SA Small Business Minister launches Startup Nations South Africa initiative

South Africa’s Small Business Minister, Lindiwe Zulu, today launched the Startup Nations South Africa initiative, a collaborative effort by founding partners, The Innovation Hub, the Industrial Development Corporation (IDC) and the Wits Business School, aimed at contributing towards building a robust entrepreneurship ecosystem and vibrant sustainable entrepreneurship culture.

With the launch of the initiative, South Africa joins a global network of Startup Nations such as Startup Britain, Startup Chile, Startup Malaysia, Startup China, Startup Norway, Startup Australia and more recently Startup Brazil, Startup Vietnam and Startup Korea.

The aim of the global network is to advance the national agenda for entrepreneurship and the creation of a sustainable environment where start-ups and small businesses can meaningfully contribute to the economic and social development of South Africa. As a full member of Startup Nations and Global Entrepreneurship Week, supported by the Kauffman Foundation, this initiative will enable local startup businesses to share best practices and collaborate with other like-minded peers in the global entrepreneurship movement.

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Speaking at the launch event, Minister Zulu said, “The Global Entrepreneurship Monitor (GEM) 2012 annual survey reminds us that entrepreneurship levels in our country are the lowest they have been in three years. The call to action is for all of us to work hard to inculcate a culture of entrepreneurship in the country. We must consciously strive to build a nation of entrepreneurs and not a nation of job-seekers.”

“In the spirit of vukuzenzele,” she added, “our people must seize the economic opportunities presented by our democracy and freedom to build and grow businesses. We see small businesses and co-operatives as critical to creating an economy that benefits all. It is through this intervention that we will be able to defeat the triple challenges of poverty, unemployment and inequality.”

Through the support of the Industrial Development Corporation, The Innovation Hub, and the Wits Business School’s Center for Entrepreneurship; Startup Nations South Africa will focus on creating a national collaboration platform between public sector, private sector, academia and civil society.

“Cultivating entrepreneurship is vital for generating inclusive growth in South Africa. Startup Nations South Africa is an extremely important initiative because it will create the conditions for entrepreneurs to flourish and showcases what can be achieved through collaboration between the public and private sectors, and civil society.” says Professor Steve Bluen, Director and Head of School, Wits Business School.

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According to McLean Sibanda, CEO, The Innovation Hub, “Innovation is critical for the growth of our economy as the National Development Plan acknowledges; startups are important elements of ensuring that innovation reaches the market and start to contribute towards job creation, poverty reduction and competitiveness.”

Startup Nations South Africa also claims to have set about building a trusted knowledge-network of highly connected local and global innovation and entrepreneur thought leaders who will provide strategic guidance on how best to create a national impact and encourage dialogue on entrepreneurship capacity development.

It adds that the Startup Nations South Africa Advisory Board will not only play a mentorship role, but also offer collective insights and thought leadership as part of the capacity building and development process.

Read the full text of Minister Zulu’s speech below:

ADDRESS BY THE MINISTER OF SMALL BUSINESS DEVELOPMENT, MS LINDIWE ZULU, AT THE LAUNCH OF START-UP NATIONS SOUTH AFRICA

10 NOVEMBER 2014 (WITS BUSINESS SCHOOL)

Programme Director,
Wits University Deputy Vice Chancellor, Mr Tawana Kupe,
Fredell Jacobs of Startup Nations South Africa,
Representatives of IDC,
Distinguished guests,
Ladies and gentlemen,

I am privileged to have been invited to speak at the launch of Startup South Africa. As we join other progressive nations around the globe who have embraced this noble initiative, I am confident that it will immensely benefit South Africa and future generations. I have no doubt that the collective wisdom of all partners will empower us to respond appropriately to the many complex socio-economic challenges that confront our nation.

Let us make a solemn pledge that, as partners, we will do whatever it takes to ensure that today will go down in history as one of the most radical interventions that helped tip the scale towards creating an inclusive economy that benefits all. I hope this network will help us draw lessons from experts and experienced policymakers and leaders on what needs to be done to create a conducive regulatory environment for the growth and development of small businesses and co-operatives.
As the Ministry, we remain open and receptive to new policy ideas that will help accelerate the formation of new businesses and sustenance of existing one. This Startup Nations Network is a powerful platform for us to learn what other nations are doing to promote and sustain enterprise development.

As South Africans, we remain concerned that small businesses have an exceedingly high failure rate, and the majority of the casualties are black and women-owned businesses. Statistics tell us that small businesses have only 37% chance of surviving four years and only a 9% chance of surviving ten years. 70% to 80% of small businesses fail in their first year, and only about half of those who survive remain in business for the next five years. We are confident that this network will help to reverse this trend through insightful research and analysis.

Programme Director, it is important to note that because of the different needs of the small business sector, government’s policy intervention will have to take into account this diversity. Part of the challenge as noted by the academic and research fraternity is the lack of empirical information about South Africa’s SMMEs and co-operatives. This empirical information will be critical if we are to effectively discharge our mandate to assist the establishment, growth and sustainability of SMEs and cooperatives. We look forward to exchanging ideas and data that will guide our policy interventions.

While advanced countries invest significantly in research and development functions, South Africa, by contrast contribute relatively small sums to research and development in the field of small business development. We need to aggressively invest in this area and address the paucity of relevant information on SMMEs. I am positive that such investments can yield enormous benefits in the long term.

We see small businesses and co-operatives as critical to creating an economy that benefits all. It is through this intervention that we will be able to defeat the triple challenges of poverty, unemployment and inequality. It is this partnership that holds the key to unlock our country’s economic potential, thus affording us a golden opportunity to launch a sustained onslaught on poverty, unemployment, inequality and underdevelopment. Indeed, all of us must accept that we carry joint responsibility to redistribute the wealth of our nation.

We are committed to working together with all partners who understand their roles in the ongoing reconstruction and development of our nation. We carry a responsibility to formulate concrete and practical ideas that will assist government to respond effectively to the challenges that confront small businesses. Indeed, this partnership must assist us with the building blocks for a robust and sustainable policy environment that places SMMEs at the centre of accelerated economic growth and development.

The President established the Ministry for Small Business Development as part of government’s commitment to place the economy and job creation at the centre stage. Government is convinced that through this intervention, we will be able to unlock economic opportunities and thus achieve inclusive economic growth and sustainable employment, particularly for women, youth and people with people with disabilities.

Government is aware that to address the current problems confronting our economy and to reverse the unemployment rate will require a radical policy shift that recognises the urgent need to invest in small and medium businesses because they are key drivers of economic growth and job creation. We are convinced that if we are to make an impact on the job creation front, the common problems faced by SMMEs must be addressed. We will pay focused attention on providing effective support to small businesses. Our ultimate goal is to reduce obstacles to doing business wherever possible and to expand access to economic opportunities for historically excluded and vulnerable groups.

Research by Global Entrepreneurship Monitor shows that small businesses are significant contributors to job creation, creating more than 50% of all employment opportunities in South Africa. Currently, the SMME sector contributes more than 45% of the country’s GDP. SMMEs have the potential to create and expand employment opportunities, develop entrepreneurial skills and enhance market opportunities.

A healthy SMME sector has the potential to make a massive contribution to the economy by creating more employment opportunities and generating higher production volumes. In 2007, the contribution of SMMEs to GDP was 35%. Targets for future contributions to GDP range from 60% to 80% over the next 10 to 15 years. SMMEs have the potential to increase exports and introduce innovation and entrepreneurship skills.

Our point of departure is that small businesses can be the backbones of any economy and the main driver of economic growth, poverty reduction and job creation. However, the sad reality is that South Africa has one of the lowest rates of entrepreneurship activities in the world. The Global Entrepreneurship Monitor (GEM) 2012 annual survey highlights that entrepreneurship levels in the country are the lowest they have been in three years. Entrepreneurial activity is an important indicator of the future of SMMEs, since the small business owners of tomorrow are today’s entrepreneurs.

Less than 14% of South Africans plan to start a business in the following three years. This is 13% below the global average of efficiency-driven economies category that South Africa falls into. Other countries that fall into the category include Malaysia, Argentina, Mexico and South Africa’s BRICS partners Russia and Brazil.

The entrepreneurial climate in South Africa is dire, with fewer locals taking the risk of starting a business, or even thinking about doing so. Early stage entrepreneurial activity took a 20% knock in one year, dropping to 7.3% in 2012. Compared to the rest of Africa and the world, South Africa is said to have the lowest enterpreneurship activity. This means our country is yet to see the true value and benefits of SMMEs.

Together, we must work towards building a culture of enterpreneurship in the country. We must consciously strive to build a nation of enterpreneurs and not a nation of job-seekers. We are painfully aware that fostering a culture of entrepreneurship is not something that blossoms over a short period of time. It takes a long time to develop and flourish.

In other words, if we create awareness today about entrepreneurship as well as train others to start a business venture, it does not mean tomorrow all these people would start and run successful enterprises. We must also be mindful that not every person is destined to become an entrepreneur. Startup South Africa must contribute to the task of building a nation of entrepreneurs.

We must promote entrepreneurship as a viable career path as we continue to build a nation of entrepreneurs. We must inculcate an understanding that starting a business is not something you do because you have run out of options and you find yourself unemployed. Enterpreneurship must be a conscious and solid decision.

Given the current state of unemployment and poverty in our country, the question is not whether we should encourage our people to look in the direction of entrepreneurship, but rather, can we afford not to? I call on all our people to seize opportunities created by the 1994 democratic breakthrough to build businesses that will create a better life for themselves and their fellow citizens.

I urge players in industry, academia and civil society to join hands with Startup South Africa in a local partnership to unleash an entrepreneurship revolution. Together, we can promote and advance entrepreneurship capacity development. The call to action is for all of us to work hard to inculcate a culture of entrepreneurship in the country. In the spirit of vukuzenzele, our people must seize the economic opportunities presented by our democracy and freedom to build and grow businesses.

We must pursue an aggressive entrepreneurship drive and create an enabling environment that will make it easy for South Africans, particularly the youth, to start and sustain their businesses. We will continue to look up to our partners to help us reignite the spirit of entrepreneurship that was so cruelly exterminated by apartheid, but which refused to completely surrender as pockets of excellence remained in the form of people like Richard Maponya and Sam Motsuenyane.

Enterprise education curricular reform at various levels of training, including Further Education and Training (FET) and university is needed to inculcate the spirit of entrepreneurship within the education system. We have already begun a strong relationship with FET colleges through. We want to accelerate this effort throught the Startup network because we believe that our interventions should have strong industry linkages.

Over the last 20 years, the South African government has provided many forms of support to SMMEs ranging from policies, strategies and programmes. I have consistently argued that there is no need for new policies. Since 1994 a wide range of policies have allowed black South Africans to participate meaningfully in the economy, but more still needs to be done to accelerate black enterprises into the main economy.

As we reflect back and assess these interventions, I can assert without any fear of contradiction that what we need is effective and practical implementation of existing policies and strategies. After twenty years, we are now able to identify what is possible for SMMEs’ development.

The country’s high rate of unemployment and extreme inequality call for bold and far-sighted interventions. We are of the firm view that supporting the development of micro, small and medium-sized enterprises offers an important vehicle for sustainable social and economic inclusion as well as national cohesion.

The government, with its regulatory and economic policies, including provision of infrastructure, notably energy, is going to be the greatest role player and facilitator for innovation and entrepreneurship in South Africa. Easing the regulatory burden and reducing red tape is going to be key if we truly want to unlock the economic and job creation potential of SMMEs. The slow business registration process, late payment of small businesses, licensing procedures and small business taxation are some of the issues.

We will continue to do the regulatory impact assessment and regulatory simplification, targeting relevant government personnel and departments, in all three spheres of government. Our ultimate goal is to reduce obstacles to doing business wherever possible and to expand access to economic opportunities for historically excluded and vulnerable groups.

Working together, we can inculcate a culture of enterpreneurship in the country.

I thank you