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'Drop out of school': Does that advice work in South Africa?

PayPal founder Peter Thiel has encouraged America's top students to drop out of university and create a company instead. South Africans could benefit from considering entrepreneurship as important as a college degree.

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Without limiting the aspirations of the others, it is for these kids – the ones whose education has equipped them with the basic know-how – that questioning the value of university education and considering whether better alternatives exist is more realistic.

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I cannot imagine that with his 20-under-20 programme, Thiel intends to create yet another exclusive, elitist system. Meaning, I do not think his primary goal is that his programme would inspire other benevolent billionaires to create other similar programmes. Because if that happens, then someone will come along and prepare annual rankings for the programmes. The best ranked would then become more coveted and preconceived notions (or value) will be placed, sometimes without real cause, on attendees and businesses started by attendees of these best-ranked 20-under-20 programmes. Does this sound familiar?

I think… I hope that Thiel’s main goal is to show that university is not the only path to success and that entrepreneurship, given the right circumstances, is every bit as good. This appeals to me because of the situation in South Africa.

Economists often speak of the developing world’s “missing middle” – that gap between what small and medium enterprises (SME) contribute to GDP and employment in high income countries (typically in excess of 50 percent on both counts) versus what they contribute in low income countries (less than half of that). South Africa’s missing middle, despite many enterprise development programmes, is large.

During the nine years over which research has been conducted, the Global Enterepreneurship Monitor (GEM) ranks South Africa’s total early-stage entrepreneurial activity lower than average among low to middle income countries. This lower rate also gives context to why South Africa ranked last among the 53 participating countries in terms of established business activity.

There are policy and other practical factors contributing to South Africa’s missing middle, but those do not even come into play because the will is lacking. In the minds of many South African students, starting a business ranks low on the list of things to do after high school. This is reflected in the country scoring below average in GEM’s indicators of entrepreneurial attitudes and perceptions.

The conversation shifts to an even more uncomfortable place when indicators of entrepreneurial attitudes and perceptions are examined by race. It is uncomfortable because it raises questions around economic freedom for blacks in post-Apartheid South Africa.

Across the board, black South Africans score noticeably lower than other racial groups. Also, need rather than opportunity is what drives many black South Africans to entrepreneurship, which is quite worrying as the research shows that opportunity-driven entrepreneurs are more likely to succeed.

With an unemployment rate of about 24 percent, the economic and social costs of this for the country are massive.

This is the real cost of a higher education bubble in South Africa – the oversold promise that a university education, above all other opportunities, is the path to economic freedom. I like Thiel’s idea because it gives me hope. Hope that there are South African parents and kids – especially those who’ve been afforded a good enough basic education – who will hear about these kinds of globally changing perceptions and begin to believe that they too could found the next Microsoft.

– Osiame Molefe blogs on South African politics and social issues at Boos From the Pews.


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