JONATHAN COOK: Could SA win a world cup in entrepreneurship?
More South Africans aim to become entrepreneurs but there is antagonism and distrust by those entrusted with small business development
To feed its people and bring dignity to their hearts through decent work, a government needs to be intentional in helping people create jobs by building sustainable businesses.
I have been trying for a while to understand the true state of entrepreneurship in SA, but the data is surprisingly confusing.
In 2021 CEOWorld magazine ranked SA the most entrepreneurial country in Africa, just above Rwanda. That did not seem to reflect the mood on the ground. Topping the rankings globally were the US, Germany and UK.
The 2022 Global Entrepreneurship Monitor (GEM) report for SA was also encouraging. It showed that there was a clear trend then of catching up in some key indicators of entrepreneurial activity.
GEM reported that more South Africans wanted to become entrepreneurs. From 2019 to 2021 the new business ownership rate almost doubled, from 3.7% of the adult population to 7.3%. Total early-stage entrepreneurial activity grew impressively from 10.8% to 17.5%. This is the percentage of adults starting or running a new business. The established business ownership rate jumped from 3.5% to 5.2%. This rate is the percentage of owner-managers who have received income from their established business for more than 42 months.
It is therefore disappointing to read in the 2023 report that total early-stage entrepreneurial activity is back down to 8.5%, and established business ownership way down to 1.8%, ranking SA 48th out of 49 countries, a fraction above Mexico. According to GEM 2023, SA is not an entrepreneurial country. What happened? Nascent SA entrepreneurs seemed to leap out of the Covid-19 disaster with great energy, only to collapse.
An obvious reason for a failing business community is an antagonistic environment. GEM measures this through an index that summarises 13 national entrepreneurial framework conditions determining a favourable environment for entrepreneurship. Governments influence many of these directly, so the framework conditions reflect government priorities and spending.
The index score for SA has actually improved, from 3.6 in 2019 to 4.1 in 2022, but we are still one of just three economies in the world (with Togo and Tunisia) where not one of the 13 entrepreneurial framework conditions was scored as sufficient.
Why is SA so behind the pack? As I have argued before, surely we need all sectors in the country to work together, supportively, to make progress? We need the opposite of what the previous small business development minister, Khumbudzo Ntshavheni, demonstrated when she said recently that business has no interest in developing the country and is engineering the government’s collapse.
That’s not partnership. How can the country move forward in creating jobs when there is that degree of antagonism and distrust by those entrusted with small business development? Contrast that with the UK. Competing to be the best place for entrepreneurs and innovators, the UK has an all-party parliamentary group for entrepreneurship.
The secretariat is provided by The Entrepreneurship Network, which “bridges the gap between entrepreneurs and policymakers to help make Britain the best place in the world to start and grow a business”. If any policymaker in SA is reading this column, please look this up.
Among the issues the public and private sectors are tackling together is the fight for talent. Apparently Prime Minister Rishi Sunak often quotes the statistic that almost half the 100 fastest-growing UK firms have immigrant founders. Globally the war for talent has been described as a zero-sum game. We have to compete to retain our own talent and attract theirs.
Governments everywhere are striving to compete globally. Can we learn from our rugby success? Imagine an all-party parliamentary group for entrepreneurship supported by a private sector think-tank in SA. It’s the stuff of dreams.
• Cook chairs the African Management Institute.
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