Factors Influencing the Performance of Youth-Owned SMEs

Small and medium-sized enterprises (SMEs) are the backbone of numerous economies across the globe.

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

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

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

Youth-owned SMEs in particular serve as linchpins of socio-economic integration within their countries.

A BARRAGE OF CHALLENGES

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

From 2017 to 2022, Namibian SMEs accounted for about 12% of the GDP and employed roughly 20% of the workforce.

These enterprises are critical for job creation, significantly impacting both urban and rural communities and supporting a large segment of Namibia’s population (National Policy on Micro, Small and Medium Enterprises in Namibia, 2016).

Under the Vision 2030 framework, the Namibian government has recognised the potential of SMEs to bolster GDP through reducing unemployment, alleviating poverty, and fostering entrepreneurship.

This imperative was underscored by president Nangolo Mbumba when addressing University of Namibia graduates on 10 April 2024.

The president challenged them to leverage their entrepreneurial spirit to create opportunities and devise innovative solutions to society’s complex challenges.

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

Coupled with a high unemployment rate of 32% (Labour Force Survey 2018), focusing on youth entrepreneurship becomes a critical endeavour.

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

It is against this backdrop that a study was initiated to explore the factors impacting the performance of youth-owned SMEs in the Kavango East.

This region was selected because of its alarming youth unemployment rate of 62.5% (Labour Force Survey, 2018).

STARK REALITIES

In Namibia, the stark reality is that around 90% of SMEs fold within their first five years.

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

While much literature spans various geographies and sectors, there’s a gap concerning youth-owned SMEs.

This study fills that void, assessing the impact of individual, organisational, and environmental factors on the performance of these enterprises in the Kavango East region.

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

Using a mixed-method research methodology, data was collected through structured questionnaires and analysed using descriptive statistics, exploratory factor analysis, regression analysis, and structural equation modelling.

The findings were insightful.

Individual factors, including age, gender, education, innovativeness, and entrepreneurial orientation, were seen to positively influence the performance of youth-owned SMEs.

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

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

RECOMMENDATIONS

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

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

Meanwhile, the government must prioritise easing regulatory constraints to promote a business-friendly environment that nurtures growth and innovation. 

Regular reviews and updates to policies and frameworks are crucial to maintaining an agile and supportive business climate that can accommodate the evolving needs of youth entrepreneurs.

– Emma Kantema is the deputy minister of Sport, Youth and National Service. This is an extract from her doctoral research on factors influencing youth-owned enterprises in Kavango East. It is written in her personal capacity.