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Financial literacy and youth entrepreneurship in South Africa

Emmanuel Kojo Oseifuah
Department of Accounting and Auditing, University of Venda, Thohoyandou, South Africa
Abstract
Purpose The purpose of this paper is to assess the level of nancial literacy and impact on youth entrepreneurship in South Africa. Design/methodology/approach The paper used both desk research and questionnaire complemented by interview to assess the level of nancial literacy among youth entrepreneurs in the Vhembe District of the Limpopo Province, South Africa. Findings The paper reveals that nancial literacy among youth entrepreneurs in the Vhembe District appears to be above average and contributes meaningfully to their entrepreneurship skills. Research limitations/implications Further research is needed to verify in specic and practical terms, the level and impact of nancial literacy on youth entrepreneurs in the Vhembe District. Practical implications Education and training at both high school and tertiary levels with emphasis on nancial literacy and entrepreneurial skills may have signicant implications for small-, micro-, and medium-sized enterprise development and growth for the youth entrepreneur in general in South Africa. Originality/value The paper is the rst to examine the level of nancial literacy among youth entrepreneurs in the Vhembe District. The paper therefore sets an important benchmark for further research in this area. Keywords Literacy, Youth, Entrepreneurialism, South Africa Paper type Research paper

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African Journal of Economic and Management Studies Vol. 1 No. 2, 2010 pp. 164-182 q Emerald Group Publishing Limited 2040-0705 DOI 10.1108/20400701011073473

1. Introduction 1.1 Entrepreneurship It is generally acknowledged that entrepreneurs, irrespective of their age, are regularly involved in decision-making activities concerning the acquisition, allocation and utilisation of resources. These activities, inevitably, have nancial implications and in order to function effectively, entrepreneurs need to be nancially literate. The 2006 Global Entrepreneurship Monitor Report revealed, however, that poor nancial literacy and inadequate management practices limit entrepreneurial activity among South African youth (Bosma and Harding, 2006). The purpose of this research therefore, is to examine the impact of nancial literacy on youth entrepreneurship in the Vhembe District in South Africa, and hence ll the gap in the current nancial literacy literature. The word entrepreneur, derived from the French verb entreprende, and the German word unternehmen, was coined by the French Economist, Richard Cantillon in the early eighteenth century (Sharma and Chrisman, 1999). These words literally mean to undertake (Cunningham and Lischeron, 1991; Afonja, 1999; Anderson et al., 2004; Hisrich and Peters, 1995). In Cantillons view, an entrepreneur is a person who buys at certain prices and sells at uncertain prices (Casson, 1993; Barreto, 1989). This denition primarily focuses on the element of risk-taking and decisions about resource allocation.

The term entrepreneur was given more prominence in the nineteenth century by the economists Jean Baptiste Say, John Stuart Mill, and Alfred Marshall. Say (1803) used the term to refer to individuals who create value in an economy by shifting resources from areas of low productivity to areas of higher productivity. He argued further that the entrepreneur must possess specialised knowledge and judgement so that he is continually aware of the costs and prices of his products and be able to determine how to compare opportunities. Mill (1848) built upon Says (1803) denition by incorporating a management component to it. He described an entrepreneur as someone who assumes not only the risk of a business venture but also its management. Marshall (1890) developed the term entrepreneur further by combining the resource component of Say and management component from Mills. He claimed that management is a key factor for coordinating the other three factors of production: land, labour, and capital. In the twentieth century, the idea of an entrepreneur as an innovator was established by the famous economist, Schumpeter (1934). He dened an entrepreneur as an innovator who develops untried technology. This denition places emphasis on innovation in the sense of new products, new production methods, new markets, or new forms of organisation. He concludes that wealth is created when such innovation results in new demand. Ever since, an increasing number of scholars and researchers from diverse disciplines such as anthropology (Stewart, 1991), economics (Kirchoff, 1991; Bagshawe, 1995; Nafziger and Terrell, 1996, Nafziger, 2006; Hisrich and Peters, 1995), management (Drucker, 1994; Stevenson et al., 1989), psychology (Shaver and Scott, 1991), sociology (Reynolds, 1991), and technology (Reynolds et al., 1999) have explored the concept of entrepreneur and entrepreneurship. This has generated over a hundred denitions all endeavouring to explain these concepts (Di-Masi, 1999, cited in Adegbite, 2007). For example, Bagshawe (1995) dened an entrepreneur as a person who has the ability to explore, identify opportunities for improvement, mobilise resources, and implement actions to maximise those opportunities. Nafziger and Terrell (1996) viewed an entrepreneur as: . the coordinator of other production resources land and capital; . the decision maker under uncertainty; . innovator; and . the gap ller and input completer. He concluded that an entrepreneur possesses the rare capability of making up for market deciencies or lling the gaps. In the view of Timmons (1990), an entrepreneur is someone who perceives an opportunity to make a prot and who has the ability to set about combining factors of production in such a way that a prot is realised. It is the ability to create and build something of value from practically nothing. Finally, Wickham (2001; cited in Sondakh and Rajah, 2006), perceives an entrepreneur as an individual who lives and functions within a social setting and is characterised by a particular set of actions aimed at the creation of new wealth through the venture. Directly linked to entrepreneur is the word entrepreneurship, commonly referred to as the activity that individuals engage in and which is often characterised by original thought, innovation, and risk-taking in order to create a new business or grow an existing business (Small Business Service, 2002 cited in Sondakh and Rajah, 2006). Some of the relevant denitions of entrepreneurship follows:

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Entrepreneurship is a process where one initiates change through creation and/or innovation (Drucker, 1994). Entrepreneurship is the process whereby individuals become aware of business ownership as an option or viable alternative, develop ideas for business, learn the process of becoming an entrepreneur and undertake the initiation and development of a business (Stevenson et al., 1989). The process of creating something different with value by devoting the necessary time and effort assuming the accompanying nancial, psychological, and social risks; and receiving the resulting rewards of monetary and personal satisfaction. (Hisrich and Peters, 1995). Any attempt at a new business or new venture creation, such as self-employment, a new business organisation, or the expansion of existing business, by an individual, teams of individuals, or established businesses (DTI, 2000).

While the above denitions are slightly different, each contains similar concepts, such as demand and supply, creation of value and wealth, innovation, management of resources, organising skill, risk-taking, and provision of capital, among others. Clearly, these denitions are narrow in the sense that each one covers only one type of entrepreneurship economic entrepreneurship ignoring the other four types: social entrepreneurship, public entrepreneurship, corporate entrepreneurship (intrapreneurship, i.e. entrepreneurship in an exiting business), and cooperatives. In order to include all types of entrepreneurship, this paper adopts the denition of entrepreneurship provided by a scoping study by the Australian Family and Community Services (FACS, 2003). The study dened entrepreneurship as the recognition of an opportunity to create value, and the process of acting on this opportunity, whether or not it involves the formation of a new entity. The basic attraction of this denition is that while concepts such as innovation and risk-taking in particular are usually associated with entrepreneurship, they are necessary but not sufcient to dene the term. This denition captures both different entrepreneurial types (economic, social, public, and corporate) and different industry sectors, whether large or small, new or established. The focus of this paper is on youth entrepreneurship as it takes place in different types of enterprises and sectors in South Africa. 1.2 Youth entrepreneurship Youth are valued possessions of the nation. Without them there can be no reconstruction and development programme. Without them there is no future. Their needs are immense and urgent. Former President of South Africa, Nelson Mandela (May, 1999). The above statement underscores the importance of the youth in any nation. According to the mid-2009 population estimates from Stats SA, the countrys population stands at approximately 49.3 million. Of this, 18.4 million (37.3 per cent) are youth in the age group 15-34 years. This means that nearly two out of every ve persons in the country are in this category. It goes without saying that where the youth are empowered and endowed with the necessary entrepreneurial skills, the future of the country would be bright indeed. To effectively assess the level of nancial literacy among youth entrepreneurs it is necessary to dene the terms youth and youth entrepreneurship. The denition of youth differs widely from country to country due to cultural, legal, institutional, and socio-political orientations. In South Africa, the National Youth Act of 1996 dened

youth as persons in the age group 14-34 years. As 15 years is the age at which young people are permitted formally to enter the labour market in South Africa, this age is used as the lowest level for this study. Schnurr and Newing (1977) dened youth entrepreneurship as:
[. . .] the practical application of enterprising qualities, such as initiative, innovation, creativity, and risk-taking into the work environment (either in self-employment or employment in small start-up rms), using the appropriate skills necessary for success in that environment and culture.

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They referred to the process of the application of these qualities as entrepreneurism, which can result in ventures in the social, political, or business sectors. Chigunta (2002) argues that youth entrepreneurship can be grouped into three main categories, leading to three types of youth entrepreneurs: pre-entrepreneurs, budding entrepreneurs, and emergent entrepreneurs. Pre-entrepreneurs comprise of youth in the age group 15-19 years (teenagers). They are novices and have no or very limited experience in business ownership. In addition they are often in transition from the security of the home or education to the work place and tend to experiment with various activities before some of them attempt to set themselves up in business. Budding entrepreneurs encompass young adults who are in their middle 20s. Unlike the pre-entrepreneurs, this category has some business experience, skills and capital to enable them to run their own enterprises. Finally, emergent entrepreneurs are those in their late 20s, i.e. from 26 to 29 years. These youth entrepreneurs are more mature and are also likely to have accumulated vital experience in business or in other areas of life. For the purpose of this study, youth entrepreneurs are dened as young people from 15 to 35 years old who recognise an opportunity to create value or wealth in an existing or new enterprise, irrespective of the sector. 1.3 Financial literacy and entrepreneurship It is widely accepted that most consumers lack the nancial literacy necessary to make important nancial decisions in their own best interests (Braunstein and Welch, 2002; Perry, 2008). Experts also generally agree that nancial knowledge appears to be directly correlated with self-benecial nancial behaviour (Hilgert et al., 2003). Noctor et al. (1992) dened nancial literacy as: the ability to make informed judgements and decisions regarding the use and management of money. According to the US Financial Literacy and Education Commission, nancial literacy is the ability to make informed judgments and to take effective actions regarding the current and future use and management of money (Basu, 2005). The Organisation for Economic Cooperation and Development (OECD, 2005) denes nancial literacy as:
[. . .] the combination of consumers/investors understanding of nancial products and concepts and their ability and condence to appreciate nancial risks and opportunities, to make informed choices, to know where to go for help and to take other effective actions to improve their nancial well-being.

These denitions suggest that nancial literacy includes increases in nancial knowledge or skills and changes in nancial behaviour (Hilgert et al., 2003; Mandell, 2004). Indeed, nancial literacy affects individuals, households, nancial institutions and the broader economy because it is an integral part of our daily lives and the lack of it has been cited by many commentators as a major reason for falling saving rates

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(Hilgert et al., 2003), mounting consumer debt (Stango and Zinman, 2007), inadequate planning for retirement (Lusardi and Mitchell, 2006, 2007), basis for divorce, mental illness, and a variety of other unhappy experiences (Cleek and Pearson, 1985; Kinnunen and Pulkkinen, 1998), the cause of emotional stress, depression, and lower self-esteem (Wolcott and Hughes, 1999), and low productivity in the work place (Fletcher et al., 1997; Joo and Grable, 2000; Welsch, 1992). The following are some of the key elements of nancial literacy skills and knowledge usually cited in the literature: . Mathematical literacy and standard literacy such as basic numeracy and comprehension skills. . Financial understanding about the nature and forms of money, how it is used and the consequences of consumer decisions. . Financial competence such as the understanding of the main features of basic nancial services, attitudes to spending money and saving, understanding nancial records and appreciating the importance of reading and maintaining them, an awareness of the risks associated with nancial products, and an appreciation of the relationship between risk and return. . Financial responsibility the ability to make appropriate personal life choices about nancial issues, understanding consumer rights and responsibilities, the ability, and condence to seek assistance when things go wrong. Clearly, the importance of nancial literacy cannot be underestimated, because a nancially illiterate person may be unable to budget appropriately to meet expenditures, be unable to identify nancial products or services that meet his/her needs, be unsure how to get and assess independent nancial advice, and nally are more likely to fall victims to abusive and exploitative practices and scams (ASIC, 2003). For example, Bell noted that the furniture and electrical goods sectors in South Africa have been exploiting consumers, particularly lower and middle income earners, by selling maintenance contracts along with lounge suites to the consumer or policies against retrenchment to retirees, and so forth. A number of writers have noted that improving nancial literacy can benet all levels of the economy and will support the nancial services sector; social and economic exclusion will also be reduced; spending power, innovation and competitiveness will increase, and loan defaults will decrease (Currie, 2005). 1.4 Problem statement The study is motivated by the need to determine youth entrepreneurs cognitive ability to understand and use nancial information in the context of the business environment in which they operate. 1.5 Research questions The following research questions were examined: RQ1. Is there a relationship between the level of nancial literacy and educational attainment? RQ2. Is there an association between gender and nancial literacy? RQ3. Are youth entrepreneurs knowledgeable about common nancial terms?

RQ4. What are the determinants of nancial literacy among youth entrepreneurs? RQ5. What are the attitudes of youth entrepreneurs towards nancial matters? RQ6. What is the level of money management behaviour among youth entrepreneurs? RQ7. What is the overall level of nancial literacy among youth entrepreneurs in South Africa? 1.6 Aim of the study The aim of the study is to assess the level of nancial literacy among youth entrepreneurs in the Vhembe District in the Limpopo Province of South Africa. 1.7 Objectives of the study To achieve the aim of the study, the following objectives were pursued: (1) to determine the overall level of nancial literacy among youth entrepreneurs; (2) to identify the determinants of nancial literacy; (3) to assess how youth entrepreneurs manage their nances; (4) to measure youth entrepreneurs numeracy and computer literacy levels; (5) to describe the attitudes of youth entrepreneurs towards nancial matters; (6) to measure the level of awareness of nancial matters among youth entrepreneurs; (7) to assess the relationship between level of education and nancial literacy among youth entrepreneurs; and (8) to establish the relationship between gender and the level of nancial literacy. 1.8 Hypotheses The following hypotheses were tested: H1. The level of nancial literacy among South African youth entrepreneurs is high. H2. There is no difference between gender and the level of nancial literacy. H3. There is a high positive correlation between level of educational attainment and level of nancial literacy. H4. There is a high positive correlation between numeracy level and nancial literacy. H5. There is a high positive correlation between computer literacy and nancial literacy. 1.9 Scope and limitations of the study The study is limited to youth entrepreneurs in the Vhembe District in the Limpopo Province of South Africa. 2. Background to Vhembe District Vhembe District Municipality was established in 2000 in terms of the Municipal Structures Act 117 of 1998. The District comprises four local municipalities: Makhado,

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Musina, Thulamela, and Mutale. It has a population of about 1.2 million in 274,460 households, covers 21,407 km2 of the Limpopo Province, and accounts for about 16 per cent of the Limpopo economy (Vhembe District Municipality, 2005, 2006). Situated in the northern part of Limpopo Province, Vhembe District is boarded by Capricorn, Mopani, and Bohlabela District municipalities in the southern, eastern, and northern directions, respectively. It also shares borders with Zimbabwe in the north and Kruger National Park in the East. The District has a competitive advantage in the areas of agriculture, tourism and mining. Agricultural activities such as fresh fruit production, cattle rearing, eld crops, cotton, commercial and subsistence farming are the major contributors to employment and economic growth of the District. In addition, tourism activities, especially eco-tourism, are playing an important role in the local economy. Table I presents the composition of Vhembe District in terms of local municipalities, geographical area, population distribution, and households. The table indicates that of the total population of 1,199,886 in the Vhembe District, 48.7, 41.1, 6.6, and 3.3 per cent lives in the Thulamela, Makhado, Mutale, and Musina municipalities, respectively. Thulamela municipality, being the largest of all four municipalities in terms of population, lies 70 km east of Makhado and 180 km north of Polokwane (the capital city of Limpopo). Traditionally categorised as a rural area, Thulamela comprises of two geographical areas: Thohoyandou and Malamulele. As in other rural areas, there are a sizable number of enterprises operating in the retail and wholesale trade, construction, catering and accommodation, transport and communications, nance and business services, and community and social services. 3. Theoretical framework for nancial literacy The literature on nancial literacy indicates that there is no standardised measure of nancial literacy (Moore, 2003; Cole and Fernando, 2008). An alternative is to use proxy measures, such as scores or indices based on knowledge level, experience levels, positive and negative nancial behaviours, among others. In this study, the theoretical framework for measuring the level of nancial literacy is adapted from the two-dimensional model developed by the Media Research Consultants Pte Ltd (2005). The model is based on the denition of nancial literacy: the ability of an individual to make informed judgements and take effective decisions in managing their nances. The framework has two dimensions of nancial literacy: they are actions and knowledge. Knowledge focuses on a persons understanding of common nancial terms and products/services. Action involves the use of the nancial knowledge in the following areas: budgeting, investment, nancial planning, keeping of accurate nancial records and the type of bank accounts kept, among others. For a graphic

Municipality Population Vhembe population (%) Estimated number of households Area (km2) Thulamela Makhado Mutale Musina Total 584,568 497,093 78,917 39,308 1,199,886 48.7 41.1 6.6 3.3 100.0 88,952 76,163 11,602 6,277 182,994 2,988 8,548 2,293 7,578 21,407

Table I. Population and households in Vhembe District

Sources: Statistics South Africa; Population Census 2001; South African Health Review (SAHR, 2002)

illustration of this model, see Quantitative Research on Financial Literacy Levels in Singapore, p. 4. (Media Research Consultants Pte Ltd, 2005). 4. Literature review The extant literature demonstrates a strong association between nancial literacy and household wealth creation. In recent years, the results of various research studies have shown that households which demonstrate low levels of nancial literacy do not plan for retirement (Lusardi and Mitchell, 2007), borrow at high-interest rates (Stango and Zinman, 2008), and acquire fewer assets (Lusardi and Mitchell, 2007). Consequently, policy makers in both developed and developing nations have been implementing nancial literacy programmes to facilitate household savings and nancial market participation, with the ultimate goal of reducing poverty and improving welfare. Researches carried out mainly in developed countries have shown that nancial literacy is an important component of sound nancial decision making and can have important implications for nancial behaviour. For example, people with low-nancial literacy are more likely to have problems with debt (Lusardi and Tufano, 2008). They are also less likely to participate in the stock market (van Rooij et al., 2007), and less likely to choose investment products with lower fees (Hastings and Tejeda-Ashton, 2008). The nancially illiterate person is less likely to accumulate wealth and manage wealth effectively (Hilgert et al., 2003; Stango and Zinman, 2007), and less likely to plan for retirement (Lusardi and Mitchell, 2006, 2007; Lusardi et al., 2009). It goes without saying that understanding nancial literacy among the youth is of critical importance for policymakers in our modern society. Cole and Fernando (2008) noted that research on levels of nancial literacy in developing countries remains comparatively low. However, a small number of studies show even lower levels of nancial literacy. The Department for International Development conducted a study in Zambia and found that only half the adult population knew how to use basic nancial products. The same study revealed that that in seven African countries only 29 per cent of adults had a bank account and that approximately 50 per cent use no nancial products whatsoever, not even informal nancial products (DFID, 2008). It is interesting to note that in Asia, an Indian survey found that a majority of labourers surveyed saved by storing cash at home in spite of the fact that they held loans from money lenders at very high interest rates (Financial Express, 2008). Piprek et al. (2004) ECI Africa conducted a study on nancial literacy programmes in South Africa on behalf of the FinMark Trust. The ndings of the study revealed that despite initiatives by the government, the nancial industry, non-prot organisations, the housing sector, and private companies to improve nancial literacy, South Africans remain underserved by programmes offering nancial education (Piprek et al., 2004). The same study showed that there is a high level of confusion about nancial matters, even among fully banked individuals (Piprek et al., 2004). This high level of confusion among the respondents is an indication that there are still problems with nancial capacity building and that there is the need to provide more nancial literacy programmes in the educational system. The Media Research Consultants Pte Ltd (2005) carried out a survey in Singapore to assess the level of nancial literacy among Singaporeans. Financial literacy was measured using three parameters:

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(1) basic money management (budgeting, spending, saving, loans, and credit facilities); (2) nancial planning/retirement planning; and (3) investment know-how. The survey covered 2,023 Singaporeans between 18 and 60 years of age, and was administered through face-to-face interviews. The ndings show that, in general, Singaporeans have fairly healthy attitudes towards basic money management, nancial planning and investment matters. The study revealed further that the majority of Singaporeans save, monitor their spending, and are generally responsible in the use of credit. Most of the respondents also recognised the importance of nancial planning and have done some basic nancial planning. Those with investments considered the risks before investing and monitor their investments. The study found, however, that many respondents do not manage and plan their nances in a disciplined or structured manner. Some do not have a clear idea of how much they need for their retirement nor have they set aside sufcient cash savings to meet emergency needs. A majority of the respondents were also not well-versed on the key features and mechanics of common nancial products such as life insurance policies and unit trusts. There is reason to believe that the majority of youth possess inadequate knowledge relating to nancial literacy. For example, Lusardi et al. (2009) examined nancial literacy among the youth in the USA using data from the 1997 National Longitudinal Survey of Youth. They reported that less than a one-third of young adults possess basic knowledge of interest rates, ination, and risk diversication. This suggests that nancial literacy was low among young people. The study revealed further that nancial literacy is strongly related to socio-demographic characteristics and family nancial sophistication. A similar study was carried out by Beal and Delpachitra (2003) to measure the level of nancial literacy among a sample of rst-year students from the University of Southern Queensland (Australia) across ve faculties. The study utilised logistic regression model to test ve main skill areas: basic concepts, markets and instruments of the nancial markets, planning, analysis and decision making, and insurance. A dichotomous dependant variable was dened by classifying respondents into two groups, high and low achievers. The ndings showed that students with higher nancial literacy scores were more likely to be male, have greater work experience, have a higher income and have a lower aggregate risk preference. While the study showed that students with higher general nancial knowledge and skills were more likely to be studying business, be male, work in a more highly skilled occupation, and have more work experience, the researchers reached the overall conclusion that university students were not skilled, nor knowledgeable in nancial matters and that this would tend to impact negatively on their future lives through incompetent nancial management. Mandell (1997), Huddleston-Casas et al. (1999), Williams-Harold (1999), the National Council on Economic Education (NCEE, 2005), and the Jump$tart Coalition (2005, 2006) investigated nancial literacy levels among US high school students and concluded that they demonstrated a lack of both personal nancial skills and knowledge. Chen and Volpe (1998) conducted a nancial literacy survey involving 924 college students from 13 colleges and that the overall mean percentage of correct scores was just 52.87 per cent. The survey examined literacy across four main areas, investigated the relationship between literacy and the student characteristics, and analysed the impact of literacy on

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student opinions and decisions. They found that those students with a non-business major and who were female, in a lower class rank, under the age of 30 and with little work experience had lower levels of knowledge. The study indicated that these students with less knowledge were more likely to hold wrong opinions and make incorrect decisions. Chen and Volpe (1998) conducted a survey of 924 US college students to examine their personal nancial literacy, the relationship between the literacy and students characteristics, and impact of the literacy on students opinions and decisions. They used a comprehensive questionnaire designed to cover major aspects of personal nance nancial literacy on general knowledge, savings and borrowing, insurance, and investments. The results show that respondents answered about 53 per cent of questions correctly. The study found also that women (under the age of 30) pursuing non-business careers and with little work experience have lower levels of nancial literacy. Those students who are less knowledgeable were found to hold wrong views about personal nance and this low level of knowledge limits their ability to make informed nancial decisions. Cude et al. (2006) examined US college students overall nancial management practices using quantitative and qualitative data from a multi-state research project. The study investigated how college students acquire nancial knowledge and behaviours and the factors that place some students at greater nancial risk than others. The ndings show that parents play a key role in their childrens nancial management practices. The authors concluded that the results provide important insight into nancial education opportunities for students, parents, college administrators, and nancial professionals and educators. Schagen and Lines (1996) conducted a nancial literacy survey of the general UK population but with a particular focus on four groups: young people in work or training, students in higher education living away from home, single parents and families living in subsidised housing. The survey results indicated that most participants were condent in their nancial dealings. The notable exceptions were single parents and students, which is particularly signicant in the light of the rising debt levels of university students in the UK (Graduate Prospects, 2005). Haiyang and Volpe (2002) conducted a survey of nancial literacy among college students in the USA. Their ndings show that women generally have less knowledge about personal nance topics. The same study revealed that gender differences remain statistically signicant after controlling for other factors such as participants majors, class rank, work experience, and age. The authors, however, found that education and experience can have a signicant impact on the nancial literacy of both men and women. They observed further that women generally have less enthusiasm and the willingness to learn about personal nance topics than men do. The Adult Financial Literacy Advisory Group (AdFLAG) undertook a study to determine how to promote better access to nancial education to young people and adults in the UK (AdFLAG, 2000). They concluded that the need for nancial literacy would continue to grow because individuals were expected to become more self-reliant. Schagen and Lines (1996) conducted a survey of nancial literacy in the UK for the NatWest Group Charitable Trust, with particular attention paid to younger people, students, single parents, and people living in subsidised housing. The respondents were asked a variety of questions about their attitudes to buying and saving, money management and condence with dealing with money matters. They were also asked

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questions testing their knowledge of nancial markets and instruments, nancial decision making, problem solving, and planning. The survey indicated that most people were condent with their nancial affairs, though this was lower for some groups, especially single parents and to a lesser extent, students. 5. Methodology Both desk research and a questionnaire complemented by interview were used to accomplish the objectives of this study. The desk research involved a review of relevant literature relating to entrepreneurship and nancial literacy. A structured questionnaire was developed based on previous studies (ANZ Survey of Adult Financial Literacy in Australia: Final Report, 2003; the Media Research Consultants Pte Ltd, 2005). A questionnaire captured information on major aspects of nancial literacy, including mathematical and computer literacy, nancial attitude, nancial knowledge and nancial behaviour of youth entrepreneurs. Data were collected from youth entrepreneurs in the Thulamela Municipality, specically, the Thohoyandou and Sibasa commercial business District (CBD). Out of 39 youth entrepreneurs, 24 (61.5 per cent) were male and 15 (38.5 per cent) were female. 28.2 per cent (11) of the respondents were between the ages of 15 and 25 years, 30.8 per cent (12) were between 26 and 30 years, and 41 per cent (16) were between 31 and 35 years. 6. Data analysis The level of nancial literacy was measured by analysing respondents answers to questions on mathematical and computer literacy, nancial attitude, nancial knowledge, and nancial behaviour using the SPSS statistical package. Respondents demographic data were also analysed. The results are shown in Tables II-XI. 6.1 Demographic data A number of observations can be made from Table II: about two-fths (41 per cent) of the respondents are between 31 and 35 years of age, about a quarter (23.1 per cent) are in the 21-25 age bracket, and about a third (30.8 per cent) are in the 26-30 years age bracket. It can be observed from Table III that of the 13 respondents, 33.3 per cent are employed while 66.7 per cent are self-employed.
Age group 15-20 21-25 26-30 31-35 Total Male 8 8 8 24 Female 2 1 4 8 15 Total 2 9 12 16 39 Respondents (%) 5.1 23.1 30.8 41.0 100.0

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Table II. Age distribution of respondents

Type of entrepreneur Table III. Type of entrepreneur Employed Self-employed Total

Male 9 15 24

Female 4 11 15

Total 13 26 39

Percentage 33.3 66.7 100.0

According to Table IV, approximately 62 per cent have tertiary education, whilst 7.7 and 30.8 per cent have postgraduate and secondary education, respectively. 6.2 Mathematical and computer literacy It can be observed from the data presented in the table that approximately 51 and 61 per cent of respondents, respectively, rated their mathematical and computer ability as better than average. 6.3 Financial attitude According to Table VI, approximately 31 per cent are extremely condent about their ability to manage their own nances while 23.1 per cent are somewhat condent. The remaining 46.1 per cent are either not too condent or not at all condent. The table shows that approximately 72 per cent of the respondents are very interested in increasing their nancial knowledge. 6.4 Financial knowledge The table shows that approximately 72 per cent of respondents have knowledge about interest rates, approximately 51 per cent know about National Credit Act. About
Male Secondary (Grade 8-12) Tertiary (Technikon/University) Postgraduate Total 5 16 3 24 Female 7 8 15 Total 12 24 3 39 Percentage 30.8 61.5 7.7 100.0

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Table IV. Level of education

Male Mathematical literacy Not very good Not good Average Good Very good Total Computer literacy Not good Average Good Very good Total 3 8 8 5 24 6 8 10 24

Female 1 1 6 5 2 15 3 6 5 1 15

Total 4 1 14 13 7 39 3 12 13 11 39

Respondents (%) 10.3 2.6 35.9 33.3 17.9 100.0 7.7 30.8 33.3 28.2 100.0 Table V. Mathematical and computer literacy skills of respondents

Response type Not at all condent Not too condent Somewhat condent Extremely condent Total

Male 4 5 7 8 24

Female 3 6 2 4 15

Total 7 11 9 12 39

Respondents (%) 17.9 28.2 23.1 30.8 100.0

Table VI. Condence in managing ones own nances

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56.4 per cent have knowledge about insolvency, about three-quarters know about value added tax (VAT), and just a third have knowledge about the stock exchange. 6.5 Financial behaviour The table shows that 64.8 per cent of entrepreneurs are thrifty, i.e. they save money whenever they can. The table shows that the majority, 85.3 per cent of the respondents, keep nancial records.
Response type Male 2 5 17 24 Female 3 1 11 15 Total 5 6 28 39 Percentage 12.8 15.4 71.8 100.0

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Table VII. Interested in increasing ones nancial knowledge

Not sure Somewhat interested Very interested Total

Number of respondents Interest rates National Credit Act Insolvency/bankruptcy VAT Stock exchange 28 20 22 29 12

Respondents (%) 71.8 51.3 56.4 74.4 30.8

Table VIII. Knowledge of nancial terms

Response type Very thrifty, saving money whenever I can Somewhat thrifty, often saving money Neither of the above Somewhat spending oriented Very spending oriented

Male 4 12 3 4

Female 5 3 4 2

Total 9 15 7 4 2

Percentage 24.3 40.5 18.9 10.8 5.4

Table IX. Savings-orientation or spending-orientation

Record type Table X. Keeping of nancial records Maintain no records Maintain minimal records Maintain very detailed records Total

Male 4 5 11 20

Female 1 8 5 14

Total 5 13 16 34

Respondents (%) 14.7 38.2 47.1 100.0

Number of respondents Table XI. Financial management skills I I I I budget and track spending read to increase my nancial knowledge contribute to a savings account regularly compare my receipts of purchases to my monthly statement 26 28 22 18

Respondents (%) 66.7 71.8 56.4 46.1

About two-thirds (66.7 per cent) of the respondents do budget and track their spending, 71.8 per cent read to increase their nancial knowledge, 56.4 per cent contribute to a savings account regularly while less than 50 per cent do not compare receipts of purchases against their monthly statements. 7. Findings and conclusion Analysis of the data reveals that the majority of youth entrepreneurs (approximately 71.8 per cent) are in the 26-35 years age bracket and 69.2 per cent have at least an undergraduate degree. Also, over half (51 per cent) of the respondents rated their mathematical literacy as being above average, while 61 per cent rated their computer literacy as above average. More than half of the respondents have an idea about interest rates, VAT, National Credit Act, and insolvency, while just a third (30.8 per cent) have little or no knowledge about the stock exchange. It may be concluded that the level of nancial literacy among youth entrepreneurs in the Vhembe District is above average. However, due to the small sample used for this study, the result cannot be generalised. It is therefore recommended that a more extensive study be undertaken to verify the level of nancial literacy as well as its impact on youth entrepreneurship in the District.
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Further reading Aardt, I.V., Aardt, C.V. and Bezuidenhout, S. (2000), Entrepreneurship and New Venture Management, 2nd ed., Oxford University Press, Oxford. Andres, C. and Salazar, A.C. (2004), Modern challenges of new business creation & entrepreneurship in rural area, paper presented and talk delivered at the Association of Global Business Conference, Cancun, 20 November. Barnett, C.G. (1993), Dening entrepreneurship, unpublished paper delivered at the 7th Annual Conference of Small Business, Johannesburg. Beal, D.J. and Welch, C. (2002), Financial literacy among Australian University students, Economic Papers, Vol. 22 No. 1, pp. 65-78. Bucar, B. and Hisrich, R.D. (2001), Ethics of business managers vs entrepreneurs, Journal of Developmental Entrepreneurship, Vol. 6 No. 1. Burgess, K. (2003), FSA to tackle nancial literacy, in Takumi, T. and Cantillon, R. (Eds), Essai sur la Nature du Commerce en General, Kinokuniya Book Store, Tokyo. Consumer and Financial Literacy Taskforce (2004), Australian Consumers and Money, Commonwealth of Australia, available at: www.ctaskforce.treasury.gov.au/content/ discussion. asp?NavlD4 (accessed December 10, 2004). de Klerk, G.J. and Kruger, S. (2002), The Driving Force Behind Entrepreneurship: An Exploratory Perspective, Swiss Research Institute of Small Business and Entrepreneurship, University of St Gallen, St Gallen. Du Toit, R. (2003), Unemployed youth in South Africa: the distressed generation?, paper presented at the Minnesota International Counselling Institute (MICI), 27 July-1 August. FinMark Trust (2004), Financial Literacy Scoping Study & Strategy Project, Final Report, FinMark Trust, Johannesburg. Grace, H.S. and Haupert, J.E. (2003), Financial literacy, CPA Journal, Vol. 76, p. 8. Hogarth, J.M. (2002), Financial literacy and family and consumer sciences, Journal of Family and Consumer Sciences, Vol. 94, pp. 14-28. Hogarth, J.M., Beverly, S.G. and Hilgert, M.A. (2003), Patterns of nancial behaviours: implications for community educators and policymakers, paper presented at the 2003 Federal Reserve System Community Affairs Research Conference, available at: www. chicagofed.org/cedric/les/2003_conf_paper_session1_hogarth.pdf Hogarth, J.M., Hilgert, M.A. and Schuchardt, J. (2002), Money managers: the good, the bad, and the lost, Proceedings of the Association for Financial Counselling and Planning Education, pp. 12-23. Jennings, D.F. (1994), Multiple Perspectives on Entrepreneurship: Text, Readings and Cases, South Western, Cincinatti, OH. Joo, S. and Garman, E.T. (1998), The potential effects of workplace nancial education based on the relationship between personal nancial wellness and worker job productivity, Personal Finances and Worker Productivity, Vol. 2 No. 1, pp. 163-73. Kapitsa, L. (2002), Youth entrepreneurship policies and programmes in the UNECE member states, paper prepared for Operational Activities, United Nations Economic Commission for Europe for the Youth Employment Summit, Alexandria, 7-11 September. Knight, F.H. (1971), On the history and method of economics, in Stigler, G.J. (Ed.), Risk, Uncertainty and Prot, University of Chicago Press, Chicago, IL. Mason, C. and Wilson, R. (2000), Conceptualizing nancial literacy, Research Series Paper 2000:7, Business School, Loughborough University, London.

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Nieman, G. (2002), The entrepreneurial process, in Nieman, G. and Bennet, A. (Eds), Business Management: A Value Chain Approach, Van Schaik, Pretoria, pp. 57-72. Nieman, G. and Pretorius, M. (2004), Managing Growth: A Guide for Entrepreneurs, 1st ed., Juta, Cape Town. Nieman, G., Hough, J. and Nieuwenhuizen, C. (2003), Entrepreneurship: A South Africa Perspective, 1st ed., Van Schaik, Pretoria. Say, J.B. (1971), A Treatise on Political Economy or the Distribution and Consumption of Wealth, A.M. Kelly, New York, NY. Schoof, U. (2006), Stimulating youth entrepreneurship: barriers and incentives to enterprise start-ups by young people, SEED Working Paper No. 76, International Labour Organisation, Geneva. Stevenson, H.H. (1997), The Six Dimensions of Entrepreneurship, in Birley, S. and Muzyka, D.F. (Eds), Mastering Enterprise, Financial Times Pitman Publishing, London. Stevenson, H.H., and Jarillo-Mossi, J.C. (1990), A paradigm of entrepreneurship: entrepreneurial management, Strategic Management Journal, 11 (special issue), 17-27. Thulamela Municipality (2006), IDP Review, July. van Nieuwenhuyzen, B.J. (2009), Financial literacy as core competency of South African military ofcers: a measurement instrument, unpublished PhD thesis, Department of Public and Development Management, Stellenbosch University, Stellenbosch. Vitt, L.A., Anderson, C., Kent, J., Lyter, D.M., Siegenthaler, J.K. and Ward, J. (2000), Personal Finance and the Rush to Competence: Personal Financial Literacy in the US, The Fannie Mae Foundation, Washington, DC. Wickham, P.A. (1998), Strategic Entrepreneurship: A Decision Making Approach to New Venture Creation and Management, Pitman, London. Widdowson, D. and Hailwood, K. (2006), Financial literacy and its role in promoting a sound nancial systems, Reserve Bank of New Zealand: Bulletin, Vol. 70 No. 2, pp. 37-47. Worthington, A.C. (2005), Financial literacy in Australia, paper presented at AFA ANZ Conference Proceedings, Melbourne, 3-5 July. Web sites www.kmu.unisg.ch/rencontres/band2002/F_04_deKlerk.pdf www.nber.org/papers/w15352 About the author Emmanuel Kojo Oseifuah holds a PG Cert. Adv. Taxation (UNISA), an MSc (Accounting and Finance), CIMA (UK), ACCA (UK), and BA (Hons) in Statistics/Psychology. He is currently teaching accounting, auditing, nance, and taxation at the University of Venda, South Africa. Prior to that, he lectured at the University of Swaziland, and had taught mathematics for the Ministries of Education in Ghana and Zambia. He also held accounting posts at Harley Reed Consultancy (UK) and OA George & Co Certied Auditors (UK). His areas of research include nance, taxation, auditing, and nancial reporting. He has contributed research papers at several national and international conferences related to International Financial Reporting Standards, scholarly publishing in Africa, activity-based costing and HIV/AIDS, nancial management in the public sector, among others. Emmanuel Kojo Oseifuah can be contacted at: oseifuah@univen.ac.za

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