U2 lead singer Bono—long an advocate of increased aid and policies to fight extreme poverty in Africa through a campaign he created called ONE—surprised some observers when he said in a speech at Georgetown University last year, "Aid is just a stopgap. Entrepreneurial capitalism takes more people out of poverty than aid."
The idea of fighting poverty through entrepreneurship is catching on in South Africa at a time when South Africa is coping with a GDP that grew just 2.5 percent in 2012, compared to an average of 4.5 percent annually from 2002 to 2008—before the global financial crisis. The nation is also suffering from high unemployment among young people, with nearly 29 percent of people aged 25 to 34 unemployed in the third quarter.
South Africa's Department of Trade and Industry and several other government entities have tried to encourage young people to start businesses through the Gro-E Youth Scheme, launched in April 2013. It provides low-interest loans and other services to start-ups launched by young people in the country.
However, the push to mint new entrepreneurs is off to a slow start. A government publication in December quoted an official from the Gro-E program saying that the quality of the applications has been weak—with just two of them approved at the time of the interview. The Global Entrepreneurship Monitor 2012 South Africa Report found that just 2.3 percent of the population is currently involved in running established businesses, the second lowest rate in the world. Just 5 percent of young people aged 18 to 24 were involved in early-stage entrepreneurship in 2012, though in a more encouraging sign, 9 percent of those ages 25 to 34 were part of the start-up scene, the report found.
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CNBC recently spoke with Edith Jibunoh, a development economist and ONE's global policy director, about why the group is increasingly embracing entrepreneurship as a route to fighting poverty in South Africa and in other African nations. She manages the organization's work with institutions such as the World Bank, IMF, United Nations and African Development Bank. Before joining ONE, Jibunoh was the economist in the Office of the Nigerian President, supporting the virtual poverty fund for the Nigerian Millennium Development Goals.
The following is an edited version of CNBC's interview with Jibunoh.
CNBC: Your organization is focused on fighting poverty in Africa and other parts of the world. How does entrepreneurship fit into that mission?
Jibunoh: We've come to realize that aid is just a stopgap. We're not a business organization at all, but part of the solution we've identified to the long-term alleviation of extreme poverty is going to come from identifying opportunities to boost the capacity of people to improve their livelihood. That's going to come through job creation and entrepreneurial activity.
This is so important for Africa—and South Africa, particularly. A large part of the population is youth, and youth unemployment and underemployment is a huge, huge problem. The identification of how these young people can be productively engaged has become such an important issue. There have been linkages between underemployment and young people being willing to join extremist groups. It's amazing that more people are not saying what Bono has said: You can address both peace and prosperity when you give people jobs.
CNBC: Do you see a tie-in between your work and Nelson Mandela's encouragement of social entrepreneurship?
Jibunoh: We always say he was our first boss. A lot of his messaging was really linked to the things that drove the creation of this organization and the work that we do. Social entrepreneurship is so important to development, because it's not focused just on a profit-driven agenda. It looks to engage people productively and improves their livelihoods and also contributes to the development of their countries.
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CNBC: Where do you see entrepreneurial progress taking place in South Africa?
Jibunoh: South Africa has done a lot with information and communications technology (ICT). [The nation has some well-known role models for inspiration, such as Ronnie Apteker, founder of Internet Solutions, South Africa's first Internet service provider.] Technology has really provided African countries with the opportunity to create social entrepreneurial tools that are not just to build businesses for profit but also to change lives.
One of the reasons poverty persists in Africa is because the sector in which most people are employed—agriculture—is not receiving sufficient investment. There isn't enough recognition of the importance of agriculture in the African economy. Instead, the sector has suffered from disinvestment. We have to elevate the importance of agriculture.
Lack of pricing transparency has meant that farmers haven't made the money they should on their goods. A lot of farmers, because of the explosion of ICT, now have access to tools and apps that allow them to sell their goods at the prices they deserve. They can match their yields to what is being demanded.
These things are happening because of new access to technology, especially basic technology. Africa is not at the point where people are sitting there with iPads and laptops. You're finding this explosion of technology that's SMS-based.
(Read more: Can entrepreneurship be taught?)
"One of the reasons poverty persists in Africa is because the sector in which most people are employed—agriculture—is not receiving sufficient investment."
CNBC: How does the picture in South Africa compare to the rest of Africa and the emerging world, in terms of business growth and opportunities for future growth. While GDP per capita has increased the last 20 years, it has not done so as fast as some other developing economies.
Jibunoh: South Africa is suffering from its success. Because it's further along in its level of development, it is better integrated into the global economy. The shocks impacting the global economy have affected South Africa's growth trajectory a great deal. They have a tremendous export market to the rest of the world, to Europe and America. They're suffering because of that faster development they experienced. That said, they're still miles ahead. It's going to take a long time for the rest of the continent to catch up. Nigeria is closely behind in level of growth, but not in the level of development. Where South Africa has a major problem is addressing youth unemployment.
CNBC: Is there an active start-up scene that young people can join?
Jibunoh: A lot of people have very basic levels of education and informal education, so they don't have the skills to do things like budgets, which are necessary for writing a business plan. Investing in basic training for skills that allow people to run businesses effectively is critical. There's a skills problem. Before you start accessing capital, you have to know how to write a business plan. The government has to do a lot of work to help build up the skills of the young people. The last 15 years have been about primary education and getting kids in school. Kids got into school and got the basic education, but they didn't necessarily get the skills.
There are programs like Gro-E that have started to try to address this problem, but I think South Africa has to promote the stronger job creation mechanisms, [which] take a bit longer. They have been trying to invest in agriculture—that's an important job-creating sector—as well as manufacturing and industrialization.
CNBC: Is ONE involved in entrepreneurial programs?
Jibunoh: Our work is about policy, and right now we're focused on agriculture. It is a huge sector for social entrepreneurialism. We're making sure policies support the agricultural sector so they can ensure a supply of jobs is being created. ONE is going to kick off an agriculture campaign as part of the African Union Year of Agriculture at the African Union Heads of States Summit in January 2014. This campaign will encourage African heads of state to make the policy changes and investments in the sector that will promote job creation and sustainability and ensure sustained exits from poverty. There needs to be concerted pressure—for entrepreneurship and job creation mechanisms.
—By Elaine Pofeldt, Special to CNBC.com