The ecosystem of youth entrepreneurship in Lesotho

I recently came across the concept of Systems Thinking in my MBA studies. It came to mind today as we held discussions at an Information Day held by the ministry of Gender, Youth, Sports and Recreation for youth entrepreneurs.

An attendee expressed frustration at the fact that the conversation around youth entrepreneurship and youth development in general that we were engaging in at the event, was missing the important element of defining what an ecosystem of entrepreneurship looks like, who the different players in the ecosystem are, who the enablers of the ecosystem are and what each stakeholder needs to do in order for youth entrepreneurs to be successful.

Of course, this frustration is common amongst all entrepreneurs and not just youth entrepreneurs. It is also common not only in Lesotho but across Africa, where entrepreneurship has often been cited as the "key to African development"; and it is brought on by the fact that it seems every stakeholder that is trying to advance entrepreneurship is either shooting in the dark - trying everything that they can without putting thought and research into it, or doing the right thing in an environment where everything else is not being done right, and therefore, not really making an impact on a macro scale.

What does this mean? It means we have people and organisations, working to advance entrepreneurship but who are doing so in silos, duplicating efforts or even countering each other's efforts, resulting in real barriers to entrepreneurial success not being addressed, or in entrepreneurial efforts not resulting in the expected job creation, economic growth or other forms of development in a country, in a sustainable way.

What does an entrepreneurship ecosystem look like:

This article describes the following as attributes to a successful entrepreneurial ecosystem:

- A broad, deep talent pool of employees

- Financial capital (Venture Capitalists, seed investors, etc)

- Leadership

- Mentors and advisors

- Professional services

- Large established organisations which are supportive to the growth of start-ups

- Supportive policies and regulatory framework

- Entrepreneurship events (bootcamps, pitch-competitions, hackathons etc)

- Stakeholders who are work together and committed to giving back to the ecosystem.

Similarly, D. Isenberg is quoted in an article as saying that the components of an entrepreneurial ecosystem can grouped into the following six elements: " a conducive culture (e.g. tolerance of risk and mistakes, positive social status of entrepreneur); facilitating policies and leadership (e.g. regulatory framework incentives, existence of public research institutes); availability of dedicated finance (e.g. business angels, venture capital, micro loans); relevant human capital (e.g. skilled and unskilled labour, serial entrepreneurs, entrepreneurship training programmes); venture-friendly markets for products (e.g. early adopters for prototypes, reference customers), and a wide set of institutional and infrastructural supports (e.g. legal and accounting advisers, telecommunications and transportation infrastructure, entrepreneurship promoting associations).

With all this said, Peter Senge defines systems thinking as "a discipline for seeing the whole rather than the parts, for seeing patterns of change rather than static snapshots, and for understanding the subtle interconnectedness that gives living systems their unique character". In the context of entrepreneurship ecosystems, it means we need to analyse the different parts of the ecosystem together in order to understand why (youth) entrepreneurship initiatives in this country don't have a high success rate. We have to analyse how the different parts are interconnected instead of just looking at an individual component like access to finance and making statements like, "when we give money to the youth, it becomes a wasted resource because these businesses just don't become successful", as if to suggest that all that these ventures needed to succeed was money. This means we have to gain an appreciation of what areas of the ecosystem we need to invest in, in order to see a meaningful change in this area.

Furthermore, we need to seriously consider who we will assign the responsibility of coordinating the different parts of the ecosystem, or at the very least, keeping record of the state of the ecosystem and the sufficiency of the activities taking place within it in order to make recommendations of what the areas of priority must be for the various stakeholders who are involved and have an interest in the ecosystem.

If I just consider D. Isenberg's components as referenced above, I am of the opinion that Lesotho has not even scratched the surface in developing a sound entrepreneurship ecosystem, and that a lot of work still needs to be done by the government and other relevant stakeholders in each of these components individually, and to ensure that they function together well as a unit.

For example, when we talk about providing finance is Lesotho, we usually talk about the provision of loans from financial institutions or the provision developmental grants or aid from development partners. The Central Bank of Lesotho launched a Maseru Securities Market, which was supposed to provide local businesses with capital-raising opportunities from the public, but years after it was established, there is no single company listed on the exchange. Furthermore, it is not clear how much thought went into deciding that a local securities market was what we needed in the first place, if you one considers the liquidity issues that exists in markets as small as ours (something I will write about another time). Apart from local stokvels/societies - which are not in the culture of investing in local businesses, and a few investment companies, there are no real and accessible options for funding for local businesses. Even the funding that some businesses get is either too expensive or unsuitable for the business in some way or another. The government itself has tried different models of funding businesses in the country, which includes providing a credit-guarantee scheme, setting up trust funds or investing directly in infrastructure such as greenhouses or factory shells and providing businesses an opportunity to use them at a reduced fee or for free, however these initiative has resulted in some of the following challenges as reiterated by the Honourable Minister of Gender, Youth, Sports and Recreation, such as:

- Failure of businesses to pay back loans from government funds.

- Failure of businesses to honour credit agreements resulting in the government having to cough out money to pay back credit-guarantee schemes.

- Unused equipment and infrastructure provided by government for free with the hope of encouraging people to go into businesses in key productive sectors such as agriculture.

When we apply systems thinking to analyse the root-cause of these challenges, we will probably find that the government implemented what they thought were solutions without considering the other elements that would have to work for these financing schemes to be effective, such as providing the funded businesses with professional services in order for there to be accountability for the funds, and for the businesses to be run formally with clear operational and other strategies. Additionally, consideration would have had to be made of whether the people running the businesses are well-equipped to run them, and have hired the right teams to carry the expected growth of these businesses.

On the other hand, the youth has also suffered by throwing money down the drain, investing in business ventures that may have sounded like good ideas, but that were doomed to fail from the beginning because of factors such as a non-conducive business environment (Lesotho is ranked 106th out of 190 countries in the Ease of Doing Business Index), lack of infrastructure, lack of access to markets, lack of business skills to run the business (as having a good idea is just not enough).

What is VERY clear to me, after yesterday's event is that our leaders (government, private sector, development partners and others) have not been thinking systematically about how to advance entrepreneurship in this country, and they have not made sufficient efforts to collaborate in a meaningful and sustainable way that can have a significant impact on the economy, and in particular on youth entrepreneurship. My lingering fear is that the National Youth Policy (which I critiqued here) was also developed without a systematic analysis of what other factors important for its success are.

The fact of the matter is we cannot continue to do things unsystematically in trying to tackle the issues that relate to the youth in this country. In as much as I applaud those who make an effort to contribute in some way to the ecosystem, I also fear that we have a crisis on our hands, of youth who are underdeveloped with low levels of opportunities, and leaders who are clueless about what is really going to work.

I implore everyone who is in a position of influence to take action to ensure that every single stakeholder with a mandate to develop the youth, is engaged in their efforts collaboratively. I implore business leaders in collaboration research institutions to take the responsibility of defining what Lesotho's entrepreneurship ecosystem should look, and that each stakeholders' activities and initiatives should be measured against the key performance indicators of this ecosystem, and that activities that enable or contribute to other activities within the ecosystem are prioritised so that we can start seeing the results we want to see, of young people going into entrepreneurship, starting businesses in the right industries, creating the jobs that we need and growing the economy in a meaningful way.

Yours in Service,

Likeleli M.