There is no scarcity of initiatives to address youth unemployment in Uganda.

In recent years, well-

intentioned donors have established programs in the country aimed at putting young people to work.
At the same time, the Ugandan Government has set out several strategic plans and initiatives to
tackle the issue. This level of donor and domestic interest is unsurprising: Uganda has one of the
youngest populations in the world, with 78% under the age of 30, representing significant
development potential. But if left untapped, it could turn into a major development challenge.

Despite job creation efforts, the youth employment challenge has hardly diminished. It’s time to
reassess the program and try something new.

Misdiagnosis

Uganda’s national unemployment rate is 9.2%, while the unemployment rate for youth aged 18-30 is
13.3%. Although high, these rates are not so far removed from global averages. Consider the
European Union, where the average youth unemployment rate has hovered at 14.3% for the last few
months of 2019.

But the unemployment statistics for Uganda are misleading. In reality, Ugandans, and especially
young Ugandans, are highly likely to be underemployed, in precarious and non-rewarding work, or in
jobs that cannot offer decent incomes. 83.5% of the Ugandan population aged between 15-29 work in
informal jobs, and that figure is 10% higher for young women than men.

Although informality doesn’t necessarily imply poor job quality, in Uganda, there is a strong
correlation between the two. 41% of the total working-age population is engaged in subsistence
farming, which means that a substantial proportion of the workforce neither generates an income, nor
engages with markets. Overall, the high prevalence of informality skews the unemployment rate,
resulting in an inaccurate reflection of the realities of the Ugandan labour market.

It’s therefore essential to consider the quality of employment and develop interventions to tackle
underemployment and poor job quality. With the majority of Ugandans working in near-subsistence
agricultural or informal, low-productivity household enterprises where jobs are precarious and low-
paying, Uganda’s main challenge lies in responding to the increasing lack of decent jobs.

Working with the Private Sector

Youth in low-income countries have widely been thought to be lacking the skills, competencies and
knowledge to enter the workforce. This belief that the deficiency is on the labour supply side has
resulted in skills interventions – and many of them. But with no clear link to a real job in the labour
market, young people found that opportunities to apply (and earn a wage from) their newly acquired
skills were extremely limited.

Over the last decade, there has been a rapid growth of the Ugandan labour force. More than a million
young people are entering the job market each year in the country. But this has not been met with a
commensurate increase in the number of formal jobs available. Although Ugandan youth are
commonly regarded as highly entrepreneurial – and it’s true that Uganda hosts the greatest number of
young entrepreneurs on the continent – in reality, most youth-run businesses are small-scale and
informal, with little employment-generating effect and a very high discontinuation rate. Like many
low-income countries, Uganda’s economy is dominated by these micro-firms, the vast majority of
which emerge through necessity, rather than opportunity.

The country is facing crucial systemic barriers that limit economic growth and job creation. Chief
among these is an unfavourable business climate, characterised by an often-prohibitive cost of doing
business, and limited access to start-up or scale-up capital.

But the poor quality of basic education also inadequately prepares youth for work, and limited
infrastructure to support business operations and logistics means businesses struggle to engage with
markets. Collaborative action is required by donors working with private sector and government to
stimulate transformative growth, improving the quality and quantity of labour demand, whilst also
linking firm growth to the creation of job openings specifically targeted at youth. Equally, all skills
interventions need to be demand-driven, so that training is responsive and relevant to market needs.

The Challenge Fund for Youth Employment

The Challenge Fund for Youth Employment, implemented by Palladium in partnership with VSO
and Randstad, launched its first call for proposals in Uganda in December 2019. The fund is
prioritising working with private firms in high potential sectors, to improve the functioning of these
markets and upgrade firms in high-potential sector value chains. To avoid ‘skilling for skilling’s
sake’, or indeed, firm growth without a proportionate increase in youth employment, the fund
requires implementing partners to demonstrate a direct pathway to improved productivity and
sustainable job creation.

The fund offers a real opportunity to reframe the discussion and action around youth unemployment
in Uganda. With the working-age population projected to double by 2040, it’s clear that business as
usual will not cut it. The fund welcomes applications from private sector partners that consider
structural barriers to firm growth and are willing to test innovative approaches to create or improve
jobs for youth.

The Challenge Fund for Youth Employment is looking for ideas that provide decent work
opportunities for young Ugandans and include a clear link between labour supply and demand. Read
the Uganda Scoping Report and learn more about how to apply for the Challenge Fund. Deadline
for first round applications is 15th February 2020.