Fast tracking entrepreneurial growth is key to SA tackling economic woes

Entrepreneurs boost economic growth. Entrepreneurship is non-partisan — anyone can become an entrepreneur and even an uneducated person can build wealth via a successful business venture.

Entrepreneurship is the engine of economic growth, so it should come as no surprise to learn that the US is top of the list.

In the US, 6.02% of the population owns their own business and the US is in the number one spot for cultivating entrepreneurship — as per the Global Entrepreneurship and Development Institute (GEDI). In the UK, the number of entrepreneurs has risen by 6.4%, according to LinkedIn research. The UK is number five on the GEDI rankings.

GEDI Data

The GEDI looks at a number of factors, including social and economic infrastructure, abilities and aspirations of the local population, to produce a picture of how each country on the list performs, domestically and internationally.

Unfortunately, when all the relevant factors are taken into account, South Africa is a woeful number 58 on the list.

The SA Economy is Struggling

It’s not been a great year for South Africa. The economy is struggling. The government recently confirmed the 2017/18 fiscal deficit is likely to reach 4.3%, which is the largest deficit since 2009.

A bumper harvest has boosted the economy but seasonally adjusted and annualised figures for the third quarter of 2017 reveal that the economy grew by just two percent, which is a drop of 0.8% from the second quarter.

Last month, S&P downgraded South Africa’s credit rating to full junk status or sub-investment grade.

S&P also downgraded South Africa’s currency rating, citing in both cases “weak economic growth leading to deterioration in public finances beyond previous expectations”.

Meanwhile, Moody’s placed SA under “review”, which allows it to remain in key global bond indices.

It flagged political uncertainty as a major cause of the government’s inability to stabilise its finances and tackle slow economic growth.

SA Needs Entrepreneurs

Faced with such a raft of economic woes, South Africa needs more entrepreneurs. Decisive action is needed.

The SA government needs to create 11 million new jobs if it has a hope of meeting economic growth targets. SMEs are the key to job creation, but without better access to government funding, entrepreneurs will struggle to build businesses capable of generating new jobs.

Expansive regulatory reform is needed to create a more favourable climate for South African entrepreneurship. There also needs to be an increased focus on attracting women entrepreneurs, as research carried out by the World Economic Forum has found that efforts to encourage female entrepreneurship do pay dividends.

Like many African countries, South Africa shows an unconscious bias against women. Women are historically disadvantaged, especially in the finance sector.

Experts suggest better education such as better access to the financial markets via platforms such as MetaTrader 4 would help to give women a better advantage.

For example, female entrepreneurs could receive more favourable interest rates on business loans and a higher tax exemption, which would help to fast-track their businesses.

Looking forward, it is clear that better education, more government funding and leadership from all sectors of government are needed to boost the SA economy.

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