Entrepreneurship has been hailed as the key to South Africa’s economic recovery – and the good news is that all signs point to it being on the rise.
According to the Global Entrepreneurship Monitor (GEM) report 2021/2022 released by the Stellenbosch Business School, there has been a dramatic rise in early-stage entrepreneurial activity among South Africans between the ages of 18 and 64 with “early-stage” defined as “setting up a business” or “operating a business for less than three years.”
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Claire Klassen, consumer financial education specialist at Momentum Metropolitan, says that the emergence of this new wave of entrepreneurial, micro-entrepreneurial and side-gigging activity is borne from necessity.
“In the wake of Covid-19, South Africa’s unemployment rate increased significantly, as many businesses were forced to close or retrench staff. Youth were hardest hit, as they tended to be overrepresented in sectors ravaged by the pandemic, such as the service, hospitality and retail industries. With less work experience under their belts, they were often the first out the door when companies made job cuts.”
Klassen says that South Africans are inherently resourceful and with earning an income critical to survival, many started to look at new avenues to make ends meet. Interestingly, the GEM report also assessed social attitudes towards entrepreneurship, finding that 81,8% of respondents felt that entrepreneurship was a good career choice, while 20% of those who were not in business had entrepreneurial intentions.
“While this is encouraging, five out of seven small, medium and micro enterprises (SMMEs) in South Africa fail within the first year. We need sufficient runway to see this current rise in early-stage entrepreneurial activity result in tangible economic benefit, says Klassen. “We’re in a window period of opportunity, and it’s make or break time.”
So, what resources are available to budding entrepreneurs that will help position them for success? Klassen offers several tips for those considering starting their own business or side hustle.
Get financially savvy
Klassen says that it’s important to have good financial knowledge and an understanding of what is involved in running a business. “A pot of savings is critical to cover essential business start-up costs, as in an emergency or ‘buffer’ fund that will help ensure the lights stay on when your business goes through a slump.”
There are free online tools that will help boost your financial knowledge. Making it with the Majolas is a free, zero-data online financial literacy course, with its latest edition focused on entrepreneurship.
“It teaches key financial concepts that are essential for entrepreneurs to understand, such as how to draw up a business budget, tips for negotiating with suppliers and the importance of compiling a solid business plan – all packaged in an engaging, easy-to-follow storytelling format,” explains Klassen.
“Metropolitan also hosts a Facebook group, MetroKickStarz, which is dedicated to helping young, budding entrepreneurs through its financial education programme.
“I would recommend that aspiring entrepreneurs join this community, which provides them with the space to interact, share ideas and access valuable knowledge and other resources for free,” recommends Klassen.
She adds that it is vital that entrepreneurs determine their personal as well as business budget, and do not mix the two. “Seeking the advice of a financial adviser will help you make better decisions and protect your business,” she advises.
Learn from those who made it
Klassen suggests that those wanting to start their own business research similar companies or ventures that have been successful. “It’s important to understand why they work; what sets them apart from their competitors and what they do well – or not so well.
“Find out more about the founder and make a study of their habits. Do they believe in continuous learning? Perhaps there are certain principles or a philosophy they live by, which guide them. Understanding what is involved in successfully starting and running a company – and the small daily habits that set you up for success – will make a significant difference in the trajectory of your own business,” she says.
Klassen adds that there are free conferences and networking events relevant to specific industries; a quick online search will enable you to identify what is being hosted in your community. “Attending these events will provide you with an invaluable opportunity to network and learn from experienced business leaders.”
The public sector has made available several initiatives to benefit business owners. “Visit the Industrial Development Corporation (IDC) website or the Small Enterprise Development Agency (SEDA) website to apply for business funding,” suggests Klassen.