RAEL LEVITT: Entrepreneurs most need a government that keeps out of their way

The structural effects of the Covid-19 pandemic on the economy and businesses are starting to become clear. Surveys in most countries show that people who can work from home are likely to do so for two or three days a week in the post-Covid-19 world, compared with hardly any in 2019.           

Most businesses in stable economies have regained their appetite for capital spending. And the pandemic appears to be triggering a shift towards higher levels of entrepreneurship around the developed world.

Using data for a range of rich countries, The Economist magazine estimates that the number of newly formed companies in the fourth quarter of 2021 was 15% higher than the average before the pandemic.

Not everywhere is booming with new business start-ups. In SA, where the ANC government believes in state-led growth, start-ups are more sluggish. But most places are far more vibrant, and start-ups are growing.

In the US the share of people who work for new companies is rapidly rising. Britain and other European countries are experiencing a similar trend. In Germany and France the number of start-ups is about 50%-70% higher than before the pandemic.

With the Silicon Valley tech boom cooling down, most businesses set up during the pandemic have nothing to do with e-commerce. They are construction firms, logistics companies and traditional businesses that make things and service things.

New staff

Entrepreneurship is so good for countries. New businesses try out fresh ideas and ways of doing things while drawing capital and people away from established businesses stuck in their old ways. An economic recovery with many start-ups creates more jobs since young businesses typically seek to expand and thus hire new staff.

There are various explanations for the start-up boom. But the most interesting is that Covid-19 has given people reason to start something new. The pandemic has reminded people that life is short and may have encouraged them to take more risks.

According to The Economist, it would not be the first time. In the US, after the World War 1 had ended and the Spanish flu epidemic had faded, an even bigger start-up boom began in 1918 as more people plucked up the courage to set out on their own.

Back home in SA it has been a rough couple of years for existing and new businesses. Now more than ever it is imperative that we shine a light on our local start-up community and celebrate their wins and the resilience they have shown in the face of the enormous challenges that come with a pandemic and an economy in decline.

Start-up businesses play a vital role in SA’s development and upliftment through job creation, poverty alleviation and fresh income to the fiscus. The National Development Plan says that about 90% of jobs in SA will be created through small, medium-sized and micro-enterprises (SMME) by 2030. The government has identified entrepreneurship and business development as important building blocks for a growing, sustainable economy. But as most exasperated business people know, what the government says and what it does are often two vastly different conversations.

There are many growth inhibitors in SA, and the lack of reliable electricity is now probably the most critical. However, red tape is another. Until the government works out how it can assist start-ups, the best thing it can do is keep out of the way and stop creating more and more roadblocks.

The country needs start-ups more than start-ups need the country. And a meddling central government that has had little success in running its own state-owned entities can help most by keeping far away from those who have the ability to make things happen.

• Levitt is CEO of industrial, storage and office property company Inospace.