Factors influencing the performance of youth-owned SMEs – Opinion

SMALL AND MEDIUM SIZED ENTERPRISE (SMEs) are the backbone of many economies around the world.

They have consistently driven impressive economic growth, stimulated job creation, reduced poverty, improved gross domestic product (GDP), and fostered equitable and sustainable development.

Research shows that the vitality of a thriving SME sector is testament to its importance in urban and rural development, highlighting the central role of entrepreneurship in national economic prosperity.

Furthermore, youth entrepreneurship has greatly contributed to self-employment and widespread poverty reduction.

In particular, youth-owned SMEs serve as hubs of socioeconomic integration within their countries.

A WATER OF CHALLENGES

In Namibia, the contributions of the SME sector to GDP and employment are modest compared to their counterparts in sub-Saharan Africa.

From 2017 to 2022, Namibia’s SMEs accounted for around 12% of GDP and employed approximately 20% of the workforce.

These businesses are critical to job creation, have a significant impact on both urban and rural communities and support a large segment of the Namibian population (National Policy on Micro, Small and Medium Enterprises in Namibia, 2016).

Under Vision 2030, the Namibian government has recognized the potential of SMEs to boost GDP by reducing unemployment, alleviating poverty and encouraging entrepreneurship.

This imperative was underlined by President Nangolo Mbumba when he addressed graduates of the University of Namibia on April 10, 2024.

The President challenged them to harness their entrepreneurial spirit to create opportunities and come up with innovative solutions to society’s complex challenges.

The emphasis on youth-owned SMEs is particularly pertinent given Namibia’s demographic profile: a significant 71% of the population is under 35 years of age.

Coupled with a high unemployment rate of 32% (2018 Labor Force Survey), focusing on youth entrepreneurship becomes a fundamental task.

However, youth-owned SMEs face a barrage of challenges, including limited access to finance, resource constraints, regulatory burdens, tough market competition, and difficulties in talent acquisition and retention.

In this context, a study was initiated to explore the factors affecting the performance of youth-owned SMEs in Kavango East.

This region was selected due to its alarming youth unemployment rate of 62.5% (Labor Force Survey, 2018).

CLEAR REALITIES

In Namibia, the harsh reality is that around 90% of SMEs close within the first five years.

This high failure rate, estimated at 75% for small businesses, points to deep-seated business challenges that demand attention.

While much of the literature spans diverse geographies and sectors, there is a gap regarding youth-owned SMEs.

This study fills that gap, assessing the impact of individual, organizational and environmental factors on the performance of these companies in the Kavango East region.

Employing a pragmatic research philosophy and an abductive research approach, the study reached out to 368 youth-owned SMEs in the region and conducted in-depth interviews with five key informants.

Using a mixed methods research methodology, data were collected through structured questionnaires and analyzed using descriptive statistics, exploratory factor analysis, regression analysis, and structural equation modeling.

The findings were revealing.

Individual factors such as age, gender, education, innovation and entrepreneurial orientation were considered to positively influence the performance of youth-owned SMEs.

Organizational factors, such as managerial competencies and access to resources, also positively affected performance.

Furthermore, the study confirmed a significant positive relationship between competition, market access, government policy, regulatory framework and the performance of these SMEs, along with other influencing factors such as business and financial issues, youth-specific challenges and local conditions.

RECOMMENDATIONS

The study concluded with a recommendation for stakeholders (government agencies, business associations and financial institutions) to work together to forge an enabling environment for youth-owned SMEs.

Financial supporters and entrepreneurship advocates should offer accessible and tailored financing to these SMEs.

Meanwhile, the government should prioritize easing regulatory restrictions to promote a business-friendly environment that encourages growth and innovation.

Regular reviews and updates of policies and frameworks are crucial to maintaining an agile and supportive business climate that can adapt to the changing needs of young entrepreneurs.

– Emma Kantema is the Deputy Minister of Sports, Youth and National Service. This is an excerpt from her doctoral research into the factors influencing youth-owned businesses in Kavango East. It is written in a personal capacity.