Entrepreneurial data isn’t all doom and gloom for South Africa

13 June 2017 by Christo Botes

South Africa has recorded one of its lowest levels of entrepreneurial activity since 2002, according to the recently released Global Entrepreneurial Monitor (GEM) South Africa report 2016-2017. And with such a finding, it is easy to become pessimistic about the country’s prospect of ever improving its levels of entrepreneurship - and all the job creation, wealth creation, and prosperity that goes with it.

When looking at the recently released GEM report, South Africa has consistently scored below its peers, and this year ranked 52nd out of 65 participating countries for entrepreneurial intentions – which dropped by more than a third (from 15.4% to 10.1%) when compared to 2013 and almost halved when compared to 2010.

While the low entrepreneurial intention for South Africa is concerning given that South Africa’s unemployment rate is at a record high of 27,7% since 2003. Rather than allow this grim statistic to feed into the current gloomy mood hanging over the local economy, South Africa, and its decision makers should be doing what entrepreneurs do – which is to look for opportunities where others see problems, to go into action where others fall into despair, to think differently and to keep trying new things.

Recent findings from the report which showed that only 37.9% of South Africans believe they have the skills required to start a business, compared to the Africa region average of 58.6%. Furthermore, only 6.9% of entrepreneurs in 2016 were engaged in early-stage entrepreneurial activity (TEA), and of these entrepreneurs, the majority (58.7%), expect to create between one and five jobs within the next five years.

These figures show that we have too few entrepreneurs, and of those we do have, too few are of the job-creating kind and too few survive longer than three and a half years (2.5%). But, the GEM data on South Africa’s economic peers also shows that it is possible to do much better than our current position as the Africa region average for TEA is 17.6%, with an established business ownership rate of 11.9%.

With such clarity, the industry needs to focus on what should be done about South Africa’s entrepreneurial problem. While only 6.9% of adults are involved in starting up a business, this is by no means an indication that South Africans have turned their back on entrepreneurship, especially as this figure has typically hovered around 7% during the years.

Quite the contrary, the GEM report contains a very hopeful set of figures when it comes to South Africans entrepreneurial mind-set. No fewer than 72% of South Africans believe that entrepreneurship is a good career choice, placing the country 15th out of the 65 participating countries. And 78% of South Africans accord a high status to successful business people. In other words, South Africans believe it is attractive to be an entrepreneur.

What these findings show is that additional resources shouldn’t be spent on raising entrepreneurship awareness as this job appears to be done. Rather, the nub of the problem is the hard skills needed to build something as complex as a business.

The clear answer to this is a solid basic education, from school level, which teaches strong numeracy and literacy skills. However, South Africa’s current education system is leaving many without basic skills so they are unable to teach themselves on the job as entrepreneurs do, thereby meaning many are unprepared for survival in the business world.

Thereby, if we are to solve South Africa’s low levels of entrepreneurs, we need to first solve the education problem. Government, civil society, labour, and business must work together if any significant progress is to be made.

Furthermore, the private and public sector need to relook the neglected National Development Plan which contains many of the requirements for the growth of entrepreneurship, namely clear policies, improved infrastructure, reduction of red tape, protection of competition and strategic use of government procurement. If the fundamentals of NDP are implemented and basic education improves, entrepreneurship levels will rise, albeit slowly.