2.1
Definition and types of youth entrepreneurship in
Germany and Africa
2.2
Motivations of young people to engage in business
2.3
Required Capabilities of Young Entrepreneurs
2.4
Impact of youth entrepreneurship on the society
and on young entrepreneurs
EDGAR BONGKISHIY, Cameroonian entrepreneur and
software-developer
MAMY JOEL RAMAHEFARISON, founder of a cyber café
in Madagascar
NELE HEINEVETTER founder of Niche Art and
Architecture Tours Berlin
3.1
Political factors
Macro-economic Policies
Governmental Support for (Youth) Entrepreneurship
Political Stability
3.2
Economic factors
Access to Capital
Unemployment
Economic Growth
Inflation
Market forces
3.3
Social factors
Social and Cultural Norms
Risks and Uncertainty
Problem of entrepreneurship in South Africa
3.4
Technological factors
Positive relationship between developed infrastructure
and entrepreneurship
Infrastructure in Germany
Infrastructure in South Africa
3.5
Environmental factors
Environment in South Africa
Environment in Germany
3.6
Legal factors
Business Structure
Licences or Permits Acquisition
Insolvency
4.1
Instruments and economic policy for promoting
youth entrepreneurship in Germany
Funding
Counceling and Training
4.2
Instruments and economic policy for promoting
youth entrepreneurship in South Africa
Funding
Counceling, Training and Skills Development
Broad Based Black Economic Empowerment
Conclusion
4.3
Trends and identification of markets with potential
for young entrepreneurs
South Africa
Germany
Civic Education for Responsible Young Entrepreneurs
4.4
Potential of youth entrepreneurship policy within the
German-African Partnership
1.
Young entrepreneurs in Germany and Southern
Africa
2.
Opportunities and barriers for business creation
by young people
3.
Youth entrepreneurship policy and civic education
T
he “Go Africa… Go Germany…” program is conceptualised and
organized by the Federal Agency for Civic Education (bpb) and is
under the patronage of the President of the Federal Republic of
Germany, Christian Wulff. It took place for the fourth time from August
15th to September 2nd, 2011 in Germany and from March 12th to March
28th, 2011 in South Africa and Swaziland. It is designed to bridge the
knowledge gap between the realities and perceptions that Germans and
Africans have of each other. The program is mainly aimed at students
and young graduates up to the age of 28 engaged in the subject areas of
political science, international relations, economics, media science and
law. By bringing together this young generation of academics and young
professionals in an intercultural meeting, it aims at encouraging an interdisciplinary and intercultural exchange and learning experience.
One of the major aims of the program is to acquire a creative human
basis for future German-African cooperation and to facilitate exchange
between the scholarship-holders and established experts in the fields of
economics, politics and law. To date, participants from all over Germany
and more than 20 African countries have travelled together through
Germany and at least one African country on the second part of the
program. In 2007, the trip led us to Namibia; in 2008/09 to Tanzania
and Uganda; in 2009/10 to Ghana and Nigeria; in 2010/11 to South
Africa and Swaziland, and in 2012, a new group of participants will travel
to Kenya and the newly founded Republic of South Sudan.
By means of peer-teaching and on-going training, scholarship-holders
will be able to act as multipliers of the lessons they have learned in Germany and Africa within their respective local contexts. The creation of a
Common Paper serves as the first collaborative effort between all 26
“Go Africa… Go Germany…” scholarship-holders. The focus lies on
topics related to youth in Germany and Africa, and the German-African
Partnership. The fourth generation of the “Go Africa… Go Germany…” program was challenged to write about youth entrepreneurship
and civic education. The results were summarized in our “Major Findings” and will be distributed to academics and decision-makers for further discussion.
For more information and for accessing previous Common Papers,
please visit the website of this program: www.bpb.de/goafrica
I
n the course of the next decade approximately
five hundred million young people will enter the
labor market (Haftendorn& Salzano 2003: iii).
However, many of them have great difficulties
in finding an appropriate job and are not able to
make use of their skills and qualifications. In general
the unemployment rate amongst young people is
twice to three times as high as it is for adults (OECD
2008: 30). Due to the global recession, the prospect
of employment by established companies is further
hampered. The young people's limited access to the
labor market often results in a vicious cycle of poverty and social exclusion.
By not being able to participate in their respective
economies, these youth are at risk of not reaching
their full potential, and in doing so, straining the
economy and relevant social structures. This is due
to the fact that the government's investment in education and training will bear no fruits if young people
do not move into productive jobs that enable them
to pay taxes and support public services. Furthermore, poor employment at the beginning of a young
person‟s career may have negative effects on job
prospects in later life (Haftendorn & Salzano 2003:
iii). Not only does it impede opportunities to gain
work experience and practice expertise but it also
prevents young people from establishing a functional
network of business contacts.
An essential prerequisite for this endeavor is an innovative education system which emphasizes the
development of skills and attitudes that make up an
entrepreneurial mind-set such as lateral thinking,
questioning, independence and self-reliance among
young people. In addition to this, young entrepreneurs should be provided with further education
during vocational training, business incubation and
the start-up phase of their businesses.
This paper focuses also on the link between entrepreneurship and civic education in Germany and
Southern African countries. The entrepreneurs' status as self-employed risk takers within their communities makes them positive role models. Entrepreneurs who have gained knowledge on the subject
of civic education are more likely to be good corporate and civic citizens. If these entrepreneurs act in a
corporate and socially responsible manner they have
the potential to become what is commonly referred
to as “multipliers”. In this role they are able to promote the virtues of the civic educated life on a
broader basis than other citizens and can therefore
make an important contribution to society. Due to
their energy and innovative approach to problems it
is especially important that young entrepreneurs
participate in their communities and broader society
in a responsible way.
The first section of the paper focuses on the characteristics, necessary capabilities and motivation to
start up a business of young entrepreneurs in Germany and Africa and the impact of youth entrepreneurship on the society as well as on young entrepreneurs. Personal interviews with a range of young
businessmen and -women will complement theoretical findings and give insights in different businesses
and the personalities of their founders as well as in
country-specific political, social and economic realities.
In the third chapter, the focus lies on the opportunities and barriers to business creation by young
people which will be analyzed using the PESTELscheme. This scheme takes into account political,
economic, social, technological, environmental and
legal factors that young entrepreneurs have to take
into account when starting up their businesses.
The following section compares economic policies
for promoting youth entrepreneurship in Germany
and identifies new markets of interests for young
entrepreneurs. A special focus lies on finding ways of
promoting responsible and sustainable business
management through civic education. Finally the
authors deal with the potential of youth entrepreneurship policy and try to find new strategies for
facilitating youth entrepreneurship within the German-African Partnership.
2.1 Definition and types of youth entrepreneurship
in Germany and Africa
I
n order to investigate youth entrepreneurship,
opportunities and barriers for young people and
the necessary policies to open up a business, it is
necessary to define the terms 'youth' and
'entrepreneurship'.
Since the age range of 'youth' in academic research
varies to a high degree depending on the author it is
difficult to find a precise definition of this term. The
United Nations usually define „youth‟ as all people
between 15 and 25 years of age (United Nations
2007: 61). In this paper, the focus not only lies on
young entrepreneurs who started up their own businesses directly after school but also on young people
who founded their own company during their studies or after graduating. Therefore 'youth entrepreneurship' in the following research includes all
people between 18 and 35 years.
The term „entrepreneurship‟ can be defined in an
economic but also in a social and a cultural way.
According to Haftendorn and Salzano entrepreneurship can occur “[...] at home, school, leisure and at work
[…]” and it includes “life attitudes and […] the courage to
act in the social, cultural and economic background” (Haftendorn/Salzano 2003: 1). Ulrich Schoof defines it as
the process of recognizing “[...] an opportunity to create
value, and the process of acting on this opportunity, whether or
not it involves the formation of a new entity” (Schoof 2006:
7). In general, entrepreneurship occurs in different
sectors and types of businesses. For this reason
Schoof distinguishes three different types of entrepreneurship according to their working sectors.1
The first and most common type is economic entrepreneurship which primarily aims at creating wealth and
generating profit. An economic entrepreneur is willing to take risks, focuses on innovative projects and
tries to invest resources efficiently with the highest
possible outcome. Public entrepreneurship is the same as
economic entrepreneurship, however its objectives
and motivations are different. A public business is
socially orientated and works within the realm of
public institutions and organizations. This sector is
increasingly important for young people. Finally,
Schoof names social entrepreneurship. This type of business is directed towards social problems or the provision of public goods and focuses on creating social
value. Social entrepreneurs try to reach financial selfsustainability and deliver a socially acceptable return
on investment. The difference between a traditional
non-profit institution lies in the concept of setting
clear, profit-related performance goals. Furthermore
non-profit organizations are independent from the
state, which is mostly not the case for social businesses. Social entrepreneurship is a worldwide successful concept and particularly popular among
young people (Schoof 2006: 8 ff.).
As this paper is focusing on youth entrepreneurship
in Germany and South Africa, it is essential to elaborate on the differences between the formal and informal sector. Even though South Africa, being the largest African economy, has the smallest informal sector on the continent, informal employment is increasing (UNDP 2003: 98ff; Verick 2006: 5ff).2 For
many young people, especially with lower levels of
education, this is an attractive sector when entering
the labor market. Contrary to a formal business, an
informal business is not required to pay governmental taxes. At the same time informal workers are
generally not covered by social security and labor
legislation, which causes many problems for their
security. It is very difficult for the government to
control the great variety of mostly small and microcompanies since their economic activities are unregistered. Further characteristics for the informal
sector are a high poverty rate among workers, a high
proportion of women and self-employment people
who receive much lower wages than in the formal
sector. . Since informal businesses are very unpredictable, often difficult to sustain over a longer peThe percentage of the informal sector in 2003 was about
39% of total employment in South Africa. Hence the
informal sector almost doubled since 1991 (20% informal
employment) when the Apartheid-regime broke down
(UNDP 2003: 98ff).
2
Schoof further distinguishes between inter-,
intrapreneurship and co-operative entrepreneurship
(Schoof 2006: 8ff.). Due to the limited scope of this
paper we will not elaborate on these categories.
1
riod of time and risky for both economic and personal reasons, it is crucial to develop educational
programs that give informal workers a chance to
enter the formal sector (Verick 2006: 5).
2.2 Motivations of young people to engage in
business
I
t is often said that a person cannot win a game
they do not set out to play. Interpreted in the
context of entrepreneurship, this statement suggests that success as an entrepreneur depends on the
motivating factor behind that decision. Lau, Shaffer
and Au (2007) classify these motivational factors in
two groups. External measurable factors such as the
status of the economy, the actions of competitors
and increased income and prestige, on the one hand,
and subjective internal factors which refer to a person‟s individual appraisal of their career experience
based on personal standards, on the other hand.
In a study conducted by Henderson and Robertsons
(2000), it was established that the most common
reason for becoming an entrepreneur was the extrinsic need to earn more money and earn a prestigious
status in society. In 2009, TIME magazine named
Mr. Alhaji Aliko Dangote from Nigeria as Africa‟s
richest entrepreneur. Unable to secure employment
soon after obtaining a Bachelor‟s degree, Mr. Dangote launched his career as a street vendor selling
rice and sugar. Tired of constantly being disrespected
each day due to his line of work, he sought to make
more money subsequently rising in society. He borrowed various loans to expand his business, which
he founded in 1977 at the age of 20 as a small trading firm, and transformed it into the Dangote
Group, the largest cement factory in Africa. The
billionaire Dangote is controversial but he is also a
role model and a challenge to young African entrepreneurs.
Equally important external motivational factors such
as the status of the economy and the availability of
capital are shaped by government policies and regulations. People are driven to venture into entrepreneurship in countries where governments are politically stable, less legal restrictions and barriers to entry for private businesses, currency stability and provide opportunities for investment capital (Shane,
Locke & Collins 2003). As demonstrated in Madagascar, deliberate government reforms such as priva-
tization create opportunities for entrepreneurs where
technologically innovative and profit opportunities
arise in revamping previously underutilized bureaucratic state departments.
There are also critical internal factors that influence
the entrepreneurship process. Shane, Locke and
Collins (2003) report that individuals who have a
high need for achievement engage in entrepreneurial
activities and tasks as they require a high degree of
responsibility and require individual skill and effort.
Entrepreneurs derive a sense of accomplishment and
satisfaction from completing tasks independent of
others, in a way that challenges them, and where
their principles and values are not compromised.
Most importantly, they want to be their own boss,
set their own rules and not be limited by others. In
the case of young entrepreneurs, this need to take on
responsibility and make decisions autonomously
must be met at the same time as the process of
growing up and becoming an adult.
Self-efficacy is another motivational factor for entrepreneurs. Self-efficacy is the self-confidence to be
able to gather and implement necessary personal
resources, skills and competences to accomplish a
certain goal or target (Shane, Locke & Collins 2003).
Compared to regular employees, individuals with
high self-efficacy feel that the only way their goals
can be achieved is by venturing as entrepreneurs and
enjoying the benefits of owning a process from the
planning of the business to the development and
realization. Individuals with high self-efficacy often
pursue a not so successful line of business that they
are familiar with, commonly through family heritage
or peer association with the belief that their personal
strategies and higher standards will result in success.
Lastly, the excitement of taking a risk is also a motivational factor for becoming an entrepreneur. Risktakers are challenged to deviate from the norm of
schooling, and establish a new way of life with the
hope of joining the ranks of youthful self-made capitalists like Mark Zuckerberg, the founder of the social network Facebook, and earning a place in history. Risk taking is a necessary trait for entrepreneurs
especially in the beginning of the process as they are
faced with much more continued uncertainty than
managers of already established companies. In order
to succeed they must take the risk of facing situations with unclear outcomes and view that as attractive and non-threatening (Budner 1982). Young
entrepreneurs can be particularly good at risk-taking,
as they are less likely to be affected by previous experiences and they bring a youthful audacity with
them.
2.3 Required Capabilities of Young Entrepreneurs
O
n a personal level, motivation and creativity
are definitely amongst the most important
factors in being an entrepreneur. However,
there are several capabilities a prospective young
entrepreneur is required to have in order to engage
in a successful business.
There is always the risk of failure when starting up a
new business. An entrepreneur therefore needs to
have a strong and stable character and has to be able
to deal with a high level of insecurity, competitive
pressure and possible professional setbacks. This
implies having no fear of being a pioneer and of
taking risks, as well as high perseverance despite of
many hurdles. At the same time an entrepreneur
needs to be realistic and should consider potential
risks well before taking them. Decisiveness and conscientiousness should be well balanced as an entrepreneur has to be able to cope with bearing responsibility, not only towards his or her employees and
shareholders, but also towards clients, the government, banks and the society as a whole.
Considering that financiers, customers, business
partners and even family and friends are often very
skeptical towards new innovative ideas (Langer
2010), a young entrepreneur has to be able to convince doubters with a self-confident and professional
appearance. Especially when personally interacting
and negotiating with business partners, self-assured
behavior and social adaptability are an essential precondition for achieving strong bargaining power
(Baron & Markman 2003: 41ff.). In addition, communicativeness and “a high level of expressiveness [are]
often a „plus‟ from the point of view of generating enthusiasm”
(ibid.) on the part of both trade partners and employees.
Another essential entrepreneurial capability is economic thinking in order to have a basic understanding of how markets work and how to calculate potential risks. Entrepreneurs should always keep an
eye on competitors and look out for new opportunities that increase productivity and promote business.
On the one hand, this implies openness towards new
ideas and a high level of flexibility in order to adapt
to the changing circumstances of the market. On the
other hand, being a couple of steps ahead of the
competitors requires an ability to think strategically.
Good managerial and leadership qualities are crucial.
Besides these personal competences, the start-up of
a business venture also requires a certain degree of
education in entrepreneurship (OECD 2001: 81ff.).
This is not necessarily a precondition for a young
entrepreneur but must be acquired in the course of
time in order to achieve sustained success. Van der
Sluis et al. assert that the relationship between
schooling and performance is unambiguously positive (2005: 225 ff.). Among other things, it is imperative for an entrepreneur to have the most basic understanding and knowledge of financial management.
This would ensure that the entrepreneur has accurate
financial reports that would help to guide them in
making future decisions and choices. Therefore if an
entrepreneur has any plans for growth, a solid financial management is critical from the start-up phase
and onwards.
Further, it is of real use for entrepreneurs to know
the broad legal framework for operational purposes
and for engaging potential clients (Verma 2011).
Understanding legal issues, before entering a given
business sector protects potential entrepreneurs
from unintentionally disregarding the rule of law
which governs their industry; a circumstance which
would jeopardize the likelihood of their growth and
success. Knowledge of legal provisions also ensures
that any arrangement with one‟s stakeholders is
completely transparent. The entrepreneur should
have legal knowledge of business agreements including disclosures, payment terms and cycles, contractual terms and conditions, delivery terms, price
agreements, et cetera, so that they are legally protected from defaulters.
A comprehensive and flexible marketing strategy is
needed during the initial stage of an organization‟s
development until a successful brand name is created
for the products and the business gets firmly established. This implies that an entrepreneur requires
marketing skills in order to positively identify the
organization‟s potential market and also to be able to
strategically tailor their products with potential customer‟s needs in mind. An entrepreneur also requires
the ability to discern different trends in their market
of choice and be versatile enough to adapt to these
trends. A thorough understanding of consumer be-
havior and consumption patterns is therefore an
inevitable necessity for an entrepreneur.
Communication expertise is a vital component when
starting up a business. Reaching out to and widening
networks is essential if an entrepreneur wants to
improve his/her business (Fill 2010). This may take
the form of formal or informal networks particularly
those concerned with specific sectors or localities
(CEEDR 2000). In such manner, the business will
gain a good reputation as its image is being built up.
Moreover, an entrepreneur„s initiative to network
will ultimately improve the business and the product
or service. Nevertheless, it is important to mention
that several factors override one‟s capabilities towards being a successful entrepreneur within this
context. The economic, socio-cultural and political
environment in which one is willing to operate plays
a significant role in determining an entrepreneur‟s
success. Daniel S. Fogel asserts that these factors
usually influence people‟s willingness and ability to
undertake entrepreneurial activities (Fogel & Gnyawali 1994). Environmental constraints also refer to
the availability of assistance and support services that
facilitate the start-up process. For instance, empirical
studies of entrepreneurial environments of various
countries show that countries that keep rules and
regulations at a minimum, offer tax and other incentives, and provide training and counseling services to
start-up entrepreneurs increase the likelihood of new
venture start-ups (ibid.). Chapter 3 will elaborate
further on these factors.
Looking at the above mentioned required capabilities, one might get the impression that being a successful entrepreneur depends very much on a person's character and that entrepreneurial spirit can‟t
be learnt. However, we believe that the ability to
start a flourishing business is a mixture of an entrepreneurial personality, good education and the right
technical preconditions. It is therefore important to
foster creative educational programs aimed at training young and highly motivated students and giving
them financial and technical support for innovative
business ideas.
2.4 Impact of youth entrepreneurship on the society
and on young entrepreneurs
F
ostering youth entrepreneurship and the provision of financial and technical assistance is
relatively costly. Consequently one might ask
for the impact and benefits of these initiatives to the
society. Several studies have been conducted on this
issue and most conclude that entrepreneurs have an
important function within a country‟s economy.
First of all, starting a business venture exempts one
from being unemployed and thereby from relying on
social assistance. Moreover, a successful business
start-up will eventually lead to the creation of employment, thereby reducing the unemployment rate
of a community or country. However, although the
insolvency rate of young entrepreneurs might be
high, as discussed above, they do have a positive role
in society (van Praag & Versloot 2007: 33).
Another positive effect, which does not depend on
the success of the business, is the development of
new skills and the acquisition of experience. Economic thinking and best practices in management
and dealing with setbacks are skills which can be
used in any other position – whether employed or
self-employed. These skills and experiences are in
high demand and thus might “increase the likelihood
that these young people finding a job elsewhere”
(Llisterri et al. 2006: 16).
Youth entrepreneurship also helps to address some
of the socio-psychological problems and delinquency
that might arise from joblessness in society. Therefore, there is a direct effect on the employment situation if new young entrepreneurs hire fellow youth
from the „dole‟ queues (Curtain 2000). Youth entrepreneurship is playing an increasing role in job creation across the world. In both developed countries
and less-developed countries, self-employment is
emerging as an important source of employment,
livelihoods and economic dynamism. In developed
countries and more industrially advanced developing
countries, production and employment relationships
are becoming increasingly flexible and informal,
casualization) which involve sub-contracting production to small enterprises.3 This is largely in response
to increasing global competition and information
technology. In developing countries and transition
3Flexibilization
refers to the move from standardized, largescale production to small-scale, flexible forms (Hoogvelt,
Ankie 1997; Rasmussen, J. et al. 1992; Streeten 1991).
economies, the bulk of new employment in recent
years has been in the informal sector as well.
Youth-run enterprises (YREs) also provide valuable
goods and services to society, especially the local
community (Stone, et al., u.d). 4 This results in the
local community‟s revitalization. It has also been
observed that new small firms tend to raise the degree of competition in the product market, thereby
bringing gains to consumers (Curtain 2000), virtual
tangible and positive impact on society. In addition,
these enterprises may create linkages between youth
entrepreneurs and other economic actors, such as
through sub-contracting, franchising etc., creating an
economic hub in highly developed entrepreneurial
societies (White and Kenyon 2000).
White and Kenyon further note that social and cultural identity is promoted through youth enterprises,
as is a stronger sense of community where young
women and men are valued and better connected to
the society. They note that youth enterprises give
young people, especially marginalized youth, a sense
of „meaning‟ and „belonging‟. This can shape their
identity encourage others to treat them as equal
members of society. The popularization and democratization of entrepreneurship can allow the disadvantaged in society to succeed regardless of social or
family background (White et al 2000).
Given this situation, the promotion of youth enterprise in general and youth entrepreneurship in particular is vital. The importance of this promotion
should also be seen in the context of improving
social attitudes towards entrepreneurship. Collectively, these influences are referred to as an „enterprise
culture‟.5
Seven interviews have been conducted in Germany
and Africa, supporting and illustrating the findings of
this chapter. The summary and transcript of the
interviews are available on the site of
www.bpb.de/goafrica in the rubric Common Paper
2011/12.
Stone, et al., u.d, in a survey of YREs in Minnesota,
USA, observed that they build houses, publish books, run
restaurants, staff child care centers, provide business
services, and offer others services and goods.
5 Drawing on Gibb (1988), White and Kenyon (2000: 18)
define an „enterprise culture‟ as a “set of attitudes, values
and beliefs operating within a particular community or
environment that lead to both „enterprising‟ behaviour
and aspiration towards self-employment”.
4
What is the nature of your business?
My current project is Launisch.de, an internet startup and a social platform for emotions. The purpose
of the platform is to categorize and rate articles or
postings according to moods. On this project I‟m
working with two partners.
What motivated you to start the business?
I keep coming up with internet ideas that are not out
there yet and have an entrepreneurial spirit which
won‟t let me rest until I turn some of my ideas into
running businesses. The feeling that I would in this
way contribute in a big way to society keeps me
working hard on new concepts.
What was your source of finance for your startup?
I am financing the projects in the starting phase
more or less with personal savings and partner contributions. My intention is to attract viable investors
in the long run and hopefully get a return on investment too. Most internet projects live from advertisements, so I‟m always working with partners with
a background in business administration.
How long did it take you to establish the business and break-even?
I've been working on the concept and implementation of launisch.de for the last one and a half years
But the platform is not yet in production, so we‟ll see
how it turns out.
What difficulties did you face while starting up
the business?
The most difficult part is to get the project financed.
Additionally working as an employee, I‟m still fully
employed by MeinAuto.de and that doesn't leave
enough time to concentrate and get my ideas realized
fast enough. I‟m presently doing a lot of overtime
with the insight that the longer you wait the vaguer
the idea becomes. So pulling launisch.de through is
my main objective now.
Was there a point when you were about to give
up?
The vain search for finances and the lack of interest
from investors makes you develop doubts about a
business idea. But I think it is the market that finally
decides in the end. You can only win if people find
your project useful.
What capabilities and skills do you think an
entrepreneur should have?
An entrepreneur should be a fast decision maker and
have good communications skills with customers,
employees and partners. He should also be patient,
persistent and confident in his ideas.
What were the reactions of your friends and family when you decided to start your own business?
Most of my friends were excited and very supportive. My parents, especially my mother, who is also
an entrepreneur, believe 100 percent in my capabilities. It is very inspiring to be surrounded by positive
and progressive thinking people. My family and
friends definitely belong to that category.
Which factors would have facilitated the founding of your business?
Coming from Cameroon to Germany, I had to
bridge a big cultural gap and completely change my
mindset. The way of doing business here is fundamentally different from the way Cameroonians go
about things. State sponsored funding and a platform for foreign entrepreneurs in Germany would
have also helped. The African lobby in Germany
doesn‟t have much of a voice and that doesn‟t make
it easier. As far as African entrepreneurs in Germany
are concerned there is no solid foundation to build
on
What does work mean to you?
Work for me has to be first of all some sort of a
hobby. It‟s stress when you wake up and already are
in a bad mood, just thinking about work. Your job
should be fun and that can only happen if you like
what you are doing. Identification with your career is
definitely a huge motivating factor
Where do you see yourself and your business ten
years from now?
In ten years from now I see myself having a full
operating company in Germany with a branch in
Cameroon.
What is the nature of your business?
I own and manage a cyber café with three associates.
We offer different services, like printing documents,
photocopy, computer graphics, data entry services,
producing invitation cards, maintenance of computers and printing of posters. We also sell computing
materials such as hard drives and USB sticks.
What motivated you to start the business?
I could not find any permanent employment, and I
wanted to make money. My associates and I
dreamed of our own company which would make
our parents proud, especially since we were really
young and had not yet worked in a formal environment before. We chose the computing industry because we had knowledge about it. Being our own
boss allows us to be free, to work in a manner that
suits, to spend the profits as we desire and work
flexible hours.
What was your source of finance?
To get funding, we agreed that each of us had to sell
any valuable goods we owned. So we sold items such
as our bicycles, music instruments and even our
computers. And we also did some part time work in
repairing old computers.
How long did it take you to establish the business and break even?
The first two months were really difficult for us and
we were about to give up. We only started to realize
profits in the third month; so far the past five
months have been good.
What difficulties did you face while starting up
the business?
In the beginning, we had a lack of materials such as
the computers, scanners and photocopiers. It took
about two months to get the license to access internet. This was a real challenge because internet services are our core products, the other services only
supplement this service. This was one of the reasons
that we did not attract many customers to our café.
Additionally, there were many other cyber cafés
operating near our premises at much cheaper rates
so there was a lot of competition. Our families also
did not support our idea of entrepreneurship and
often told us to look for formal employment.
What current challenges do you face now that
you have established your business?
The biggest challenge we have is the devotion of the
associates to the business. Apart from the cyber café,
each of us manages other personal smaller entities.
One sells computers, the other sells cars etc. Sometimes, I am the only one who is working in the café,
which makes it difficult to properly attend to all the
customers while handling the finances and other
supplies. Other than that, we are all still young and
need time to engage in other activities such as relationships! At times we need to work till midnight
and over the weekend and it is quite stressful.
What capabilities and skills do you think an
entrepreneur should have?
Starting a business is not easy. Entrepreneurs therefore need to be optimistic and have the motto:
“Never give up” in mind. In my opinion, young
people are creative and always find solutions. Entrepreneurs should not be afraid of competition and
also be flexible and set realistic targets in a field they
are knowledgeable.
What were the reactions of your friends and family when you decided to start your own business?
Only a few of our family members and friends encouraged us. The majority questioned the viability of
our business, perhaps because they were jealous as
some are currently running their own cyber cafés.
Which factors would have facilitated the founding of your business?
It would have been useful to have more knowledge
in the IT-industry. We knew the basics, however for
some problems we had to learn on the job. If for
example I had had a degree in Computer Sciences
things would have been easier.
Where do you see yourself and your business ten
years from now?
In ten years, I am sure that I will have obtained at
least a formal diploma in computer graphics. Then, I
hope to start my own business without any partners
specializing specifically in advertising. For this company I hope that will expand beyond our borders.
What was your source of finance?
We did not have to make bigger investments and still
have very little fixed costs. We started the business
during our studies depending on our savings. We
then won a business plan competition and invested
the trophy money.
How long did it take you to establish the business and break-even?
Our break-even was immediate and through the
competition we had press-coverage from the beginning. We‟re still growing though.
What is the nature of your business?
NICHE ART AND ARCHITECTURE TOURS
BERLIN introduces participants to remarkable art
and architecture locations in the German capital that
are off the beaten track. The tours are geared to art
and architecture enthusiasts looking for competent
insider knowledge. Rather than focusing on galleries
and buildings featured in most tourist guides,
NICHE explores unique hotspots and backdrops
that contribute to Berlin‟s thriving contemporary art
and architecture scene.
What motivated you to start the business?
We founded our business at the beginning of 2009 in
reaction to a fascinating phenomenon: By necessity,
art and architecture lovers tend to visit only the wellknown galleries and buildings in Berlin. That‟s because new urban developments and alternative art
spaces rarely make it into tour guides. But of course,
it‟s the newest trends and developments that appeal
most to experts and connoisseurs – and those spaces, in turn, can benefit from a new audience. The
idea for NICHE ART AND ARCHITECTURE
TOURS BERLIN was born. We (two art historians
and one architect) had already devoted our free time
to art and architecture and wanted to share our passion as well as make those treasures accessible to a
wider public. We love to transfer knowledge and
create dialogue between the people working in Berlin
and those who want to know the scene better.
What difficulties did you face while starting up
the business?
Being three partners who set up a business in their
free time required much coordination. Also doing it
on our own involved a lot of trial-and-error. The
business plan and the prior market analysis was thus
vital.
What current challenges do you face now that
you have established your business?
At the moment we are trying to expand our activities
– both horizontally and vertically. We are recruiting
people and are trying to professionalize operational
sequences.
Was there a point when you were about to give
up?
We definitely did have moments when studying,
working and running a business felt like an overload
we couldn‟t handle anymore.
What capabilities and skills do you think an
entrepreneur should have?
One should be very creative – but persistent, follow
one‟s plan but adapt to changing conditions quickly.
Working with people and being genuine is very important for us. We treat everyone – be it client, partner or employees – the way we want to be treated.
But we never lose sight of our goal, which is to make
money with this service.
What were the reactions of your friends and family when you decided to start your own business?
Everyone encouraged us and, more importantly,
supported us whether with their expertise or emotionally.
Which factors would have facilitated the founding of your business?
More time for the development and some financing
for young entrepreneurs. Our business lives on the
contacts we had and made since then – it needed
time to develop.
Where do you see yourself and your business ten
years from now?
I see the three of us working as heads of a company
with several employees which is active in other fields
such as curating, publishing and consulting in both
fields: art and architecture. We‟d like to expand to
new capital cities, too.
What does work mean to you?
I work with my best friends, meet and support amazing artists, architects and the likes – even our clients
are as passionate as we are for the arts. I love my
work and I am proud of what we have achieved so
far.
T
his
chapter
examines
the
macroenvironmental forces and preconditions of
different angles of society affecting business
creation by young people. To simplify the extremely
diverse and complex macro-environmental forces
and surroundings, the PESTEL- framework is used
as a strategic tool to categorize environmental forces
into political, economic, social, technological, environmental and legal ones. The varied effects of the
different factors that are likely to influence business
creation in a positive or negative way and their interplay will be analyzed in the following five subchapters.
3.1 Political Factors
I
n developing nations, the political environment
can be a possible enhancer or a serious barrier to
the development of entrepreneurship (Themba
et al 1999: 104). The same holds true – albeit to a
lesser extent – in industrialized countries such as
Germany. Entrepreneurship in both South Africa
and Germany is therefore affected by several political and institutional factors which include: the country‟s macro-economic policies, governmental support
and political stability.
(a) Macro-Economic Policies
Macro-economic policies, frameworks, legislation,
regulations and laws can either promote or discourage entrepreneurial development in a country
(Clover & Darroch 2005: 241, Dockel & Ligthelm
2005: 54). In South Africa some of the government
regulatory laws are considered a threat to the Small
and Medium Enterprises (SME) sector. Although
overregulation is still an issue, South Africa has seen
significant trade regulation that has supported entrepreneurship (Luiz 2002: 55) such as the Reconstruction and Development Program (RDP) and the
Growth Equity and Redistribution (GEAR) policies
(Nasser et al 2008: 394). In the “Doing Business
Report 2010” of the World Bank group, South Africa ranks on place 34 for the ease of doing business,
and on place 75 for starting-up a business out of 183
countries.
Germany ranks 22nd for the ease of doing business
and 88th for starting up a business. With an overall
tax rate of 44.9%, new entrepreneurs face high entry
barriers here. Germany benefits from the European
Common Market (The Heritage Foundation & The
Wall Street Journal 2010), for instance through the
favorably low EU weighted tariff rate of 1.3% (2008)
or from non-tariff barriers such as agricultural subsidies. This poses an opportunity to entrepreneurs
who want to start a business in the European market. Concerning the collaboration between German
and Southern African entrepreneurs, the abovementioned trade regulations might, however, function as a barrier, especially as many African countries
mainly export agricultural products and other raw
material.
(b) Governmental Support for (Youth) Entrepreneurship
The South African government is working hard towards promoting youth entrepreneurship in the
country, for example through the National Youth
Development Agency (NYDA). The NYDA offers
start-up capital in the form of loans for new youth
entrepreneurs. However in South Africa, while entrepreneurial support is typically provided in the
form of incentive programs or inducements to encourage the founding of new enterprises (Mueller &
Thomas 2001: 67), many entrepreneurs have no
knowledge about existing government support mechanisms or how to access them. Some entrepreneurs find that services like grants or procurement
opportunities are complicated, inflexible or inadequate for actual entrepreneurial needs (Fielden et al
2002: 56). Therefore the challenge facing the postapartheid South African government is to institute
enforceable rules, regulations and policies with the
aim of promoting a national interest that includes the
vibrancy of business enterprise (Ahwireng-Obey &
Piaray 1999: 79).
Both opportunity and necessity entrepreneurship is
important for Germany – the former in order to
strengthen a knowledge- and innovation-based
economy; the latter in order to cope with the high
unemployment rate, currently at 7.3% (Federal Employment Agency of Germany 2011). When it comes
to the encouragement of opportunity entrepreneurship, the EXIST program, which collaborates with
German universities, is probably the most popular
and successful government initiative in Germany
(Heydebreck 2007: 115 ff.). In recent years, troublesome unemployment rates have necessitated an increased rate of entrepreneurship (see Bergmann &
Steinberg 2006). With the introduction of the social
welfare reform “Hartz IV” from 2003 to 2005, the
German government has raised the profile of selfemployment to being a considerable alternative
through the distribution of start-up grants to unemployed people who want to start their own business
(see more on the different policies in part 4.4).
(c) Political Stability
Regional instability in the Southern African Development Community (SADC) and other parts of
Africa has led to an influx of people from these
countries into South Africa as the country has politi-
cal stability as well as one of the strongest economies
on the continent. These immigrants provide competition for local entrepreneurs as they are sometimes
very knowledgeable and experienced regarding entrepreneurship. Corruption in the issuing of government business contracts has led to a phenomenon
known as “tenderpreneurship”, which will be examined in more detail in section 3.3. This has had a
negative effect on potential entrepreneurs‟ perceptions on doing business in South Africa.
The democracy in Germany established in 1949 can
be considered as highly stable – as a federal country
with 16 states, it features a decentralized structure in
which decisional powers in areas such as local taxation, education or infrastructure are borne by the
individual state. Corruption can be considered as a
challenge for transparency and on-going political
stability. This is not limited to the Siemens scandal
that made headlines, but also concerns the employment of company lobbyists in federal ministries
(Transparency International 2009: 336). In sum,
political stability is very important as a determinant
of the success of entrepreneurship and should be
monitored and supported.
3.2 Economic Factors
E
conomic factors, in terms of opportunities
and barriers such as access to capital, the
unemployment, economic growth, inflation
and market forces can be decisive in the success of
youth entrepreneurship.
(a) Access to Capital
Capital is an essential pre-requisite for any business
creation and the degree of accessibility to capital
constitutes an important determinant in youth entrepreneurship, especially because young people often
lack financial resources or face difficulties in acquiring them due to their inadequate business management experience and financial credibility. However,
there exist both public and private sources of capital,
which include personal contacts as well as financial
institutions.
(b) Unemployment
Unemployment may act as an incentive towards
raising the level of entrepreneurship. With few job
prospects and a need to earn an income, people
GEM Report 2010: The GEM categorizes economies
into three different groups: factor-driven, efficiency-driven
and innovation-driven economies, based on the Geneva
World Economic Forum 2010‟s (WEF) “Global
Competitiveness Report 2010-11” which identifies three
phases of economic development based on GDP per
capita and the share of exports comprising primary
goods.
6
often opt for self-employment, be it in the formal or
the informal sector. This form of entrepreneurship
out of “necessity” is sometimes even encouraged
through governmental programs directed at promoting the formation of Small and Medium Enterprises
(SMEs). From this, it can be construed that the unemployment rate and the level of entrepreneurship
are positively related, i.e. when the former increases,
the latter rises too.
However in many developed countries such as Germany, the allocation of social assistance to many
unemployed – though special entrepreneurial programs – may curtail the level of entrepreneurship
because since people are still receiving financial re35
Unemployment rate and TEA (%)
A wide spectrum of private financing is available –
the potential entrepreneur‟s own and families‟ funds,
bootstrapping, “angel‟ or informal investors, microfinancing institutions, support from nongovernmental organizations, business partnerships
and venture capital – yet, in most instances, the cost
of capital from private institutions can be relatively
high, which may discourage potential young entrepreneurs. In this case, capital from public institutions, with lower interest rates and longer payback
periods, may be an option. According to the Global
Entrepreneurship Monitor (GEM) 2010 Report,
Germany provides one of the highest levels of public
support for entrepreneurs among the 21 innovationdriven countries to which it belongs, while South
Africa – classified within the 24-efficiency-driven
economies6 – exhibits poor public support, which is
one of the three least valued entrepreneurship
framework conditions in the country.
The concept of “dual economy”, composed of the
formal economy and the informal economy, is an
important aspect in the accessibility to capital. Prospective entrepreneurs from the formal economy,
which is regulated, can find financial resources from
various institutions more easily, compared to those
in the informal economy, who have low financial and
legal reliability. Nonetheless, apart from the possibility of benefitting from micro-finance, the graduation
of entrepreneurs from the informal to the formal
sector through legal recognition can be effected, as
in the case of South Africa. Governmental programs
have been carried out as nearly 90% of entrepreneurs
in disadvantaged urban communities in South Africa
(GEM South Africa 2009 Report) operate within the
informal sector and contribute extensively to the
economy.
30
25
20
15
10
5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Unemployment rate of South Africa
TEA of Germany
TEA of South Africa
Unemployment rate of Germany
Figure 1: Relationship between Unemployment Rate and
TEA in Germany and South Africa.
sources, they may not be motivated to earn a living
through self-employment. Furthermore, in a country
which has a low supply of labor in some fields, such
as is the case of Germany, people may reconvert
themselves into another sector so as to get job opportunities there, thus minimizing the effect of unemployment on the state of entrepreneurship.
Figure 1 clearly indicates that for both South Africa
and Germany, the level of unemployment is not
directly linked to the level of entrepreneurship,
which is represented by the Total Early-Stage Entrepreneurial Activity (TEA)7. A positive relationship is
GEM 2010 Global Report: TEA is defined as the
“prevalence rate of individuals in the working-age
population who are actively involved in business start-ups,
either in the phase preceding the birth of the firm, or the
phase spanning 3½ years after the birth of the firm”
7
witnessed only in two cases for South Africa (from
2002 to 2003 and 2009 to 2010) and four instances
for Germany (from 2004 to 2005, 2005 to 2006,
2008 and 2008 to 2009).
(c) Economic Growth
The greater the rate of economic growth, the higher
the national income, which leads to more purchasing
power and increasing demand, resulting in new markets being developed and more supply needed, consequently creating new and rising opportunities for
entrepreneurial activities. It can be presumed from
this that the level of entrepreneurship is directly
connected to the economic growth rate.
Moreover, as developing countries usually have
higher economic growth rates than developed countries, the former economies tend to enjoy a higher
entrepreneurship level. This can be due to the fact
that existing markets in developed countries have
tight entry barriers and people prefer to work in
well-established firms offering stable and secure
employment opportunities.
growth may promote entrepreneurship through
tough labor market conditions, which may increase
entrepreneurial activities (as discussed in the paragraphs on unemployment above), while recessions
generate more business creation opportunities due to
changing market drivers (for example, bankruptcy of
existing firms and changing consumption habits). In
addition to this, the entrepreneurship level may be
influenced by economic growth in foreign countries,
particularly effects on exports of goods and services
and imports of raw materials.
Since the state of entrepreneurship is influenced by
factors other than national economic growth rates,
and as observed from Figure 2, entrepreneurship is
not necessarily directly linked to economic growth.
(d) Inflation
The price development of goods and services is an
important factor for entrepreneurship. Inflation has
an ambiguous effect and holds either opportunities
or disadvantages. Price instabilities are however
mostly considered as negative due to a lack of reliability in expectations. When an entrepreneur knows
14
10
12
8
Inflation rate (%)
Real GDP Growth rate and TEA (%)
12
6
4
2
0
-2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-4
10
8
6
4
2
-6
Real GDP Growth rate of South Africa
TEA of South Africa
Real GDP Growth rate of Germany
TEA of Germany
Figure 2: Relationship between Real GDP Growth Rate
and TEA in Germany and South Africa
However, there may be some exceptions to the direct link between economic growth and the level of
entrepreneurship within dynamic economic environments which may impact on entrepreneurship in
either a positive or a negative way. This may also be
the case even in economically stable spheres which
though they offer unchanging and predictable conditions, favor already-established firms to the detriment of potential entrepreneurs. Negative economic
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Inflation rate of South Africa
Inflation rate of Germany
Figure 3: Inflation Rate in Germany and South Africa
that the supply prices are rising by the same percentage as the year before, it is simple to use the expected development for his own price settings. This
gives the entrepreneur the opportunity to speculate
on the price changes. If there has been evidence that
wages, for example, are reacting more slowly on
inflation than product prices, this could be beneficial
for entrepreneurs in the service sector.
The negative effects nevertheless should not be disregarded. With inflation decreasing purchasing power, there is the risk of slow wage adoption. Consumers are therefore in the unlucky situation where
product prices are rising faster than their wages.
People think twice when they buy products, according to their decreasing real budget. This obviously
negatively influences consumer confidence, which
worsens the problem of shrinking purchasing power.
Furthermore, companies are reluctant to invest when
they cannot rely on stable prices and fear decreasing
demand. This in turn jeopardizes economic development, which may have apparent negative effects
on entrepreneurship.
As demonstrated in Figure 3, Germany‟s inflation is
lower than that of South Africa in the given period
of time, which is not necessarily economically harmful, due to neutrality of money, which means that
prices and income change in the same way and no
real changes are perceived. It is however important
that the value of money changes in a constant manner so that individuals can predict price changes to
plan their future investments. The statistics indicate
that South Africa had a more volatile inflation rate
than Germany, which can be problematic to entrepreneurs, as mentioned before.
There are very similar effects regarding foreign exchange. Even though it has to be born in mind that
many start-up companies do not play on the international market.
good supplier relationship and a significant market
share. As shown in the table below, the majority of
young entrepreneurs in South Africa operates in the
consumer or retail sector (71.2%) which has low
barriers to entry – in terms of start-up capital and
skills requirement – but generate low margins due to
high competition. The same trend exists in Germany,
with migrants (with a TEA of 7 compared to 4.5 for
non-migrants) concentrating on consumer services
(GEM Germany 2010 Report).
(e) Market forces
Table 1: Involvement in Entrepreneurial Activity by Sector
in South Africa.
Market forces, being a significant factor influencing
the level of entrepreneurship, include, according to
Michael Porter‟s Five Forces model (Lipsey &
Chrystal, 2004), the bargaining power of suppliers,
the bargaining power of consumers, the threat of
substitutes and new entrants and the competitive
rivalry within the industry.
These market forces can be experienced in national
or local markets as well as on the international arena.
At the national level, developing countries often
have more market access opportunities because in
most cases, a considerable amount of unexploited
resources can be used to create innovative products
and enter new or existing markets. In developed
countries, on the contrary, harsh barriers to market
entry may be faced due to the existence of established firms, with a strong and loyal customer base,
SECTOR
Extractive services
(agriculture, forestry, fishing and
mining)
Transformative services
(construction,
manufacturing,
transportation,
communication,
utilities and wholesale distribution)
Business services
(finance, insurance and real estate)
Consumer services
(retail, motor vehicles, lodging and
restaurants, personal services, education and recreational services)
Business
Entities
TEA (%)
5.2
16.4
5.5
71.2
Internationally, young entrepreneurs in developing
countries may find it initially difficult to sell their
products because of fluctuating exchange rates, lack
of finance and market knowledge, inadequate communication and transport networks and restrictive
trade policies. For a country of the size of South
Africa, young entrepreneurs can find it more profitable to initially concentrate on the national market.
According to the GEM Germany 2010 Report,
Germany ranks first among the 21 innovation-driven
economies with lower market barriers, favoring entrepreneurship, which may be due to its proximity to
other developed nations and its membership in the
European Union and the accompanying advantages.
Economic factors such as access to capital, unemployment, economic growth, inflation and market
forces, are important elements for understanding the
operational principle of entrepreneurship. These
economic aspects can be easily used by policy makers through favorable adjustments to public financial
support, in order to encourage youth-led entrepreneurship. Nevertheless economic factors are not the
only determinants of entrepreneurship and other
elements such as social factors may also act as opportunities and barriers to youth entrepreneurship.
3.3 Social Factors
T
here are macro sociological factors such as
general social and cultural surroundings, that
strongly influence entrepreneurial activities
(Jacobsen 2003: 66). The relationship between these
interactions are complex and many studies – for
example work done by Trompenaars and HampdenTurner (1997, 1995), Deal and Kennedy et al. (2000),
the renowned 7-S-Framework used by McKinsey
(Peters and Waterman 2004), the Cultural Web from
Johnson and Scholes (Johnson, Scholes et al. 2007)
or the Global Entrepreneurship Monitor (GEM)
Reports –investigate cultural differences influencing
business structures and entrepreneurial activities.
(a) Social and Cultural Norms
According to the GEM Global Report (2011: 49)
and the GEM Report on South Africa (2009: 28), the
social and cultural norms in South Africa and Germany are among the most negative entrepreneurship
framework conditions and therefore rather constraining entrepreneurial activities. Some key determining factors will be examined with reference to
the work of Geert Hofstede, which comprehensively
compares socio-cultural differences from over 70
countries and other studies supporting his significant
findings.
Following Hofstede‟s results (1967-2009), Germany‟s
business activities are, in general, more short-term
oriented. People within society tend to respect traditions and set a high value on fulfilling social obligations. Short-term orientation is also a major obstacle
in South Africa, where people, especially from poorer communities, want to achieve short-term profits
instead of reinvesting profits into their businesses
(Harris, van Vyk 2011). In comparison to the world
average, Hofstede (Hofstede 1967-2009) highlights
Germany‟s generally democratic structures, illustrating equality for everyone, whereas South Africa is
consistent with more paternalistic or autocratic structures, a situation, however, still below the world
average.
Another finding from Hofstede reveals a strong
masculinity orientation in both countries in comparison to the world average. This implies that on the
one hand, gender roles are more distinctive and different. On the other hand, it reveals that people
(male and female) within society are more orientated
to the so called “male” values including for example
competitiveness, the ability to assert oneself, the
accumulation of material assets or more accurately
profit-orientation.
Additionally, both countries are inclined to show,
most notably in relation to the international average,
a strong emphasis on individual action rather than
on collectivistic actions. This implies that people
within society are not that strongly dependent on
groups such as the family or religious organizations.
(b) Risks and Uncertainty
Furthermore, Hofstede indicates a relatively low
uncertainty tolerance in Germany. This indicates
among other things that Germans tend to stick to
the implementation of strict rules, laws, policies and
regulations and especially with regard to entrepreneurship, and thereby avoid uncertain and high-risk
operations (ibid.). This risk-adversity is supported by
the findings of the GEM Report on Germany (2010:
24), which highlights a disproportionately high fear
of failure. 43% of the German population sees the
risk of failure as a reason not to start a business no
matter how high the probability of failures in reality
might be; in this case perceptions tend to rule actions.
The International Labor Organization (ILO) also
refers the high uncertainty avoidance particularly in
young entrepreneurs. For them, a business failure
tends to be seen more often as a personal failure that
is accompanied with a loss of social reputation
(Simpson, Christensen: 43). According to the German business magazine Brandeins (Brandeins 2008),
the main factor restraining someone from starting up
a business in Africa is the weak nature of the social
system. This affects people who want to get away
from poverty but start to struggle when they earn
money because typically they need to support their
extended family. In comparison, Germany has a
sufficient state welfare system. Employees have
health insurance, safe pensions and access to financial support if they are unemployed and are more
likely to choose this option over self-employment
with an uncertain future.
(c) Problem of entrepreneurship in South Africa
Another important finding for South Africa is the
problem of „tenderpreneurship‟. According to Harris
and van Vyk (2011), there is a trend where people set
up a business to provide a service to the government
or local municipalities, and then get a sizeable
amount of money from the government contract.
This type of business creation does not take part in
the real economy but relies on excess funds from
municipalities.
However, these studies describe a rising culture within society and are not applicable to all individuals.
Moreover, the research that has been done so far is
in its nascent stages and it‟s therefore challenging to
draw definitive conclusions about the extent to
which this trend has been incorporated into entrepreneurship and society as a whole. In conclusion,
there is no blanket formula to deal with different
socio-cultural attitudes in society and transform barriers to opportunities. Thus, the changing pattern of
cultural determinants is a medium or long-term
process. To evaluate and assess socio-cultural backgrounds and their impact and to carefully consider
the issues are the first steps in starting to create an
awareness and understanding. According to the ILO,
media campaigns, credible role models and youth
business events, competitions or awards can create
positive attitudes for the youth towards entrepreneurial activities. In addition, a more enterpriseorientated education can be useful in promoting
specific knowledge and skills and attributes which
will help young people in their decisions to start their
own business (Schoof 2006: 30 ff.). The right entrepreneurship-promoting education should be put in
place, combined with adequately developed infrastructure to facilitate an increased level of entrepreneurship.
3.4 Technological Factors
T
echnological factors typically refers to basic
facilities, necessary for economic activities,
which are usually provided by the state, including infrastructure. Developing infrastructure can
be extremely costly and requires significant forwardplanning on the part of government. However, infrastructure development represents long-term governmental investments and once facilities are in
place, costs are restricted to maintenance and upgrades (Snickers 1989: 251-252). For the purposes of
this study, this section will look at the type and level
of public infrastructure required for entrepreneurs to
be successful. The focus will therefore be on transport (port, rail and road), power and telecommunication infrastructure (World Economic Forum 2010:
4).
(a) Positive relationship between developed infrastructure and entrepreneurship
It is well accepted that the level of infrastructure
development can have either a limiting or enabling
effect on entrepreneurship (Van de Ven 1993: 211).
Mostly the relationship is conceived as a positive
one: an increase in infrastructure results in better
prospects for successful entrepreneurship. For example, although Douala, Cameroon has a busy and
successful port, the road infrastructure connecting
the port to the city is poor, thereby dampening the
port‟s positive effects on business and entrepreneurship (Guest 2004: 172).
It can however be argued that under certain circumstances a lack of infrastructure leads to increased
innovation and novelty in entrepreneurship. This
may be an area in which young entrepreneurs can
play a role, because although they lack experience in
the sector, they can be valuable contributors to developing novel solutions for overcoming infrastructure shortcomings. However, in extremely low infrastructure areas it is less likely that high-value entrepreneurs will be produced (Low, Henderson, & Weiler 2005: 62). It therefore seems that, on the whole,
the correlation between infrastructure and entrepreneurship is a positive one.
(b) Infrastructure in Germany
The overall quality of German infrastructure ranked
5th out of 139 countries assessed in the 2010/2011
Global Competitiveness Index. Further, Germany
ranked within the top ten in the following areas –
which means that each of these is considered a notable competitive advantage – quality of roads, quality
of railroad infrastructure, quality of port infrastructure, quality of air transport infrastructure, quality of
electricity supply and quality of fixed line telephone
services (World Economic Forum 2010: 165). Germany therefore has the infrastructure necessary for
the success of entrepreneurs in the SME, as well as
high-value entrepreneurial sector.
(c) Infrastructure in South Africa
South Africa, along with Mauritius, topped the African infrastructure rankings, but lagged far behind
Germany (World Economic Forum 2010: 40). On
the whole, South Africa ranked 56th out of 139 countries on the overall quality of infrastructure assessment. They received the following rankings in specific areas: quality of roads 43rd; quality of railroad infrastructure 47th; quality of port infrastructure 49th;
quality of electricity supply 94th and quality of fixed
telephone services 98th (World Economic Forum
2010: 303).
It therefore seems clear that the South African entrepreneur has good transport infrastructure to work
with, particularly because of the transport infrastructure development that took place in preparation for
the World Cup (World Economic Forum 2010: 40).
However, power and telecommunication, both of
which are of critical importance for successful medium and high-value entrepreneurial enterprise,
could be significantly improved upon. It should also
be noted that the World Economic Forum 2010
statistics do not capture the variable distribution of
infrastructure in South Africa and that more remote
or rural areas are likely to suffer from decreased
access to transport, power and telecommunications
(Limao & Venables 2001: 451). The overall result is
that infrastructure in urban areas allows for successful entrepreneurship at all value levels, while rural
areas are likely to be conducive to small low-value
enterprises.
It should be noted that South Africa is anomalous in
Africa and that other countries, even within the
Southern African Development Community
(SADC), do not have the same levels of infrastructure development. For example, Botswana ranked
84th out of 139 counties, assessed on the overall
quality of their infrastructure, Mozambique ranked
119th, Madagascar ranked 130th and Angola ranked
136th (World Economic Forum, 2010). This indicates
that entrepreneurs in these countries will have less
access to infrastructure and that this may dampen
their potential to be successful. The level of infrastructural development may however be limited to
environmental conditions which are not conducive
to technological improvements.
3.5 Environmental Factors
N
atural resources are used as raw materials,
some of which may be overused to the
point of depletion. This transformation
process produces waste that is potentially dangerous
to human life and the environment. Therefore,
young entrepreneurs are facing a wide spectrum of
new problems affecting the environment.
(a) Environment in South Africa
In South-Africa poverty is a major reason for and
consequence of the environmental degradation. A
vast majority of countries depend on their natural
resource base for economic and social development.
Thus, two-thirds of South-Africa's people live in
rural areas and rely on agriculture and other natural
resources for income. With the rapid growth of population and urbanization, this means that environmental degradation will definitely increase. Energy
consumption in South Africa varies dramatically and
is dominated by fuel consumption. The use of wood
for fuel is predominant in both rural and urban
areas, and this causes deforestation and can lead to
soil erosion. Finally, increased food insecurity resulting from rapid population growth, degradation of
agriculture and arable lands, and mismanagement of
available water resources combined with poor economic policies to support food production, is another serious environmental problem.
(b) Environment in Germany
Despite the remarkable progress Germans have
made in reducing it, air pollution remains a continu-
ing nationwide problem, especially with more vehicle
usage, industrial pollution and modern gadgets.
Therefore young entrepreneurs must integrate environmental concerns into the vision of their business
and become more environmentally-friendly. The
rising awareness of the importance to preserve the
environment as well as the demand for alternative
energy resources and services for the reduction of
pollution can provide new opportunities for innovative young entrepreneurs. Environmental degradation and respect for the environment can be uplifted
through legislation and subventions that protect the
environment while promoting business creation.
Furthermore, new economic sectors can provide
opportunities for young entrepreneurs to start-up
business. Alternative energies, transportation or
environment-friendly production are sectors in need
of innovation and dynamism, especially from young
entrepreneurs.
3.6 Legal Factors
L
egal and administrative hurdles associated
with starting up a business will influence
whether or not a young person will venture
into entrepreneurship. The more hurdles there are,
the more disheartening it is to embark on entrepreneurship. At the same time, legal and administrative
factors can also provide security for investment and
business ventures. For a young entrepreneur in
Germany or South Africa, there are a multitude of
legal issues to think about when it comes to starting
a business. Everything from the business name, to its
structure and operation has legal implications. At the
same time, the legal environment can provide important protection for the interests of young entrepreneurs.
(a) Business Structure
The young entrepreneur in Germany or South Africa
firstly needs to decide which business structure is
best suited to their business, based on important
considerations such as liability issues and which form
provides the best tax structure. Moreover, different
forms of business structures have different legal prerequisites for setting up. The most important forms
of business structures both in Germany and South
Africa are: individually as a single owner enterprise
(sole proprietorship); jointly with others in a partnership; through a close corporation (where only natural
persons may be involved); through a private or public company; or through a business trust.
(b) Licenses or Permits Acquisition
Depending on what type of business the young entrepreneur engages in, they may need a variety of
licenses or permits. At a minimum, one will need a
business license and tax registration. For instance in
South Africa, the Business Act 71 of 1991 places the
requirement of a trading license on businesses involved in the sale or supply of meals or perishable
foods; provision of certain types of health facilities
or entertainment; or hawking in meals or perishable
foodstuffs. A trading license would be obtainable
from the local authority for the area where the business is to operate. However in reality, most informal
traders in South Africa – some due to ignorance and
some due to the mere dread of complicated procedures – operate without it.
(c) Insolvency
Another problem linked to formal and informal
trade is the risk of insolvency. Whereas insolvency of
formal business enterprises is subject to proceedings
covered by insolvency law and therefore somewhat
regulated and calculable, insolvency of informal
businesses is – by definition – not. Especially in
South Africa, this might impose another significant
barrier to business creation or re-entering business
after insolvency.
(d) Administrative Hurdles
In comparison to the rest of the world, both countries are not in the lead when it comes to administrative support to entrepreneurs founding a business. In
Germany, administration and bureaucracy have remained among the most significant hurdles for business creation for years (GEM Country Report Germany 2009: 24). According to the World Bank‟s
Doing Business Report 2010, it takes nine procedures to register a firm in Germany. In the subcategory “Starting a business”, the country ranks at
number 84, indicating that it is much easier to run an
existing business than to set up a new one. South
Africa is ranked 67th and thus slightly better posi-
tioned in the latter category. One has to overcome at
least six legal procedures within an average of 22
days to register a new business. Even though it is
easier to set up a new business in South Africa, both
countries could improve their international ranking.
In sum, administrative and legal arrangements remain very important barriers for youth entrepreneurship in both countries. Given the size of South African‟s informal sector, these factors are of paramount
importance.
The aim of this chapter was to analyze macroenvironmental forces and their constraining or enhancing impact on youth-led entrepreneurship. This
was done by drawing on the six analytical categories
of the PESTEL framework. Accordingly, opportunities and barriers to business creation by young
people were investigated in the areas of politics,
economics, society, technology, environment and
law. In the course of the analysis it became clear that
within each of these categories, there are multiple
factors affecting youth entrepreneurship in an either
positive or negative way. This chapter does not claim
to have discovered all of them. Neither does it seek
to provide a hierarchy of issues. In contrast, its aim
is to bring a variety of important factors in different
areas to the reader‟s attention. By analyzing the macro-environment from various angles, it thus sheds
light on a number of different challenges in these
areas. The role of politics in addressing these challenges will be addressed in the next chapter.
B
uilding on the previous chapters, which elaborated on individual and large-scale preconditions for successful entrepreneurship, this
chapter analyzes targeted political efforts to promote
young entrepreneurs. In the first part of this section,
existing instruments that promote youth entrepreneurship will be identified. These instruments can be
categorized as funding, counseling and training. Furthermore, this chapter provides a summary of some
of the most important programs that help to imple-
ment and inform youth entrepreneurship policy in
Germany and South Africa. Here, the focus will lie
on both programs promoted by state ministries as
well as private sector-initiatives and NGOs. In addition to this, an overview of future opportunities,
trends and market potentials for young entrepreneurs will be explored. The last part of this chapter
highlights the importance of enhancing civic education for responsible economic behavior of young
entrepreneurs.
4.1 Instruments and economic policy for promoting
youth entrepreneurship in Germany
E
ven though there is neither a central organization nor an overall strategy in Germany
that coordinates youth policy and implementation (Bertelsmann-Foundation 2009: 141) one can
identify numerous initiatives, organizations and
projects that promote youth entrepreneurship. A
significant factor that contributes to the diversified
implementation of German youth entrepreneurship
policy is the German federal system, causing differences in each state. However, there have been numerous initiatives and programs on federal, regional,
as well as on local levels.
(a) Funding
For young people the lack of finance, experience,
skills, knowledge and familiarity with the business
world are the main factors in discouraging selfemployment. Therefore, financial instruments are a
crucial factor because they build the foundation of
every start-up enterprise. The lack of adequate
finance is one of the most prominent impediments
to young people seeking to create their own business
(Schoof 2006: 41). Especially young entrepreneurs
have problems getting access to finance and face a
high probability of not receiving any or sufficient
loans (Kohn et al. 2010: 68). This is due to the fact
that many banks see young start-ups who don‟t have
an established credit record as a high risk. In most
cases, the local bank is the first institution where
future young entrepreneurs can apply for a loan.
However, the bank needs to be convinced of the
merit and profitability of the business venture, so the
presentation of a clear concept and business plan is
essential.
Besides the local bank there are also other institutions that give loans to young business start-ups. The
most common financial instrument for young entrepreneurs in Germany is the “Startgeld” (start-up
bonus) offered by the Development Loan Corporation (Kreditanstalt für Wiederaufbau – KfW, see
below). The KfW often works in cooperation with
local banks, state banks or micro finance institutions
by granting additional loans or by acting as a financial back-up instrument. In practice this means that a
KfW-loan can be additionally enforced by a state
loan guarantee or the KfW covers loans granted by
local banks and takes partial or full coverage in case
the business fails and the young entrepreneur is not
able to repay the loan (existenzgruenderjungunternehmer.de 2010).
(b) Counseling and Training
A convincing and effective business plan is indispensable and besides the funding, is an important
factor for any start-up. Here, Germany obtains a
multitude of initiatives promoting youth entrepreneurship in terms of consulting and training (Brixy et
al. 2010: 22). While the state and local banks build
the core of finance-assistance for future entrepreneurs, there are many consulting firms, NGOs and
associations which focus on counseling and providing other forms of support. These programs and
initiatives range from business-projects in elementary
schools and universities up to professional consulting service for future start-ups. They also offer financial support for further training after the business
has been established.
Consulting is significant because the more business
assistance a young entrepreneur obtains at the beginning, the better his or her chances are of creating
a successful and sustainable business (Schoof 2006:
61). Together with experts, young entrepreneurs can
set up a business plan, negotiate with banks and get
general coaching in business management in order to
successfully realize their business venture. This is
even more important since according to the Eurobarometer Survey (2004), administrative complexity is
seen as a major obstacle for entrepreneurship and
self-employment (Schoof 2006: 52).
Experts say that the infrastructure concerning consulting is fully developed in Germany and agree on
its importance in the promotion of the establishment
of businesses. Despite this, only half of the people
who intend to set up a business make use of consulting services (Brixy et al. 2010: 32).
In conclusion, youth entrepreneurship policy can be
described as a multi-actor framework which exists on
federal, regional and local level and provides instruments such as funding as well as counseling and
training offered by public and private institutions.
Unfortunately, it lacks a federal coordinative body to
improve policy and implementation on all levels. The
report of the Bertelsmann-Foundation suggests a
consolidated federal policy-strategy can be implemented by regional and local governments as well as
NGO and private associations (BertelsmannFoundation 2009: 161). A fruitful dialogue between
federal ministries, private companies and NGOs as
well as a closer cooperation between economic- and
education policy would lead to more effective, coordinated and lasting results.
4.2 Instruments and economic policy for promoting
youth entrepreneurship in South Africa
A
ccording to the South African Finance Minister, Pravin Gordhan, businesses that employ less than 50 individuals represent 68%
of private South African employment (Sibanyoni
2011). It is therefore difficult to overstate the importance of small businesses and entrepreneurs in addressing the high rates of unemployment in South
Africa. What follows is a range of public, private and
NGO entrepreneurial assistance. As in the German
example the following section addresses the issues of
funding, counseling, training and skills development
with the addition of Broad Based Black Economic
Empowerment.
(a) Funding
South African entrepreneurs often struggle with the
“funding gap” and access to follow-up support. The
South African Department of Trade and Industry
has tried to address these challenges with the help of
organizations like Khula Enterprise Finance and the
Small Enterprise Development Agency (SEDA)
(KHULA 2010 & SEDA 2010). These organizations
serve as “incubators” that help with funding and
mentorship. Incubators have proven to be relatively
successful with SEDA, achieving a survival rate after
graduation of the participants of 70% (Endeavor &
First National Bank 2010:23).
From the NGO sector the South African Institute
for Entrepreneurship and the international nonprofit organization Endeavour also deliver capital
and advisory assistance to entrepreneurs (South African Institute for Entrepreneurship 2010, Endeavor
2010). In the private sector, Business Partners is a
risk finance company that offers financing and sector-specific advice to SMEs (Business Partners
2010).
(b) Counseling, Training and Skills Development
In the area of skill development the South African
government has created the Sector Education and
Training Authority (SETA). The 23 SETAs provide
skills development by means of internships, learnerships, skills programs and apprenticeships within all
the economic sectors in South Africa. This is primarily done by appropriating skills levies from employers and distributing it to learners within the sector in
the form of grants and bursaries (Skills Education
Training Authorities in South Africa 2010).
Young entrepreneurs can apply for these grants and
bursaries to obtain a qualification in New Venture
Creation within the specific industry from a certified
college. After the entrepreneurs have obtained the
one-year qualification they will partake in a mentorship program from the same college and obtain a
capital stipend from the SETA or from their own
initiative (South African Institute for Entrepreneurship 2010).8
The South African Institute for Entrepreneurship is
an NGO that addresses entrepreneurship training
for illiterate or semi-illiterate adults by distributing
training materials that simulates real world business
circumstances (South African Institute for Entrepreneurship 2010).
(c) Broad Based Black Economic Empowerment
The South African government has also created a
points system to incentivize bigger businesses to do
business with entrepreneurs from previously disadvantaged backgrounds. Within the framework of
South African Institute for Entrepreneurship; Personal
Communication with Ishmael Vayej, Head of Operations,
21 October 2010.
8
Broad Based Black Economic Empowerment
(BBBEE), larger enterprises are awarded points on
their BBBEE scorecards that allow them compete
for government tenders if they have achieved a certain BBBEE rating (South African Institute for Entrepreneurship 2010). However, there is much discussion going on about the efficacy and sustainability
of this program.
(d) Conclusion
As in Germany there are a myriad of different public, private and NGO entrepreneurial support initiatives. South Africa and Germany both lack an allencompassing coordinating structure and in South
Africa entrepreneurs are sometimes unaware of how
to access the assistance at their disposal. Although
South African entrepreneurs face various challenges,
entrepreneurship and small businesses were explicitly
mentioned in the 2011 State of the Nation and
Budget Speeches, thereby demonstrating their importance to government.
4.3 Trends and identification of markets with
potential for young entrepreneurs
4.3.1 South Africa
M
ost analysts make very positive predictions
with regard to South Africa‟s future economic development, due to stable growth
rates of around 4% over the last decade and strong
investor confidence in recent years (Ehlers 2011;
GTAI 2010). However, if one wants to identify
promising market trends for young entrepreneurs, it
is important to bear in mind that the duality of the
South African economy. The stark division between
the formal and an informal sector present different
opportunities for young entrepreneurs.9
In the formal sector, the market-entry barriers for
new businesses and SMEs are often considerably
high. This is because South Africa‟s key industries in
the formal economy – the mining sector, car manuThe main difference between the formal and the
informal economy lies in the variation of accountability to
the state. Whereas all businesses in the formal sector are
required to have official documentation such as business
registration, trading licenses, work permits and taxation
records, the informal sector includes all forms of
unregistered businesses.
9
facturing industry or the chemical and pharmaceutical industry – are dominated by large conglomerates
and big multinational companies, making South
Africa being one of the most corporatized economies in the world (Castle/Kantor 2000). Since economies of scale favor large enterprises in these industries, and the amounts of initial capital, technical
capacities and personnel needed for market-entry are
very high, a strong growth rate in the respective
markets is not necessarily associated with increased
start-up possibilities for young entrepreneurs.
Therefore the highest market-potential for SMEs
and young businesses in South Africa‟s formal sector
lies in the service industry. For instance, South Africa is becoming a favored international location for
business process outsourcing and off-shore business
activities (DTI 2011). Business process outsourcing
(BPO) refers to instances where international companies relocate business processes that they usually
perform in-house to a third-party service provider
who will carry out the service on behalf of the company. The BPO industry's focus sectors are financial
services, insurance and telecommunications, with
outsourced processes including sales and call center
services, data capture and conversion, accounting,
benefits administration, human resource functions as
well as web-design and development. The BPO sector has an expected annual growth rate of about 50%
in the next five years (SouthAfrica.info 2008), presenting various possibilities for young entrepreneurs
in South Africa.
The South African information technology (IT) and
electronics sectors, which are both characterized by
technology leadership and a highly competitive consumer market, are also expected to continue showing
strong growth in the near future. South African electronic and IT products are penetrating the African
market and the country has been ranked as one of
the top-30 software development outsourcing destinations by the Gartner Research Group. These positive market-prospects leave a wide range of possibilities for software developers, IT service providers or
innovators interested in starting a business in this
sector. Partnerships between academia, government
and private industry like the Johannesburg Centre
for Software Engineering or Google‟s recently announced Cape Town-based technology incubator are
designed to assist young entrepreneurs in starting
their businesses (Google-Africa 2011).
Another common entrepreneurship trend in recent
years in South Africa is “tendering”. This term refers
to requests made by the government to have independent service providers fulfill the needs of the
state. Newspapers regularly advertise calls for tenders from state departments and local municipalities,
requesting services such as catering, servicing
schools, building state houses, providing sanitation
in rural areas, financial services (auditing, taxation
etc.) and many more. The intended purpose for outsourcing as opposed to using state-owned enterprises
is to encourage the start-up of micro, small and medium businesses, particularly those run by citizens
from previously disadvantaged backgrounds.10
Last but not least, the tourism industry bears potential for business start-ups of young entrepreneurs in
South Africa. Currently tourism contributes almost
10% to the country‟s GDP and in 2009 roughly
250.000 German tourists visited the country (GTAI
2010). Investment into tourism infrastructure by the
state as well as new ecologically sustainable tourism
projects (ecotourism) bring about new possibilities
for young entrepreneurs.
In the informal sector, entry barriers for young entrepreneurs are relatively low, with the main disadvantage being that the state is not able to trace the
money that is made in this sector and is therefore
unable to collect taxes from it. As a result, small
businesses in the informal sector do not contribute
to the official net worth of the South African economy. However, opening up a small restaurant, becoming a street vendor, a home-based hairdresser or
a backyard mechanic can be a way for young people
to rise out of unemployment and absolute poverty.
Starting a business in the informal sector may also
help young entrepreneurs to acquire basic entrepreneurial skills by experience, and if their businesses
reach a certain size they can later transition into the
formal sector. As recent studies show, the high unemployment rate in South Africa has led to a new
wave of informal and formal businesses by young
South Africans who cannot find jobs and therefore
In theory, tendering is an ever expanding market, which
is full of potential for young entrepreneurs. However, due
to the stringent requirements of the formal sector, many
are unable to benefit from this market which considerably
narrows the pool of potential recipients. In order to
tender, one requires a registered business, a business plan,
quotations and other documentation.
10
decide to take their fate in their own hands (GEM
2009; Investment at Work 2011).
4.3.2 Germany
T
he structure of the German economy is largely export-oriented. While in South Africa,
apart from supplying components to the
manufacturing industry as well as machines and
chemical products, increasing domestic consumption
and growing purchasing power in South Africa and
other African countries can bring about exportpotential for smaller German enterprises that produce consumer goods of all kinds (e.g., household
appliances, electronics).
However, as is the case for young South African
entrepreneurs in the formal economy, the highest
potential for young entrepreneurs in Germany lies
not in the manufacturing sector but in the IT, communications and innovative technology sectors. “Life
Sciences” (e.g., bio-technologies, environmental
sciences, ecology) in Germany have enormous market-growth potential and young entrepreneurs with
innovative ideas and basic marketing and business
skills are strongly encouraged by the government and
universities to start up their own enterprises. Initiating E-Businesses by selling services or commodities
through the Internet is another trend that many
young freelancers have recently taken up and this
trend is likely to continue in the future.
Despite their relatively low market potential, other
economic sectors in Germany have attracted the
attention of entrepreneurs. For instance, in the gastronomy sector the trend has persevered in recent
years with 60.000 new start-ups per year on average
since 2000, despite a mostly oversaturated market
and a high failure-rate in the past (BMWi 2011).
Other markets that face a consistent number of new
start-ups despite over-saturation are business consulting, law firms and freelance media enterprises.
Last but not least, a constantly growing market with
enormous potential for young entrepreneurs in
Germany is the health sector. Today the health care
industry in Germany is the biggest economic sector
accounting for about 10% of all business start-ups
annually, and given the country‟s demographic development it is expected to continue to grow in the
coming decades (Fischer Consulting 2011). With a
trend towards privatization and outsourcing in the
health care sector, young entrepreneurs can provide
services such as aged care work, physiotherapy and
home care services.
4.3.3 Civic Education for Responsible Young Entrepreneurs
E
ntrepreneurs have a responsibility towards
the societies they operate in. According to
Liikanen (2003) responsible entrepreneurship means “to run a business in a way that enhances
its positive contribution to society whilst minimizing
negative impacts on people and environment.” He
also points out that responsible entrepreneurs should




Treat customers, business partners and competitors with fairness and honesty.
Care about the health, safety and general wellbeing of employees and customers.
Be respectful to natural resources and environment.
Act as good citizens in the local community.
(a) Elements of civic education
According to the International Encyclopedia of Education,
civic education is broadly concerned with the development of citizenship or civic competence. Civic
education for responsible young entrepreneurs includes the following:

Basic Civic Knowledge
This includes knowledge about civic life, politics and
government. Young responsible entrepreneurs
should therefore be encouraged to acquire relevant
intellectual and participatory skills in order to operate
their businesses effectively within their societies. It
also involves being able to think about political issues as well as understanding these issues so as to be
able to make informed political decisions.

Civic Dispositions and Attitudes
Civic dispositions refer to a person‟s inherent traits
which are both private and public in character. This
entails accepting responsibility for the consequences
of one‟s actions as well as fulfilling one‟s moral and
legal obligations as members of the society. It is only
when this disposition is acknowledged and observed
that young entrepreneurs can be more responsible
and successful in their business operations.

Participation and Civic Duty
This refers to the duties of the individual to society
and the state. Every young entrepreneur needs to
perform his or her duties as a citizen. It involves
assuming the personal, political and economic responsibilities of a citizen and voting during elections,
paying of taxes to the state, respecting the rights and
dignity of others and if possible engaging in their
communities. Since entrepreneurs don‟t live in isolation and for that matter are integral members of the
society, the decisions people make through elections,
referendums and other public issues affect them and
their business activities.

Social and Environmental Responsibility
Social responsibility represents a way of acting which
will contribute to the general development of the
society. Young entrepreneurs are encouraged to
ensure that their business operations benefit the
entire society and this can be done by taking up the
responsibility to educate their employees to be also
responsible citizens. Entrepreneurs can also serve as
role models for future entrepreneurs by engaging in
socially responsible activities.
Civic education can therefore be referred to as a
subject that makes individuals aware of civic matters
such as politics, governance, human rights as well as
individual‟s rights, duties and responsibilities to the
state. This education helps to remove apathy and
increase popular participation in national activities
which contributes to the strengthening of democracy
and nation building. The obvious advantages of civic
education make a strong case for popular participation but even more so for entrepreneurs due to the
possibility of them being multipliers through their
economic activities and role models in their communities.
(b) Existing programs of civic education with a link
to business
In Germany the responsibility for civic education is
divided between public and private providers. In the
public sector, there are institutions and programs
dealing with civic education on the European level,
the German national level, the federal states level
and the local level. 11 On the national level, several
federal ministries provide civic education training.
The Federal Agency for Civic Education (bpb),
which falls under the portfolio of the Federal Ministry of the Interior, is the major national institution of
civic education. Its events and publications are aimed
at the German population, especially at multipliers
like teachers. Thus far no special provision has been
made for entrepreneurs, but an initiative is being
planned under the guise of the Africa Start-Up program developed in cooperation between the bpb and
the Africa Association.
Due to the federal system in Germany the organization of civic education in schools, vocational schools
and universities falls on the Federal State governments.
A summary of the educational plans of BadenWürttemberg12 is an example of this. The main focus
of the school syllabus is the acquisition of competences. These competences are treated on a more
comprehensive and theoretical basis at the Gymnasium and Realschule than the Hauptschule where
practical competences are deemed to be more important. Throughout, students are encouraged to use
their learned competencies to form their own opinions on new topics by considering political, economic and social parameters. The Gymnasium, Realschule and Hauptschule syllabus generally mention
key words related to the definition of „civic education for responsible young entrepreneurs.‟ Nevertheless, the general nature of school education makes it
difficult to impart specific knowledge on entrepreneurship and how it relates to civic matters.
Looking at civic education for responsible young
entrepreneurs at universities in Germany, a distinction has to be made between fields of study directly
related to economic topics and others. Some universities, like Tübingen or Hohenheim, offer special
courses on ethics or Corporate Social Responsibility
(CSR) in their business administration and economics curricula, sometimes these courses are compulOnly the national level will be considered in this paper.
Landesbildungsserver Baden-Wuerttemberg:
http://www.schule-bw.de/entwicklung/bistand/
11
12
sory but this does not count for all universities
(Sneep 2011; Jacobsen/ Pennekamp 2010). In other
fields of study, imparting entrepreneurial skills is not
part of the curriculum. However, some universities,
like the University of Mannheim, do have special
campus wide programs especially designed for entrepreneurship education (Mannheimer Gründer Guide
2011).
In many developing democracies, including South
Africa, issues around job creation, crime prevention,
AIDS prevention and pension and maintenance
awards are of more immediate concern than broader
issue of civic education. In South Africa this makes
youth education policy frameworks, especially at the
local or municipality level unstructured and short
term.
However in recent times the National Youth Service
(NYS) have been tasked to help harness the potential
of youth in South Africa and increase their employability. The quest to develop young entrepreneurs in
South Africa is also largely being spearheaded by the
Umsobomvu Youth Fund (UYF) which builds upon
the work done by NGOs. In addition to this, the
Youth Advisory Centers (YAC) is largely responsible
for providing youth entrepreneurship education.
They also provide training workshops for up-andcoming entrepreneurs.
The key to the success of establishing the culture of
responsible entrepreneurship in South Africa is education and this depends on the efforts of all stakeholders including the state, educators and young
entrepreneurs themselves (Isaacs et al 2007). According to the Youth Development Network, during the
period 1994-1999, post-apartheid South Africa has
been characterized by a policy formulation phase
aimed at solving the problem of large youth unemployment. However, the challenge since 1999 has
been one of implementing these policies. In spite of
these shortfalls, there has been a special USAID
sponsored program “Democracy for All”, which has
been in place since the 1990‟s spearheaded by Street
Law, a South African NGO, under the auspices of
the University of KwaZulu-Natal‟s Centre for SocioLegal Studies. The program involves sending trained
university students into South African high schools
to teach students about the issues regarding democracy, human rights, elections, conflict resolution and
how citizens can behave responsibly in society (Brilliant, 2000). Apart from the educational impact of
the home, school is considered the main medium by
which significant impact can be made on youth entrepreneurship development.
According to Isaacs et al. (2007), entrepreneurship
development and civic training in South Africa is
“not a new phenomenon”. As far back as 1994 a
coordinated entrepreneurship strategy (through the
2005 Revised National Curriculum for Grades R-9)
was developed and implemented. In South Africa,
the National Department of Education is responsible for developing entrepreneurship education policy
but each provincial education department is responsible for its implementation. Researchers such as
Isaacs et al have discovered the following shortfalls
in the school curricula regarding entrepreneurship
and civic education:






Schools do not have sufficient human and physical resources
Teachers are neither equipped nor trained to
teach entrepreneurship education
Schools receive little support from the government
The syllabus on entrepreneurship education is
not always available
Entrepreneurship is not considered a priority
Meaningful relationships with businesses are
non-existent (Isaacs et al, 2007)
(c) Recommendations
Based on these findings it is recommended that for
young entrepreneurs to be more responsible and
aware of the risks and consequences of their business, the role of civic education and entrepreneurship education should be of prime concern. Moreover these ideas should also be incorporated into the
current youth entrepreneurship development and
education framework. This includes the following:






Encourage the involvement of community
stakeholders in youth entrepreneurship education
Make use of existing municipal and provincial
government resources
Involve the young people in the preparation,
design and implementation of projects
Stakeholders should encourage and sustain private sector support
Develop and manage partnerships among the
youth networks
Integrate education on HIV/AIDS
The last point is necessary because in South Africa
young people are the most vulnerable groups when it
comes to HIV/AIDS infection. The question therefore which arises for young people is “How do I get
a job; and how do I survive” (Youth Development
Network, 2004). Employment and HIV/AIDS are
two key developmental issues that affect Africa. For
instance, one cannot conduct workshops on how to
start a small business without asking questions about
how an entrepreneur‟s HIV status will impact on the
type of business and its success. In addition, there is
the issue of how to deal with and manage employees
who may be affected or infected by HIV/AIDS. As
a result the Youth Development Network in South
Africa has developed a tool kit called “Integrating
HIV/AIDS in Life Skill and Employment Training
Programs” (YDN).
Moreover, civic education should be participatory.
The greatest emphasis should be on helping the
participants develop their own skills and tactics for
enhancing their roles as citizens. An awareness of
and education in their civic responsibilities will help
encourage a culture of responsible entrepreneurship.
4.4 Potential of youth entrepreneurship policy within
the German-African Partnership
T
he bpb contributes to the promotion of a
German-African partnership with the provision of knowledge about the African continent and especially with its yearly student exchange
program “Go Africa… Go Germany...”.
Concerning the potential of youth entrepreneurship
policy within the German-African partnership, the
programs run or supported by the Federal Ministry
for Economic Cooperation and Development
(BMZ) and the Federal Foreign Office (AA) are of
particular interest. Initiatives like the Weltwärts- and
the ASA-program provide opportunities for young
people to live and work in developing countries for
some time and to gain inter-cultural experience and
understanding. 13 These voluntary services do not
The Weltwärts-program is the development volunteer‟s
service of the BMZ. More than 10.000 young people aged
18-28 have been sent out for a 6 to 24 month long stay to
developing countries worldwide so far. The aim is to
provide intercultural experience and understanding as well
as knowledge about global interrelations. The ASA13
necessarily have a direct reference to youth entrepreneurship but they advocate knowledge about global
inter-relations and relevant skills for a responsible
young generation. A special branch of ASA, called
“ASApreneurs – Shaping a Sustainable World” focuses on future business leaders. 14 InWent is also
running the International Leadership Training for
skilled employees and (future) business managers
from developing countries.15
A wide range of organizations and institutions providing civic education also exists in the private sector. These include churches, party-affiliated foundations, civil society foundations, associations like the
Deutsche Afrika Stiftung e.V. and unions. Many of
these do have special programs concerning responsible entrepreneurship and/or the German-African
partnership. 16 It is noticeable that concerning civic
and entrepreneurial education for young people and
the promotion of a German-African partnership,
there are some special programs run by trade associations and the business community in Germany: The
Southern Africa Initiative of German Business (SAFRI), for example, offers its Students Experience
Program STEP for students from the SADC region.
A similar approach is taken by the “Afrika kommt!”
Initiative of German Business.17
program is a voluntary service borne by InWent. It
includes preparation and post processing seminars in
Germany and a 3-month internship in a project in a
developing country for 250 scholarship holders every year.
14 Through their internships the scholarship holders are
supposed to learn responsible entrepreneurial action and
Corporate Social Responsibility (CSR) in a global context.
ASApreneurs cooperates closely with the private economy
and other economic stakeholders like unions.
15 Approximately 400 persons per year get the opportunity
to spend a 12 month long training on the job period in a
German company plus a 12 month long preparation and
post processing period in their home countries.
16 Giving a broader overview would go beyond the scope
of this paper, therefore, the focus will be mainly put on
the public sector and the involvement of the private
economy.
17 “STEP” and “Afrika kommt” offer six or nine month
long internships in German companies for highly
qualified business and engineering students or young
professionals and (future) management leaders from
Africa. The programs include cultural seminars,
preparation and post processing measures in the
scholarship holders‟ home countries as well as alumni
networks.
For promoting a strong German-African partnership
through responsible young entrepreneurship, a triad
of entrepreneurship education, civic education and
intercultural knowledge is imperative. Considering
this triad, a lack of congruency has to be observed in
Germany. A lack of civic education measures in the
classical entrepreneurship and management education at universities and vocational schools still exist.
Their training is highly focused on economic expertise. Presently, young entrepreneurs are not an important target group of general civic education activities. In general many (civic) educators and school
teachers may still have negative attitudes towards
entrepreneurship and “the capitalist system”: In the
German educational system, entrepreneurship is not
highly promoted and the provision of entrepreneurial skills does not play an important role in schools or
university fields of study apart from business studies.
Programs linked to the German-African partnership
are playing a certain role in civic education but only a
negligible one in entrepreneurship education. A major obstacle to a fruitful economic partnership is the
biased image of Africa prevalent in Germany. Africa‟s potentials in terms of innovation, economic
growth and as a trade partner are widely ignored.
Figure 4: The ICE-Triad to promote responsible Youth
Entrepreneurship within the German-African Partnership.
Some recent developments indicate steady changes.
In the aftermath of the financial crisis, western societies are searching for more sustainable ways of economic development (Koe Hwee Nga/ Shamuganathan 2010: 259). For German businesses the acknowledgement of their CSR becomes an increasingly important competitive factor. The buying public is
increasingly concerned about the social and econom-
ic implications of their lifestyle and consumption
(BMZ 2009: 7f.). On the other hand, the successful
hosting of the 2010 Soccer World Cup in South
Africa, the public attention it brought about for the
African continent and some positive recent economic developments in many African countries are starting to change the existing image of Africa in Germany (Fischermann 2010; Grill 2010; McKinsey Global
Institute 2010). Its economic capabilities and potential are becoming recognized, especially by political
leaders, entrepreneurs and investors. In addition to
that, intercultural knowledge and experience between
Germany and Africa are increasing because of the
general upward global integration process and the
broad, multiplier-focused approach of existing exchange programs.
Political efforts are necessary to make the best out of
these prospects. First of all, business ethics should
be systematically included into the curriculum of
future young entrepreneurs and business managers at
universities throughout Germany. Especially in internationally orientated economics courses, questions
of global development and justice should be dealt
with. The African continent should be taken into
more consideration within the context of the global
economy. Universities should try to capitalize on
their alumni-networks to provide practical insights to
their students. In addition to that, student voluntary
engagement should be promoted, e.g. in the context
of BAFöG. The educational institutions could furthermore cooperate with extracurricular providers of
civic education.
Academic as well as extracurricular civic education
should try to reduce general resentment towards
entrepreneurs and emphasize the additional value
that the society as a whole could draw from a culture
of responsible entrepreneurship. Young entrepreneurs and future managers should be considered as a
special target group of civic education measures to
further promote this culture. Moreover, civic education providers should further work on the correction
of the biased image of Africa in Germany. Intercultural exchange between Germany and African countries should therefore be further promoted in addition to civil society and private partnership initiatives
aimed at improving mutual knowledge of each other.
This is not only an end in itself but very important
for possible economic cooperation, as only profound
knowledge about the counterpart‟s needs, values and
attitudes will make this cooperation fruitful. Having
said this, well-designed ambitious programs already
exist (see above). As only a few people get the
chance to participate in such a program, it is very
important to engage them as multipliers in their
home countries upon completion of the program. A
common problem in such programs is that only few
(often already privileged) people know about them.
For that reason the information of existing programs
should be enhanced.
If these measures are implemented, the promotion
of a German-African partnership on eye-level with
mutual benefit seems genuinely possibly through
youth entrepreneurship and economic cooperation.
In conclusion, the promotion of responsible entrepreneurship and youth partnership in Africa and
Germany depends on our ability to confront the
challenges that affect Africa such as unemployment,
political instability, poverty and lack of adequate
resources, HIV/AIDS and crime. In Germany, it is
necessary to increase the awareness of the importance of civic education and to recognize young
possible future executives as a relevant target group.
Concerning the German-African partnership an
improvement in the knowledge about Africa and
correction of the biased image of Africa is recommended. Awareness should be raised of the various
bilateral assets of an eye-level partnership. It is only
when those problems are dealt with, that we can
build a meaningful partnership on a local, regional,
national and global level.
I
n this paper we referred to young people aged
between 18 and 35 years, who start their own
business. Entrepreneurship was defined as recognizing “an opportunity to create value, and the process of
acting on this opportunity” (Schoof 2006: 7) and it includes economic, public as well as social entrepreneurship. We focused on young entrepreneurs in
Germany and South Africa.
1. Young entrepreneurs in Germany and Southern
Africa
T
he first section concentrated on the personal
capabilities and responsibilities of young entrepreneurs and was complemented by several
interviews with young entrepreneurs in Germany
and Africa.18
(a) Young entrepreneurs and their role in society
(Youth) Entrepreneurship can have a considerable
impact on societies. It plays an important role for the
economy, in value and job creation as well as in skills
development and innovation. That is why, on the
one hand, (young) entrepreneurs have a strong responsibility towards the societies they operate in.
Responsible entrepreneurship means “how to run a
business in a way that enhances its positive contribution to
society whilst minimizing negative impacts on people and
environment” (Liikanen 2003). On the other hand the
political, socio-cultural and economic environment
in which young people are willing to operate plays a
significant role in determining an entrepreneur‟s
success.
(b) Skills, motivations and responsibilities of successful young entrepreneurs
If one is willing to foster youth entrepreneurship and
to advance its possible benefits for the society, different aspects have to be considered. First of all,
whether a young person can become a successful
entrepreneur depends fundamentally on his or her
motivations for engaging in business as well as their
personal skills and relevant character traits. In addition to subjective internal motivating factors, like a
high need for achievement or satisfaction from
completing tasks independent of others, a variety of
external motivating factors also exist. The most
common reason for becoming an entrepreneur
seems to be the intrinsic need to earn more money
and a prestigious status in society (Henderson &
Roberts 2000). Important skills and personality traits
such as motivation, creativity, the willingness to take
risks, a strong and stable character as well as economic and strategic knowledge and thinking are all
These interviews are available on the www.bpb.de/
goafrica website under the section ”Common Paper“.
18
needed to become a successful entrepreneur. Young
entrepreneurs can be particularly good at risk-taking
as they are less likely to be affected by previous experiences and they bring a youthful audacity with
them.
2. Opportunities and barriers for business creation
by young people
T
he ability to start up a flourishing business
therefore is a mixture of an entrepreneurial
personality, good education and the right
political, socio-cultural and economic environment.
These macro-environmental opportunities and barriers are also shaped by government policies and
regulations. In this paper we used the PESTELframework as a tool to categorize and analyze political, economic, social, technological, environmental
and legal opportunities and barriers for successful
and responsible Youth Entrepreneurship in Germany and South Africa.
(a) Political factors
The political environment can either promote or
discourage entrepreneurial development in a country.
It includes macro-economic policies, governmental
support for (youth) entrepreneurship, political stability and corruption. In South Africa some of the regulatory laws are considered hindrances to the development of SMEs. Germany benefits from the European common market, but for the collaboration
between German and South African entrepreneurs,
trade regulations often function as a barrier, especially as many African countries mainly export agricultural products. Although the German and South
African government try to support Youth Entrepreneurship, e.g. with start-up capital, many young
people do not know about these support mechanisms.
(b) Economic factors
The second consideration is the economic factors.
Access to capital is a very important determinant in
youth entrepreneurship because young people often
lack the financial resources needed to start their own
business. Loans with lower interest rates and longer
payback periods are provided from public institutions in Germany as well as in South Africa to promote (youth) entrepreneurship. In the South African
context differences between the formal and informal
sector have to be considered. The informal sector
contributes extensively too many African economies
and for many young people, especially with lower
levels of education, it is an attractive sector when
entering the labor market. However, for various
reasons informal businesses are very unpredictable,
economically and personally risky and have severely
limited opportunities to access capital. Therefore the
graduation of (young) entrepreneurs from the informal to the formal sector is an important aim. Other
relevant economic factors are the unemployment
rate, economic growth rate, inflation and market
forces. These economic aspects can easily be used by
policy makers through favorable adjustments to
encourage young people to start their own business.
(c) Social and cultural factors
Social and cultural factors also strongly influence
entrepreneurial activities. The social norms and attitudes towards entrepreneurship in Germany and
South Africa are among the most negative in the
world and therefore constrain entrepreneurial activities (based on the analysis of Gert Hofstede). Furthermore both countries hold a strong masculinity
orientation in comparison to the world average,
which might hinder business creation particularly by
women. Notably, in Germany the tolerance of uncertainty is relatively low and the fear of failure is
high, whereas in South Africa more paternalistic and
autocratic social structures prevail, both facts that
might discourage young people from starting up a
business. In both countries business activities often
seem to be short-term orientated and in South Africa
“tenderpreneurship” is a significant problem. On the
other hand, both, the German and South African
society, seem to place great importance on individual
rather than collective action, a cultural norm that
might help fostering business creation by (young)
individuals. There is no unique formula to deal with
different socio-cultural attitudes in society and how
they can be turned from barriers into opportunities.
This is also a medium or long-term process. Evaluating and assessing socio-cultural backgrounds and
their impact are important first steps in creating
awareness and understanding.
(d) Technological factors
Successful (youth) entrepreneurship also requires
basic technological facilities and infrastructure,
which are usually provided by the state. The overall
quality of German infrastructure is high according to
the 2010/2011 Global Competitiveness Index. German infrastructure can facilitate (young) entrepreneur‟s success. South Africa, along with Mauritius,
topped the African rankings, but lagged far behind
Germany. South Africa has good transport infrastructure, particularly because of the development
that took place in preparation for the World Cup
2010. However, power and telecommunication,
which are also of critical importance for successful
enterprises, could be significantly improved upon.
Moreover the distribution of infrastructure is variable between urban and rural areas. Nevertheless,
South Africa is an anomaly in Africa and most other
Sub-Saharan African countries, even within the
SADC-region, which do not have the same levels of
infrastructure development.
(e) Environmental factors
Young entrepreneurs in Germany and South Africa
are faced with environmental problems such as pollution, global warming, floods and overexploitation
of natural resources that could eventually negatively
affect their businesses. Therefore, young entrepreneurs must integrate environmental concerns into
the vision of their business and become more environmental friendly. Furthermore, new economic
sectors can provide opportunities for young entrepreneurs to start new businesses, for example in the
alternative energy, transportation or environmentfriendly production sectors.
(f) Legal factors
The last component assessed in the PESTELscheme is the legal factor. Young entrepreneurs in
South Africa and Germany have to consider a multitude of legal and administrative issues considering
their business activities, starting with the name and
structure for their company. They also need a variety
of licenses and permits and have to consider the risk
of insolvency. In both countries administrative hurdles for starting a venture are relatively high compared to the rest of the world. In conclusion, on the
macro-level there is a multitude of factors affecting
(youth) entrepreneurship in either a positive or negative way. These factors are challenges that can and
have to be addressed by policy makers.
3. Youth entrepreneurship policy and civic education
T
he last chapter dealt with the political dimension of young entrepreneurship, elaborating
both on the political measures to promote
business creation and on measures to foster the feeling of civic responsibility of young entrepreneurs.
Special attention was given to the potential of a
German-African partnership for youth entrepreneurship.
(a) Instruments and economic policy for promoting
youth entrepreneurship
Instruments of an economic policy to promote
(Youth) Entrepreneurship can be categorized into
funding, counseling and training. In South Africa as
well as in Germany numerous public and private
initiatives to support (young) entrepreneurs exist.
Start-up loans with lower interest rates and longer
payback periods are provided from public institutions in both countries, and there are a variety of
programs and organizations that provide training and
counseling for (potential) new entrepreneurs e.g. in
business plan creation, financial management, marketing or legal issues. But both countries lack an allencompassing coordinating structure and an overall
strategy for their (Youth) Entrepreneurship policy.
In our opinion a fruitful dialogue between federal
ministries (in the case of Germany), private organizations and NGOs as well as a closer cooperation between economic- and education policy would lead to
more effective results.
(b) Markets with potential for young entrepreneurs
As markets with potential especially for young entrepreneurs we identified the IT sector and the sector
of environmental technology for both countries. For
South Africa one has to keep in mind the split which
still exists between the formal and informal sector.
In the formal sector the market-entry barriers are
often considerably high; the highest market-potential
here probably lies in the service industry. New possibilities can also be seen in the tourism industry,
especially in ecotourism. In the informal sector market-entry barriers are lower and starting an informal
business can be a first step out of poverty and unemployment for young people. The German economy is largely export-oriented. The highest potential
for young entrepreneurs is seen in the IT, communications and innovative technology-markets. Another
constantly growing market is the health sector.
(c) Civic education for responsible young entrepreneurs
Funding and entrepreneurship education are important aspects in the promotion of successful (youth)
entrepreneurship. But (young) entrepreneurs should
not only be individually economically successful but
their business activities should also serve society at
large. To achieve this second important goal, in our
opinion, civic education is imperative. Civic education for responsible (young) entrepreneurs should
promote basic civic knowledge (e.g. about the political system and current political issues), civic dispositions and attitudes (such as compliance to democratic principles and reciprocity), participation and civic
duty (such as voting and paying taxes) as well as
social and environmental responsibility (e.g. towards
their customers, employees, business partners and
the environment in which they operate). Civic education in South Africa and Germany is provided by
both public and private institutions, in schools and
through extracurricular activities.
In Germany, general civic education is integrated
into the curricula of all types of schools but entrepreneurial education is only significantly promoted in
commercial-orientated high schools. At university
level, many business study courses do not integrate
civic education or Corporate Social Responsibility
(CSR) into their curricula. Extracurricular entrepreneurship education in Germany focuses mostly on
economic knowledge but not on CSR or civic education for responsible (young) entrepreneurs. Other
fields of study on the other hand, largely do not
address questions of entrepreneurial knowledge.
Extracurricular civic education in Germany is provided by public and private institutions like the federal agencies for civic education, churches, founda-
tions, unions or associations. It is often open to the
entire population or targeted at specific groups, like
school children, teachers or residents with a migration background. To date, (young) entrepreneurs do
not appear to be an important target group of (extracurricular) civic education in Germany.
In many developing democracies, including South
Africa, other social issues such as job creation, poverty reduction, crime and HIV prevention are of
more immediate concern than the broader issue of
civic education. It is for that reason that publicly and
privately provided civic education often seems unstructured and focused on the short-term. Schools
often do not have sufficient funding and equipment
to provide broader civic education, while entrepreneurship education also is not a priority. Public institutions like the National Youth Development Agency (NYDA) and development cooperation projects
like the USAID program “Democracy for All” try to
improve the employability as well as the civic education knowledge and practice of young people in
South Africa.
(d) Youth entrepreneurship in the context of a
German-African partnership
The title of this paper is “Youth Entrepreneurship in
Germany and Africa – Promotion through partnership”. This headline implies two different requests.
First: What can a German-African partnership on an
eye-level contribute to the promotion of (youth)
entrepreneurship in both regions? And second: What
can a positive entrepreneurial culture and responsible
young entrepreneurs contribute to the further promotion of a fruitful German-African partnership?
Concerning the potential of youth entrepreneurship
policy within the German-African partnership, the
programs run or supported by the German Federal
Ministry for Economic Cooperation and Development (BMZ) and the Federal Foreign Office (AA)
are of particular interest. Initiatives like the welt
warts- and the ASA-program (especially its branch
ASApreneurs) or the GIZ‟s International Leadership
training and support young people from Germany
and Africa with intercultural experience and knowledge, civic education and occasionally entrepreneurship education is essential.
It should be noted that concerning entrepreneurship
education for young people and the promotion of a
German-African partnership, there are special programs run by trade associations and the business
community in Germany, like the STEP program of
the SAFRI initiative or the “Afrika kommt” initiative
of the German Business. Programs like these illustrate the increasing, economical interest for Africa
in Germany.
There are approximately 600 German companies
with operations in South Africa. These companies
employ over 90,000 workers. Most German companies in South Africa are in the secondary sector and
are involved in machinery, electronic, chemical,
pharmaceutical, automobile and metal production.
The Southern African-German Chamber of Commerce and Industry serves as a representative of
these companies and the German economy in South
Africa. Although these companies are contributing
to South Africa‟s development through offering
much needed employment, they are not doing much
towards the promotion of entrepreneurship among
South Africa‟s economically marginalized groups
who lack the skills and education needed to make
them employable. More joint efforts in this area
could bring about tangible and lasting results.
certain role in civic education but only a negligible
one in entrepreneurship education. A major obstacle
to a fruitful economic partnership is the biased image of Africa prevalent in Germany. Africa‟s potential in terms of innovation, economic growth and as
a trade partner is widely ignored.
The education system in South Africa is often
blamed for the lack of entrepreneurship excellence in
the country as many school leavers do not receive
adequate learning in subjects which can make them
economically literate. At tertiary level entrepreneurship education is more theoretical than practical and
is therefore limited in its ability to develop the skills,
attributes and behaviors necessary for successful
entrepreneurial engagement. The link between entrepreneurship education and civic education in
South Africa is weak as the two fields are usually
taught separately. However tertiary institutions and
technikons in South Africa teach business ethics
courses which incorporate CSR. CSR, although useful in molding responsible business leaders, largely
ignores political education. There is a serious need
for South African educational institutions to directly
link entrepreneurship education with civic education
in order to produce business leaders who are conscious of their social, political and economic responsibilities toward the country who conduct their operations with strong business ethics as their guideline.
I
In order to promote responsible youth entrepreneurship through a German-African partnership on an eye-level, as well as promoting a
strong German-African partnership through responsible youth entrepreneurship, the triple goal of intensifying entrepreneurship education, civic education
and intercultural knowledge is imperative.
Considering this triad, a lack of congruency has to be
observed in Germany. A lack of civic education
measures in the classic entrepreneurship and management education still exists. On the other hand,
young entrepreneurs have not yet been identified as
an important target group of general civic education
activities. In the German educational system, entrepreneurship is not strongly promoted and the provision of entrepreneurial skills does not play an important role in the system. The country is missing a
supportive entrepreneurial culture. Programs linked
to the German-African partnership are playing a
Figure 5: Reciprocal Promotion of Youth Entrepreneurship and Partnership.
Recent developments indicate steady changes in
perceptions of Africa in the developed world. In the
aftermath of the financial crisis, western societies are
searching for more sustainable ways of economic
development (Koe Hwee Nga/ Shamuganathan
2010: 259). For German businesses the acknowledgement of their CSR becomes an increasingly impor-
tant competitive factor. Consumers increasingly
concerned about the social and economic implications of their lifestyle and consumption (BMZ 2009:
7f.). Additionally, the broadcasting of the Soccer
World Cup 2010 in South Africa brought positive
public attention to South Africa and the continent at
large. Furthermore, recent economic developments
in many African countries are starting to change the
existing image of Africa in Germany (Fischermann
2010; Grill 2010; McKinsey Global Institute 2010).
Its economic capabilities are becoming increasingly
recognized, especially by political leaders, entrepreneurs and investors. In addition to this, intercultural
knowledge and experience between Germany and
Africa are increasing because of the general upward
global integration process and the broad, multiplierfocused approach of existing exchange programs.
counterpart‟s needs, values and attitudes will make
this cooperation mutually rewarding. Some welldesigned ambitious programs already exist. As only a
few people get the chance to participate in such a
program, it is very important to engage them as multipliers in their home countries upon completion of
the program. A common problem of such programs
is that only few (often already privileged) people
know about them. For that reason the information
of existing programs should be enhanced.
Political efforts are necessary to make the best out of
the bilateral prospects between South Africa and
Germany. First of all, business ethics should be systematically included into the curriculum of future
young entrepreneurs and business managers at universities in Germany and South Africa. Special emphasis should go towards questions of global development and justice in international-orientated economics courses. Universities should try to capitalize
on their alumni-networks to provide practical insights to their students. In addition to this, student
voluntary engagement should be promoted, e.g. in
the context of BAFöG. Furthermore, educational
institutions could cooperate with extracurricular
providers of civic education.
Civic education provided to South African youth
should also encompass a component of responsible
business engagement. This will go a long way in
ensuring that South Africa has responsible business
and political leaders who contribute positively towards the country‟s development. Germany could
assist South Africa with its civic education program
and entrepreneurship promotion by providing technical and financial assistance in both areas. The
German government, civil society, private sector and
independent entrepreneurs can identify business
areas which have growth potential in South Africa
and work towards mutually beneficial business engagement. This business engagement has to have a
significant component of Corporate Social Responsibility (CSR) that empowers South Africa‟s economically marginalized groups. Some of these areas of
bilateral business engagement could be in Information Technology (IT), tourism, „green‟ business
(energy), social entrepreneurship, natural resources
and minerals among many other areas of possible
business engagement.
Academic as well as extracurricular civic education
should try to reduce general resentments against
entrepreneurs and emphasize the additional value
that society as a whole could draw from a culture of
responsible entrepreneurship. (Young) entrepreneurs
and future managers should be considered a special
target group to provide with civic education to further promote this culture. Civic education providers
should continue to work on correcting the biased
image of Africa in Germany. Intercultural exchange
between Germany and African countries and publicprivate partnership initiatives aimed at improving
mutual knowledge about each other should therefore
be further promoted. . This is not only an end in
itself but very important for possible economic cooperation, as only profound knowledge about the
If these measures are implemented, the promotion
of youth entrepreneurship through a GermanAfrican partnership on an eye-level and the amplified
promotion of this partnership through youth entrepreneurship and economic cooperation seem possible and mutually beneficial for both parties.
In conclusion, the promotion of responsible entrepreneurship and youth partnership in Africa and
Germany depends on our ability to confront the
challenges that affect Africa such as unemployment,
political instability, poverty and lack of adequate
resources, HIV/AIDS and crime. In Germany, it is
necessary to increase the awareness of the importance of civic education and to recognize young
possible future executives as a relevant target group.
Concerning the German-African partnership, im-
proved and well-informed knowledge about Africa
to correct the biased image that is held is of paramount importance. Awareness of the various bilateral benefits of a partnership on an eye-level should be
raised. It is when those problems are dealt with, that
we can build a meaningful partnership at a local,
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