investment promotion policies is that there has been a strong emphasis on capital-intensive ‘mega projects’ (aluminium, gas, coal). Whilst these investments have contributed significantly to economic growth, these projects have not resulted in commensurate job growth, as characterised by what is termed as ‘jobless growth’. It is important to promote the greater engagement of large businesses (including foreign investors) and business associations with indigenous youth entrepreneurs.

Recommendations:

A number of potential interventions, aimed at increasing start-ups and improving survival rates, increasing youth entrepreneurs’ sales, incomes and profits, and enhancing the quantity and quality of jobs in youth entrepreneurs’ enterprises are presented.

  • Improving the Business Environment for youth entrepreneurs and promoting an entrepreneurial culture, including a visible and supportive role from government with new policy initiatives, coordinating with wider Business Environment reform initiatives, and promotion of entrepreneurship education at secondary and tertiary levels (including Technical & Vocational Education & Training institutions and universities).
  • Promoting better access to Business Development Services, mentoring and financial support
  • Strengthening membership of representative, member-based associations that provide effective service delivery, advocacy and lobbying, as well as creating stronger business linkages with larger private sector enterprises.

The Mozambican government should play a leadership and coordinating role in association with DFID and other development partners as well as various social enterprises, both in promoting youth entrepreneurship and in mainstreaming youth issues into Business Enterprise reforms and other relevant policies and programmes. Given DFID’s extensive investments in related projects in this area, it is in a strong position for leveraging its current support to a range of initiatives with a particular youth focus or with youth components.

More details are provided in the Report