The State of Entrepreneurship in South Africa: Solutions and Recommendations

two-roads-hdr_00437011

The following are some of the recommendations now how to remedy and create a culture of thriving entrepreneurship in South Africa. This list is not exhaustive, there are other recommendation:

Education:

  • Entrepreneurial education – when offered – is unlikely to reduce/remove the deficit created by having a poor basic education.
  • Entrepreneurship training and support should not be training for the sake of training. Impact of the training should be assessed. The impact should be monitored and measured. Without that we won’t make any progress supporting entrepreneurs and businesses.
  • Relatively low number of individuals entering (and even lower completing) tertiary education. This needs to be addressed.

Market dynamics:

  • Tight vertical integration of existing businesses makes it difficult for new firms to start.
  • Big businesses essentially make it extremely difficult for small businesses to engage with them. The vendor registration processes is time-consuming and are complex and small businesses are expected to provide so much documentation. They are being treated like big businesses and there is no recognition of the cost of this compliance (both in time and real cost) to a small business. The compliance process could take up to 8 months just to complete. Corporates work with checklists and are driven by risk compliance people that have little or no understanding of the difficulties faced by small businesses.
  • Up the value chain: big players dominate which leaves little room for new entrants. The competition is doing its best to curb monopolistic behavior, however more could be done to result in reasonable bank charges, telecommunications costs etc. This is a process and over time the desired results should be visible.
  • Energy, transport, financial and communication markets too regulated – increased costs to small businesses and also reduces the flexibility for small businesses to find niche markets.

Culture and social norms:

  • Banks are not open to funding people who have previously failed in business attempts.
  • Entrepreneurship is a mindset. South Africa, in general, does not have an entrepreneurial mindset. Vast majority of South Africans have the mindset of an employee.
  • Need to start young, at primary school. Schooling needs to encourage imagination and creativity. Expose young children to entrepreneurship based on activity.
  • Entrepreneurship at school level should not have an academic focus. EMS as a school subject is not the same as entrepreneurship education.
  • Government has hyped entrepreneurship to such a level that people with no more than a basic idea believe themselves to be entrepreneurs. However a number of ideas have not got the economic right to live.
  • It is an odd phenomenon but despite (on paper) South Africa’s regulations being more onerous than in the USA, for example, they are much less rigorously enforced. In SA if your kitchen is not spotless you will have some time to rectify it. In the USA they will close you down very rapidly. So there is a freewheeling culture that is conducive to economic experimentation. This gives businesses the time to become compliant but in the USA you need to comply before opening your doors as the inspectors will be there in 48 hours to shut you down.

Government policy:

  • Legislation around the hiring and firing of staff scares many small businesses off from hiring staff. Once companies hire staff, it is very difficult to let them go if the business cannot afford them. Labour legislation needs to accommodate the up- and downswings in small businesses and the need to be able to hire and fire due to business reasons.
  • With labour the key issues are the minimum wage and lack of productivity. Policies either need to be put in place to stop dumping or employers need to be allowed to reduce the minimum wage. For example: with massive imports on textiles, small businesses cannot compete. The choice is either to shield and protect industries, or reduce wages to be competitive. If neither of these happens, businesses will be forced to close.
  • Productivity is probably the key labour issue and this goes back issues with poor quality education. Employers, potential employers and employees are all being let down by the state of education in South Africa. Under-skilled labour and low productivity limits the competitiveness of business.
  • BEE is often more about redistribution i.e. share issues. Focus should be on skills development i.e. supply chains with links into the townships and rural areas. More beneficiation should be done in mining towns where small businesses are linked to big mining companies in the location.
  • Government policies still have a ‘large-firm bias.’ The introduction of the Ministry of Small Business Development is a step in the right direction. Sufficient budget should be allocated to this Ministry so that it can be able to implement more projects that will have a positive impact on the economy.
  • CIPC needs to improve on its business registration systems. This is step one of business and how entrepreneur experience CIPC will either encourage or discourage them in the entrepreneurship journey.
  • Procurement policies needs to be transparent and need to focus on small business participation in the supply chain.
  • Improvement in cross-border trade focusing on reducing documentation, costs and time.
  • Priority fees offered to large organisations seen as impacting on small businesses’ ability to access physical infrastructure at a competitive price.
  • Questions related to cost of telecommunication (particularly in comparison to other African and international competitors).

Business support:

  • Business support needed in smaller cities and towns to spread the assistance.
  • Significant amount of support available in major cities such as Johannesburg, Durban and Cape Town; however, the support is often uncoordinated and does not specifically target one of the three business types (namely necessity, opportunity, innovation).

Financial support:

  • Banks do not lend at competitive rates – interest costs therefore extremely high.
  • Not enough access to small loans with technical support. Due diligence sometimes hinders entrepreneurs from obtaining first round funding.
  • There is a considerable amount of funding available. However accessing the funding is difficult and time-consuming as every funder has a different system, many requiring numerous (and differing) forms and requirements. There are so many unnecessary hurdles to accessing funding.
Advertisements

About Roche Mamabolo

Entrepreneur, Author, Dad. Passionate about Innovation and Creativity, Books, Poetry, Traveling, Theatre, Art, Music.
This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s