The state of entrepreneurship in South Africa
South Africa’s entrepreneurial activity, over the past eight years, has shown vast improvement, however the economy lags behind comparable economies and has not fully utilised the economic potential that is available in entrepreneurial opportunities.
According to Nimo Naidoo, project manager of the Sanlam / Business Partners Entrepreneur of the Year® competition, South Africa has the ability and the resources available to support entrepreneurs, but believes that the country has yet to develop a strong entrepreneurial culture to drive it.
Naidoo describes South Africa’s improvement in entrepreneurial activity as a positive sign but believes that we have not fully met our full economic potential. “According to the 2011 South African Global Entrepreneurship Monitor report (GEM), South Africa has been ranked as 29th out of 54 countries, with its Total Entrepreneurial Activity (TEA) rate of 9.1%, which illustrates growth of 71.7% since 2006. However, South Africa is still below average when compared to other efficiency driven economies.”
She says that contrary to belief South Africa supports a relatively stable environment for South Africans to conduct business. “In terms of doing business South Africa ranks 35th out of 139 countries, according to the 2012 Doing Business Report, and are particularly proficient in various areas of business, which include starting up of a business, dealing with construction permits, getting credit and protecting investors.”
However, Naidoo indicates that despite these favourable conditions South Africa still possesses a high business failure rate. “The GEM report found that 5.6% of South Africans had discontinued their business over the past year. South Africa ranked as the 9th highest country amongst 54 countries worldwide in this regard and although discontinued business may occur for positive reasons, such as retiring and a change in business, the report indicated that people doing so in economies such as South Africa most often cited negative reasons for doings so, which include lack of profitability and funding. Major obstacles potentially hindering growth in this area include education, health, crime and infrastructure. ”
She says because South Africa’s society has a culture that neglects entrepreneurial activities, especially individuals who have failed in the past, individuals are not opting for entrepreneurship as first choice when it comes to career preference. “Over the last five years, necessity driven entrepreneurship has grown by 22.1% and currently accounts for 34.8% of entrepreneurs, whilst 63.45% of entrepreneurs are motivated by opportunities. This a worrying sign since, opportunity-driven entrepreneurs are four times more likely to employ six or more employees than necessity-driven entrepreneurs.”
She says that GEM research revealed that only 16.9% of entrepreneurs have a tertiary education and that 0.0% of entrepreneurs have a masters qualification or higher, which indicates that 83.2% of all entrepreneurs have no tertiary education. “This supports the fact that individuals are choosing an entrepreneurial career out of necessity, and dream of finding a job rather than creating one.”
However, Naidoo points to a few promising signs in the entrepreneurial sector. “Not only has South Africa experienced a 43% increase in female entrepreneurship, but research indicates that South Africans perceive entrepreneurship as a viable business opportunity and have a low fear of failure. However, to translate this entrepreneurial intent it into actual entrepreneurial activity, it is essential that the culture of entrepreneurship in South Africa is promoted.”
