South African entrepreneurs are optimistic and resourceful even as the sector is enduring one of the most difficult economic periods, entrepreneurship developer Seed Academy’s ‘State of Entrepreneurship in South Africa’ report shows.
The report, released on Tuesday, surveyed 1 000 entrepreneurs across the country and explored the theme ‘South Africa: A society in transition’ and what this means for those engaged in entrepreneurial ventures.
“The positivity of entrepreneurs is encouraging, and we have seen that when they are supported, they acquire skills that give them a much better chance of succeeding.
“The granularity of our survey results, combined with our in-depth understanding of the ecosystem, allows for this study to be one of the most highly quoted reports with respect to findings on entrepreneurship in South Africa,” comments Seed Academy director Donna Rachelson.
She underscores that the entrepreneurial ecosystem is tough to navigate, with several entrepreneurs reporting that they do not know how to access available support.
Overall, the survey illustrated that the entrepreneurial ecosystem is sluggish. Revenues are not increasing significantly enough and challenges have remained the same over the past five years, with the added burden of the impacts of power constraints, xenophobia and climate change.
New businesses need to grow rapidly to significantly impact the economy. Entrepreneurship has been recognised, at the highest levels, as necessary to boost economic growth, create jobs in a country with record high unemployment and make the country globally competitive.
Drawing on the findings of the survey, it appears the ecosystem is making incremental improvements year-on-year.
According to Rachelson, the key factors to success for entrepreneurs are the same as last year and include strong personal networks, proper business planning, access to business support services and the ability to present for new market opportunities.
Key challenges have featured in the research findings each year for the five years the survey has been conducted. They include finding customers, an inability to raise funds, wearing too many hats, a lack of guidance, slow sales, customers paying late and the unpredictability of business conditions.
“Our experience at Seed Academy highlights that business focus is key to success,” she says.
“An interesting finding of the research is that 47% of businesses are engaged in business-to-business products and services, business-to-consumer and business-to-government at the same time – thus making market focus very difficult.”
This year, it is apparent that businesses are being severely impacted on by the transitions that are under way in the country’s young democracy. Small to medium-sized enterprises (SMEs) growth is inhibited by various micro- and macroeconomic factors, ranging from power shortages to climate change.
As with 2018, public sector corruption has been flagged as a key risk factor and appears to add costs to SMEs that tender for business.
Rachelson recommends that a multi-stakeholder consultative process be undertaken to improve the entrepreneurial ecosystem – both in terms of the policies guiding entrepreneurs and the current offerings.
“We need greater awareness among entrepreneurs about how to access funding interventions,” says Rachelson.
“Both the development finance institutions (DFIs) and private sector funders need to develop appropriate marketing and have accessible online/digital tools to assist entrepreneurs.”
She adds that entrepreneurs are often too risky for investment by DFIs and there needs to be more accessible funding options for early-stage entrepreneurs who need small amounts of working capital.
Additionally, sector-based interventions need to be tailormade to address barriers to entry, and to achieve real transformation and inclusion of SMEs within the economy.
“If changes are implemented to support entrepreneurs, there will be more new entrants to entrepreneurship as a job choice, and the lines between full-time and part-time entrepreneurs will become increasingly blurred. For this to happen, we need economic stability and a dynamic, enabling environment,” concludes Rachelson.