What measures need to be taken to improve entrepreneurship levels in South Africa?

The latest South Africa Global Entrepreneurship Monitor (GEM) 2014 revealed that entrepreneurial activity in South Africa is not sufficient, and is not in line with other sub-Saharan African (SSA) countries, nor the rest of the world – despite the level of activity increasing marginally over the last 10 years.

While the country has a good infrastructure and banking system, both of which are enablers of entrepreneurship, South Africa is faced with many other constraints hindering the growth of entrepreneurial activity.

South Africa’s largest problem is unemployment – officially reported as 26.40%. It is however believed that this figure is largely understated as it doesn’t include the percentage of the population underemployed – earning very low wages – as well as the discouraged unemployed workers who have stopped reporting their unemployment status, and are therefore not included in the official statistics. It is therefore estimated that the unemployment rate could be as high as 45%, and youth unemployment even higher.

Over the last few years, the private sector’s employment levels have not grown, each year either remaining at the same level, or shrinking. In order to improve unemployment levels there needs to be a call for the sector to become more involved with initiatives contributing towards growing the pool of interest in entrepreneurship.

While Government has implemented several initiatives to improve entrepreneurship, the most successful have been supported by only a few select private companies. Enterprise development and entrepreneurship must therefore be seen as a key area that can unlock growth.

When considering a statement by Small Business Minister Lindiwe Zulu on the aspirations for the Ministry of Small Business Development – “All of us must accept that we carry a joint responsibility to re-distribute the wealth of our nation” – it is hoped that civil society and Government will consider ways and means to ‘crowd-in’ the business sector’s considerable resources, skills and capacity to foster sustainable development.

There are six fundamental policy, legal and regulatory tools which Government can make use of to ‘crowd-in’ and engage the private sector:

  1. To celebrate, encourage and foster entrepreneurship – both commercially and socially – as one of the most noble human endeavours of all. This is the core to the reasoning behind the Sanlam / Business Partners Entrepreneur of the Year® competition, and during the competition’s 27 years existence; we have strived to promote entrepreneurship as a viable, and rewarding career choice.
  2. Develop a SME-friendly, and business in general, enabling environment with fair, clear, stable and predictable policies, laws and regulations uniformly implemented across the different tiers of Government as found in most countries. This will mean that the private sector is protected and won’t be surprised with new regulatory compliance issues.
  3. Foster, encourage, regulate and police competition between businesses, with significant sanctions being enforced for uncompetitive behaviour.
  4. Reduce the proverbial red-tape which often places onerous burdens on entrepreneurs to register businesses, obtain business/trading licences, obtain tax compliance/clearance status, to list a few. Such compliance can discourage individuals from pursuing, or continuing, entrepreneurship as a career due to all the red tape.
  5. With governments being the single largest purchaser and consumer of goods and services in most countries – South Africa being no exception – Government can utilise the power of procurement to create markets for SMEs, ensure local community participation and benefits, and generally shape the behaviour of business as good corporate citizens.
  6. Modernise, improve and build infrastructure as these projects will employ and upskill many people, thereby creating skills and an infrastructural platform which will facilitate economic development in a competitive world. The same infrastructural projects would provide additional business opportunities for SMEs.

If we can increase the number of intentional entrepreneurs in South Africa (11.8% of South African adults in 2014 had entrepreneurial intentions vs. 58% in sub-Saharan African), as well as our nascent entrepreneurial rate of 3.9% (vs. in sub-Saharan African rate of 14.1%) for those that have taken steps to start a business, we can fill the entrepreneurial pipeline, and aid them to become new entrepreneurs, and later on, established entrepreneurs.

If the business environment is enabling – and the mentioned six points are being adhered to by civil society, government and the business sector – the failure rate and number of discontinued businesses will decrease as these entrepreneurs would be being nurtured, and not left to their own devises.

By implementing these six measures in a real and collaborative way, it will assist in lowering the levels of unemployment, poverty and inequality in the country, as well as aid in improving South Africa’s total entrepreneurial activity numbers.

*Commentary by Sanlam / Business Partners Entrepreneur of the Year® competition spokesperson, Christo Botes.

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