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A recent Impact Report by the Aspen Network of Development Entrepreneurs (ANDE) shares stories and lessons about small and growing businesses (SGBs) in emerging markets. With a focus on South Africa, the research found that there’s a need for a greater focus on ecosystems, skills retaintment, and female empowerment.
Since 2009, ANDE has helped identify crucial hurdles facing startups, female entrepreneurs and market linkages. More importantly, it presented strategies aimed at fixing these inefficiencies. Bridget Fury, SA chapter director of ANDE South Africa shares the significance of the company and its vision:
“There was no roadmap when we started, yet we’ve created a network focused on collaborative conversations about the most effective ways to support small and growing businesses. And, we look forward to being a major catalyst for development impact in emerging markets within the next five years.”
The report found that, in South Africa, an estimated 91% of formal businesses are SMEs which account for more or less 55% of the GDP and 61% employment. Having said that, the country faces a high failure rate among startups pointing out that only 2% of South Africans own businesses that have been established for more than three and a half years.
The report also notes that while the South Africa’s National Developmental Plan hopes to create 90% of jobs through SGBs by 2030, today the country has one of the lowest rates of entrepreneurship in the world. The report shares three recommendations for the future of the sector:
Focus on local entrepreneurial ecosystems
ANDE believes that local ecosystems should be the focus of entrepreneurial development efforts. Beyond individual investment or support to businesses, there should be a more systemic approach focused on specific sectors within subnational regions. In order for SGBs to thrive, they need to rely on leveraging metropolitan partners, such as banks, local educational institutions, entrepreneurial support organisations and government. As entrepreneurs are successful and become investors themselves, they will help to create thriving marketplaces and an overall improved local economy.
Cultivate middle management talent
Hiring and retaining top talent is a challenge for any business, but especially in emerging markets where businesses often cannot afford the talent they need to grow. The sector should invest in education and training initiatives to develop middle managers who will create a steady workforce, and as a result strong, sustainable businesses.
Embrace a gender lens
Female entrepreneurs face cultural and structural barriers that male entrepreneurs do not. According to the report, early stage ventures with women on their founding teams are less likely to have attracted equity investment but more likely to be profitable than ventures without women founders. Having a gender lens — considering how female entrepreneurs are supported by and participate in companies—will create social impact and increase investors’ bottom line.