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The most recent Global Entrepreneurship Monitor (GEM) report shows that total early-stage entrepreneurial activity (TEA) in South Africa remains “a matter of grave concern”.
The GEM’s TEA metric measures the participation of individuals in early-stage entrepreneurial activity and conveys the percentage of the adult population between the ages of 18 and 64 years that is in the process of starting a business or has recently done so. Although the GEM’s measure of TEA shows that South Africa’s rate in 2011 (9.1%) remained fairly constant (8.9% in 2010), this rate was, again, far below the average of comparable economies around the world.
In terms of the BRICS countries, the GEM puts TEA for Brazil and China at 14.9% and 24% respectively. India did not participate in the GEM study for 2011, but it was already at 10.4% in 2006. It could be worse though, Russia remains the lowest of the BRICS at 4.6%.
South Africa is ranked the second best economy in sub-Saharan Africa for doing business by the World Bank, but notes that the country faces significant challenges in terms of electricity access and cross border trade.
Septi Bukula, Director of the 2012 International Small Business Congress (ISBC), believes that the biggest problem facing entrepreneurs in South Africa is actually market access. “The structure of the South African economy, with the dominance of large firms in virtually all sectors of the economy, is a major barrier for entrepreneurs, which is why strong competition policy is a necessity. Other challenges include late payment and, in some instances, a lack of appropriate financing mechanisms. Entrepreneurs and SMEs also face internal challenges due to weak financial management.”
While the Government already offers a number of support programmes aimed at small businesses, continues Bukula, more needs to be done. “First and foremost, the education system needs to be steered much more in the direction of inculcating a spirit of enterprise and entrepreneurship among learners at all levels. The government also needs to work relentlessly on creating an environment where it’s easy for entrepreneurs to start, grow, downscale or close a business. A culture that is more welcoming of entrepreneurship and entrepreneurs needs to be developed through measures such as celebrating entrepreneurial success.”
“From a macro-economic point of view, governments need to create a monetary policy that ensures a low and stable inflation environment, a stable exchange rate, and affordable interest rates. The economy should also produce the right kind of skills – both technical and entrepreneurial.”
Bukula’s views are echoed in the GEM report.
Bukula advises would-be entrepreneurs to look for business ideas within their own communities. “Ask yourself — what problems are people facing? What solutions do they need?
The ISBC is a practical way in which entrepreneurs can enhance their likelihood of success by interacting with experts in the field, and networking with like-minded individuals.
The International Small Business Congress (ISBC) will be held in Johannesburg between 15 18 September this year. It will be the first time that the congress is held on African soil and poses a rare opportunity for South African entrepreneurs to engage with local and international experts in their fields.
Catherine Swift, Chairman of the Canadian Federation of Independent Business (CFIB) and the international President of the ISBC, explains that the congress is a unique international forum for discussion of public policy and practices to promote small business domestically and in a global context.
“The fact that congresses are attended by such a wide variety of participants — policy makers, advocates for small business, academics, government representatives and business owners – provides a great opportunity to share experiences about which small business policies and practices have worked well — and which have not — in the many ISBC member countries around the world. The focus of ISBC has always been very business-oriented, such that participants will come away with practical ideas to apply in their domestic economy.”
According to the GEM report, South Africa has a nascent entrepreneurship rate of 5.2% and new company activity rate of 4.0%. More worryingly, given that the prevalence rates for established business owner managers remains extremely low at a rate of just 2.3% in 2011, there seems to be a pressing need for all those involved in entrepreneurship – from SMEs to government bodies – to come together to re-commit themselves to fostering growth in this important area.