Creating a generation of South African entrepreneurs

Thu, 5 February 2009

Research indicates that unemployment has become the top concern for South African citizens, trumping other issues like HIV/AIDS and crime. Fifteen years after the end of apartheid, the country’s unemployment rate stands at between 27-40% with youth unemployment at even higher levels. In response, government is focusing on enterprise development to boost economic growth, job creation and poverty alleviation.

Inequality

Poverty, created by the inequalities of the past as well as the dynamics of the global economy, remains one of the major challenges facing South Africa. Recent studies show that inequality is widening despite economic growth and that wealth creation policies are having little impact on the poor and marginalised in society.

A lack of employment opportunities and a shortage of suitably skilled individuals is a major contributing factor to poverty. Over the last two decades, the formal economy has been shedding jobs and many workers have been retrenched. In fact, some 55% of the country’s labour force depends on employment in small firms for their livelihood. And with the current global economic crisis, unemployment levels are set to increase.

Critical factor

Enterprise development is recognised worldwide as critical in facilitating economic growth which, in turn, is essential for addressing poverty-related issues, such as unemployment, gender inequality and poor health. Investing in enterprise development can create jobs, stimulate productivity and address social exclusion.

Enterprise development includes investing time and capital in helping people to establish, expand or improve sustainable businesses that contribute to the local economy. This can be through the provision of financial support such as microloans and microfinance as well as infrastructural support such as access to markets and business training.

Empowering women entrepreneurs

The provision of microcredit and microfinance services to women, in particular, can have a significant impact on their position within the household and community.

By removing their dependence on men for financial support, women can take the initiative, earn an income and support their children. This is the aim of SASIX project, the Siyazigabisa Home of Hope's Business Skills Training. The project enables vulnerable women in the Tembisa community to increase their business administration and financial literacy skills and equip them to establish viable business units.

According to the 2007 GEM Report an increasing number of female entrepreneurs entered the South African market between 2005 and 2006, in line with international trends in the growth of women entrepreneurs. Support of these budding businesses is vital for ensuring their success.

Unlocking the potential of SMMEs

The South African government’s enterprise development policy focuses on the provision of support for Small, Medium and Micro Enterprises (SMMEs) and the promotion of Broad-Based Black Economic Empowerment. Unlocking the potential of these SMMEs is key to addressing unemployment because supporting entrepreneurs can facilitate job growth, build personal confidence and stimulate innovation.

The category of SMMEs comprise a range of businesses from survivalist and micro enterprises, which are survivalist in nature and outside the formal economy, through to very small, small and medium enterprises. Government interventions focus on this latter group of very small, small and medium enterprises, which are considered to have the potential for expansion.

The challenge in South Africa is that a large percentage of SMMEs tend to fall within the survivalist category and generally tend not to have the potential for job creation. Even with very small, small and medium sized businesses, there is no guarantee that they will realise their potential for job creation. In addition, a total of 80% of all new businesses collapse within two years in South Africa so emerging businesses need considerable support to enhance their likelihood of success.

Entrepreneurship training in schools

For the last five years, the Global Entrepreneurship Monitor study has identified education and training as the key factor limiting an improvement to South Africa's rate of entrepreneurial activity which is low compared to other developing countries. South African entrepreneurs contribute only 35% of Gross Domestic Product (GDP), compared with 60% in countries like India and Brazil. And although our new curriculum aims to teach entrepreneurial skills, in reality, obstacles such as a lack of resources, skills and confidence among teachers often prevent learners from taking these skills on board.

The South African Institute for Entrepreneurship (SAIE) entrepreneurship teacher training project, another SASIX-listed initiative, provides innovative training materials to enable teachers in the Eastern Cape to overcome just such obstacles. It is an example of best practice through its use of original, creative methodologies that encourage experiential learning, with the aim building a new generation of South African entrepreneurs.

Best practice

SASIX focuses on enterprise development projects that support entrepreneurship education and training, projects promoting mentoring to enable skills transfer and increased business sustainability, and those which address gender inequalities by focusing on women’s empowerment through microfinancing.

With the shrinking of opportunities for employment in large firms and the growth of self-employment, enterprise development is becoming an increasingly important avenue for job creation and economic growth globally. The challenge is to find effective and innovative ways to provide appropriate support services to entrepreneurs to enable their businesses to achieve their potential.