Viewpoint: William Adjovu
A major challenge facing many countries is generating youth employment opportunities. An estimated 80% of unemployed youth are in developing countries and transient economies. In Ghana one out of every four people is 15 to 24 years old, and the country has an average annual growth rate of about 2.5%, according to the 2010 census. The private sector is the largest employer in Ghana, accounting for 93.1% of economically active people, with the public sector accounting for only 6.3% of employment.
In Ghana there are very few new job openings for young people. The government could leverage the capital market to enhance youth employment by constituting a fund. This fund may be called the Ghana Youth Employment Fund and would provide seed capital to Ghanaian youth that have good business ideas. In operating this fund, the government could select two banks that would receive the funds and provide a guarantee for its disbursement to the selected applicants. They would make sure all necessary requirements are met for the fund to be disbursed. The banks would provide guarantees of up to 30% of the disbursed fund to a young entrepreneur and the government would take up the remainder. The banks would also be encouraged to play a major role in this constructive venture by ensuring that all the guidelines are implemented for this fund to provide the necessary impetus for youth employment.
Careful monitoring in the early stages by the banks would occur until a business is brought to the capital market after two years, while seeking long-term capital to take care of working capital needs and expansion. More job openings would then be created and youth employment would be radically enhanced by encouraging young people into private ventures, thereby increasing GDP growth.
Disbursed funds may also be insured by selected insurance companies. If a business fails, all the necessary arrangements would be in place to recover the funds. This ensures that the selected institution does not lose sight of its oversight responsibilities, while also providing a percentage guarantee for the disbursed funds. Moreover, a carefully selected group of successful Ghanaian entrepreneurs within and outside governmental agencies would be utilised to provide mentorship. The policy direction would be well-thought out in seeking to enhance the capital market’s attractiveness, improve the savings culture of Ghanaians, improve accessibility of long-term capital and also increase new job openings.
Many young people have business ideas but lack the know-how and funds. In funding for youth start-ups, the fund should look at business plan preparations and the ways that a business could be funded to implementation. The right organisational plan for a business and its mission, objectives and goals should be precise, along with the proposed marketing strategies, planned location and pro-forma financial statements for at least two years.
The policy direction must stipulate that the capital market is to be leveraged for equity funding after a businesses operates for at least two years. This situation transfers part of what is owned to others to persuade them to provide financing needed to start or expand a business. In this, the risk of the new business is shared by the investor and entrepreneur. The equity investor gets the loan from the fund repaid, but retains part ownership and will receive a share of any future profits and increase in its net worth.
As a business develops a history of growth and a good rate of return on its initial investments, funding for expansion becomes much easier to obtain from the capital markets, in the form of bonds or issuing additional equity, or from banks. Therefore, if the government puts together a thorough policy geared towards youth employment by leveraging on the capital market, employment would increase year-on-year and deepen capital market activities in Ghana.
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