The United Nations Food Systems Summit took place on 23 September and as the first of its kind summoned by the UN Secretary-General in order to deliver much needed progress on the Sustainable Development Goals. Not only is youth empowerment a “hot topic”, so crucial to food systems transformation that it has been integrated into all Summit work themes  and is reflected  across all four “levers of change”. These levers span across four areas, namely: gender, human rights, finance and innovation. Claiming the potential to deliver wide-ranging positive change beyond its immediate focus, they have been identified by the Summit organizers as some of the most powerful factors for achieving the Sustainable Development Goals (SDGs) by 2030. Beyond the thematic importance, young people are also represented as Vice-Chairs in all five Action Tracks, showing their commitment and working together with Youth Champions and Food Systems Heroes. Following the call of the Pre-Food Systems Summit, around 10.000 youth from all over the world have been engaged and voicing their needs and concerns for a sustainable food systems transformation. In addition, the idea of a dedicated coalition on youth engagement and employment is currently under discussion.

Youth voices from the Pre-Food Systems Summit:

While we as young people have been excluded from most political and economic decision-making processes, we are also the ones who will live the longest with the decisions being made today.

The current and future engagement of youth is the key to food systems development and in order to achieve much needed transformation young people are indeed best placed. Their potential to rejuvenate the sector, acquire the knowledge and skills needed to innovate, uptake and integrate new technologies, and lead the digital transformation is not only an advantage to be harnessed, but also a major opportunity for a more inclusive and greener economy and society. With their ability to learn fast and their innovative spirit, the youth can drive change and accelerate the transition to more sustainable production and consumption patterns that are needed to achieve the goals of the Agenda 2030 and feed the world’s growing population.

Nevertheless, especially in the rural economy, youth face deeply ingrained decent work deficits, with three in four young workers worldwide in informal employment in 2016. In Africa and Asia, with 95 per cent and 86 per cent, respectively, the rate of all young workers that were in informal employment that year is even higher. While young people are typically employed on a casual or seasonal basis, they oftentimes face poor working conditions and have limited or no access to social protection. Globally, over 22 per cent of young people are not in employment, education or training (NEETs), and two out of three of these are young women.

Since agriculture is among the biggest sectors in many developing countries, it also has the biggest responsibility to provide employment. According to the World Bank, growth in the agriculture sector is two to four times more effective in raising incomes among the poorest compared to other sectors. However, due to the high level of informality, enterprises may face low productivity and decent work deficits, failing to generate public revenues or having to engage in unfair competition with formal enterprises.

Youth voices from the Pre-Food Systems Summit:

“There are challenges that often impede the growth as a result of lack of information, resources, and finance”

Lavetanalagi Seru (Fiji) 

At the same time, rural agribusinesses face fundamental challenges on their way to growth. This is especially the case for start-ups and youth entrepreneurs. Challenges include lack of startup capital contribution, collateral and guarantors, high interest rates, legal and regulatory restrictions (such as a minimum age requirement to open a bank account or obtain a loan), limited knowledge of and experience with financial services, and a lack of adequate protection and risk mitigation  measures ( such as Insurance cover for youth-led businesses). These factors are compounded by misperceptions from financial service providers that consider youth often not being bankable and a risky segment.

For young agripreneurs to grow a productive and sustainable enterprise, it is essential that their businesses and employees come under adequate legal protection. Therefore, running a formal business goes beyond completing the necessary procedures for registering a business (see Box 3). Especially for young people who voluntarily or involuntarily become entrepreneurs, starting in the informal economy presents the easier and oftentimes only way to get business operations going. Some of the challenges that lead to this constellation involve complex and less transparent procedures, knowledge gaps about what to do, difficulty to obtain necessary documents and limited information on benefits and incentives to formalize.

Additional challenges to formalize center around the little experience with the procedures of administrative institutions that are involved in the formalization process. Moreover, there might be age-related eligibility criteria youth entrepreneurs cannot fulfil which affect their ability to meet capital requirements for registering a legal entity or to cover other compliance costs. Finally, it is probable that young entrepreneurs have fewer savings due to their age, lack of a track record in business and are constrained in providing collateral.

To allow for more young entrepreneurs to understand and access the benefits of running a formal enterprise, a first step is to sensitize them about the possible benefits and to facilitate a thorough reflection of what costs and time they need to commit. Putting in place specific incentives, such as easier access to financial assets and support that make the business more productive, can reinforce the readiness to “invest” in formalization.

While sensitization and incentives alone do not mean that all youth entrepreneur will be successful in running their business formally, the exposure to what it takes to formalize the business builds important capacities that can guide youth entrepreneurs to navigate their formalization journey independently.

In light of the above, FAO has partnered with JR FARMS and the ILO to support young entrepreneurs in the agribusiness sector to foster business formalization. Access to finance is one of the major bottlenecks for youth agripreneurs, and formalization can help enterprises to overcome this challenge as registration is often a requirement to access finance and growing a business in the long run. Major considerations are potential improvements on access to business services, formal markets and productive resources such as capital and land. At the same time, business formalization links directly to improved working conditions, as it is for example a precondition for the registration of workers.  This translates into higher quality, safer and more resilient jobs (for example during times of crisis such as a pandemic or climate disasters, governments may provide aid to registered companies and workers). In addition, the generation of public revenues can contribute to the social wellbeing and development of an economy.

In May 2021, JR FARMS, together with FAO, ILO and the Rwanda Youth in Agribusiness Forum (RYAF) provided a training tailored to Rwandan youth agripreneurs. This training, titled Fit for Finance, not only explored the Rwandan financial landscape, preparing and guiding the young entrepreneurs (20 young women and 20 young men) on how to access and navigate finances through an interactive and practical approach, but also provided a dedicated session on business formalization. During this training, the young entrepreneurs had the opportunity to learn from and exchange with peers. The participants expressed their interest to impart the training content to more youth in their communities, and also, welcomed more training of this nature. In addition, participants requested mentorship support, marketing training, training on business plans, and linking innovative youth to investors and Financial Service Providers.  Following the high demand on capacity building, JR FARMS established the Green Agribusiness Fund (GAF) Academy, which will start in September 2021 and host 200 young agripreneurs from three countries (Rwanda, Uganda and Nigeria). The capacity building will begin with a session on business formalization. This is an important signal to young entrepreneurs in order to lay a strong foundation for business development. It responds to the findings of the Fit for Finance training, which noted that many youth entrepreneurs lack relevant information on the benefits of business formalization, feeding into the stigma around it. Therefore, it was considered central to familiarize youth agripreneurs with the progressive stages, advantages and responsibilities of formalization while offering a safe space for questions and concerns.

In sum, empowering young entrepreneurs by providing them with the guidance and the tools to navigate the journey of formalization independently, will grow their ability to actively shape their future and elevate their enterprise to the next level. Business formalization can be understood as a way to enable access to finance and land, as well as establish more sustainable and decent working conditions.

Box 3: Business formalization in a nutshell

From the perspective of an informal business, formalization includes the application of and compliance with existing procedures that formal businesses have to observe. This includes, for example, the requirement to have a formal legal status through business registration, to follow official bookkeeping requirements, to obtain and renew necessary sectoral and professional permits and to meet tax requirements. In addition, formalization of the business means to pay social security contributions and comply with relevant labour laws and regulations, particularly when the business is employing workers.

Article by: Judith Van Doorn, Specialist Enterprise Formalization, ILO Enterprises Department; Kareem Bayo, Jr Technical Officer Enterprise Formalization; ILO Enterprises Department; Sonja Barwitzki, Value Chains and Decent Rural Employment Consultant, FAO