THE YOUTH BULGE, A CHALLENGE WE CANNOT IGNORE

Outside Johannesburg in the town of Germiston is the Ekurheleni East College (EEC), a modest campus that serves as part of a pilot project to head off South Africa’s looming disaster.

The technical and vocational training institution is the beneficiary of an African Development Bank (AfDB) grant geared at better skilling its students – youth and SMEs for the workplace.

Students at the school learn vocational skills like a metalworking, electrical installation, plumbing and business studies.

"The need is urgent. South African officials estimate that at least six million people – or 30% of the working age population, are unemployed most of whom are youth...

The South African economy, growing at paltry two percent, can’t promise to create enough jobs for its jobless masses. It is hoped that if the pilot one of three, prove successful in getting their graduates employed or open up businesses, they can roll it out across the country and forestall what is widely seen as a ticking time bomb.

Apartheid biased development towards a white minority – South Africa has the widest wealth disparities on the continent, and as a result there are thousands of youth roaming around thinking that they are no better off 25 years after apartheid was dismantled. This frustration has shown itself in the country’s high crime rate and the attacks on foreign workers earlier this year.

A corruption which has almost ground the economy to a halt – they suffer up to 16-hour load shedding on some days, has not helped issues.

It’s the story of the continent – without the apartheid hangover, but in contexts that are no less daunting.

In Uganda more than 80% of the population is under the age of 35. According to 2016/17 Uganda Bureau of Statistics (UBOS), 13.3% of Ugandans between the age of 18 – 30 are unemployed. Other numbers have varied more wildly but don’t stand up to anecdotal evidence.

That being said the economy not creating enough jobs in the formal sector to absorb the thousands turning up in the job market every year. So like South Africa practical and entrepreneurial skills will have to be emphasized going forward.

"Conspiring against efforts to create jobs for all by the year 2040 or whatever the number is now, the increasing automation of processes across sectors. Every industry from manufacturing to banking to retail, even garages are looking to employ fewer and fewer people to gain efficiencies and cut costs....

While manufacturing jobs is what drove the industrial revolution in the 20^th century I am afraid it will not have as significant a role in the 20^th century.

New plant and machinery now need fewer workers to do more work. Unlike the workers of the industrial age these new workers need to be better educated than the automatons of the last century too.

That being said there will always be a need for a carpenter, mechanic, plumber especially as we become more urbanized. But even more importantly there is a need for good entrepreneurs who understand not only how to set up businesses but run them sustainably.

This last point is critical. An engineer who leaves university knows the subject inside out but is unable to start and run a firm, that can not only do construction but also employ more and more people and grow. Is it any wonder that after today we have no major indigenous contractors winning major jobs in this infrastructure development boom?

"The biggest companies were first small companies. And for every big company hundreds even thousands have fallen by the wayside. The ones that have survived the natural selection process have done so often because they have been deliberate and systematic in growing their capacity over time... 

In more advanced economies this has happened over generations, here in Uganda maybe over the last three decades, at least.

In addressing the youth unemployment challenge, government needs to recognize that throwing money at the challenge is at best a stop gap measure at worst will see our youth addicted to handouts. 

What government needs to do is improve the environment for doing business – we are 112 out of 189 in the Ease of Doing business rankings, commit more resources to providing vocational and entrepreneurial skills.

If done systematically then even the government handouts will be better utilized in serving the end of job creation.

At Ekurhuleni they don’t stop at graduating technicians, but work with industry – the surrounding industries actually nominate the students to the college, provide internship slots and often high them eventually.

Those who are not so lucky graduate with a toolkit to help them set themselves up in their own communities.

"South African trade ministry officials know it’s a race against time – at the college they are employing a semester system that allows them to train double the students given the facilities. When fully rolled out in a decade or so they intend to be annually passing out at least ten percent of the unemployed youth annually or 600,000 graduates....

We wish them luck. We will all need it.

FINTECH TAKING OVER, FOR THE BETTER

Activities to commemorate the financial inclusion week culminate this week with The Africa Fintech Festiva,l which starts tomorrow, (5th November) here in Kampala.

The festival’s theme is “The role of fintech in Africa’s digital economy”. The word Fintech has come into everyday use in the last decade or so and is used to describe the use of technology in facilitating banking and financial services.

The financial sector has always been ahead of the curve in the adoption of technology, but its only in recent times that applications have brought these efficiencies to the man on the street.

The speed of innovation and adoption has made us forget how traumatizing it was to deal with banks and financial institutions.

There was a time when banks were only on Kampala road, opened from 9 am to 1 pm, never on weekends and account opening and minimum balances were so prohibitive as to serve as a barrier to entry.

At the time banks would keep hand written ledgers that had to balanced every day, hence the early closure and the reluctance to go for the mass market. As competition increased, banks had to seek new clients forcing them to rack their ties and jackets to mix it up down town. New technologies helped them cope with the increased volumes of transactions and operate longer hours.

The introduction of the mobile phone created a new platform, nearer to most than their local bank branch, which has seen an explosion in accounts.

A few weeks ago the Bank of Uganda reported that mobile money users had grown to 25.8m last year compared to 22.7m in 2017. But while the value of transactions reduced to sh66.9trillion from sh73trillion the previous year the number of transactions nearly doubled to 2.5 billion from 1.3 billion.

These numbers are interesting because commercial bank accounts in Uganda last year were just under eight million, a third of mobile money accounts. This speaks to the fact that people want to and see the benefit of engaging in the formal financial sector, but for most of them it has been difficult to participate. As a result the benefits of credit and other financial products have eluded them and in effect hobbled their prospects of climbing up the social ladder.

And we will only see an acceleration in the innovation and adoption of fintech. On a micro level it will make us more efficient and productive. It has been said that the Ugandan worker is not as productive as his counterparts in the region. While a part of it is our laid back attitude to work, there is also the fact that our processes have not been as capital intensive as our neighbours.

With miniaturisation computers are becoming faster and smaller. Its barely two decades ago when 256MB CPU was adequate for our desk top computer. Now you hold that power many times over in the palm of your hands. You can now spare yourself the ordeal of visiting the banking hall depositing and withdrawing funds, receiving and making payments off your phone or computer.

The potential of an economy can be seen by how fast money moves. The time spent filling forms, standing in line, moving to and from the bank, is everyday being reduced to its bare minimum, which will and is having a ripple effect through the economy.

The beauty of technology is that upgrades are flying off the shelves almost every year, meaning “old” technologies are becoming less costly, guaranteeing that even the poorer members of the society will be hooked up faster than ever.

In Uganda today mobile phone coverage stands at about 76% across the border in Kenya it is at 105%. And it shows. Last year about sh393b daily was transacted across all mobile money platforms in Kenya, the comparable amount here is less than half that at about sh183b.

The relative sizes of the economy aside, Kenyans are well ahead of us in the use of mobile money to not only transfer funds, to provide credit, insurance and facilitate business transactions to the point that a cashless economy is a very near possibility.

One of the major challenges of our economy is that we are not aggregating our resources into meaningful sums be they human resource or land but especially capital. It is not a stretch of imagination to see how fintech will provide a real solution for our inability to aggregate capital.

Believe it or not some people don’t deal with banks out of some deep seated phobia, dealing with their phone not so much.

It’s become so pervasive that we forget that fintech is still in its early days, services are still more costly and there are still a lot of legal gray areas that have to be ironed out before it can reach its full potential.

Fintechs potential to mop all the loose change lying around, fashion products for the lowest of low as well as increase efficiency in the whole financial sector is scary. Scary in a good way if it makes all our lives easier.

MAKERERE UNIVERSITY RUNNING OUT OF ROAD TO KICK THE CAN

The events at Makerere University this last week were saddening but not surprising.

Students took to the streets to protest a planned 15% increment in their fees and came face to face with security agents who were deployed to quell the fracas.

It was never going to end properly if they army were unleashed – untrained in putting down civilian unrest, on the students. It was even more ominous when the press were kept off the campus.

It took the intervention President Yoweri Museveni for some kind of settlement to be arrived at. The university authorities did a climb down, announcing the 15% increment would only be applied to tuition and not to the facilitation fees.

Strikes -- protesting low pay by the teaching and non-teaching staff and increments in students fees, have become a perennial affair. After a few days of disagreement, a band aid solution is arrived at and normalcy returns to the University, but just for a while.

"The government and leadership at Makerere have been content to kick the can down the road year after year, ensuring that the real challenges not the symptoms fester and boil over every year.

The challenge of Makerere and other public universities is one of leadership. Inadequate resources, the falling quality of the output and now the perennial strikes are all but symptoms of poor leadership.

How is it that the square mile with highest concentration of brain power in the country, maybe even in the region, has failed to solve the simple equation of admitting a youthful population, accommodating them in relative comfort, imparting knowledge and graduating useful members of society without drama?

In fact the market is becoming increasingly dubious of its graduates, which suggests the former Harvard of Africa is not keeping up with the times. You shall be judged by your fruit, they say.

"It starts with the way the university’s chief executive officer is selected, an archaic process that rewards popularity rather than competence....

You can paper over the leadership inadequacies when you have a student body of less 500, like at Independence – making it a privilege not a right, you have a monopoly on university education and you are operating in an analogue world, where change takes place at a glacial pace.

But when you have a student body of 35,000-plus whose numbers have outstrip the infrastructure, competing with several other institutions for government support and with added baggage of a reputation the selection of the CEO has to go beyond academic cronyism.

Assuming a student body of 35,000 paying on average a million shillings a semester, for an annual revenue of at least sh70b annually, wouldn’t you have a truly competitive process to select the best possible business manager for the job?

As it is now the university’s CEOs in recent memory have been doctors, computer scientists, chemists, biologists, lawyers, all upstanding gentlemen and a lady, but none a business manager.

That is what Makerere and other public universities need, business managers, people who can take the raw input of youth, capital and the assets the university is endowed with and efficiently graduate productive members of society.

"It is a crying shame that Makerere still gets into fights about money with the staff and students, given the combination of the aforementioned brain power on the hill and the assets under their stewardship....

Nowhere in the world do university students pay the full cost of their education. A clever use of fundraising efforts, income from endowment funds and some state contribution manage to bridge the deficit between student fees and the real cost of education.

It was shocking to learn that student fees have not been increased at Makerere for the last 13 years! At the bare minimum there should be some allowance for inflation. This smacks of cheap populism ignoring good economic sense and digging a deeper hole.

Government has a lot to answer for the chaos at the university. The popular move to open up university education to a wider public, while failing to increase investment in line with the increased enrollment is at the heart of the current crisis.

Makerere is a shadow of its former self, its crumbling halls of residence are testament to this. And how is it that no new hall of residence has been added to its portfolio since CCE was was established in 1982.

This continued failure will force the government to make unwanted decisions. A reality that increases with every day.

On the one hand they maybe forced to close the university all together because it can’t continue to carry it. It may be cheaper to pay fees for students to other universities than pretend to run Makerere. Or to privatize the university, as a going concern, which may invariably lead to a cut back on student numbers but of a better quality.

Neither of the two options are palatable.

Basic education is important for an industrial economy, but tertiary education is critical for the fourth Industrial revolution, where better skilled workers than the automatons of the industrial age will be required.

Government has to make some hard decisions. To divest itself of its universities or commit significantly more resources – financial and managerial, towards university education. Maintaining the status quo is just postponing a major crisis.