What’s hampering entrepreneurship?

Entrepreneurial intentions dropped by almost 30 percent in 2015 when compared to 2013, and almost halved when compared to 2010.

Johannesburg - Entrepreneurial intentions among South Africans dropped by almost 30 percent in 2015 when compared to 2013, and almost halved when compared to 2010.

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Yet, the perceived entrepreneurial opportunities increased over the same period, according to the Global Entrepreneurship Monitor South African Report 2015/16.

Kobus Engelbrecht, spokesperson for the Entrepreneur of the Year competition, sponsored by Sanlam and BUSINESS/PARTNERS ,says there are many aspects at play when analysing these figures.

However, since 2009, more people perceive opportunities in the field, the report shows.’

Last year, 40.9 percent of South African adults perceived good entrepreneurial opportunities, up from 37.8 percent in 2013 and 25.4 percent in 2009.

Those South Africans that believe they have the necessary skills, knowledge and experience to start a business also increased to 45.4 percent, up from 42.7 percent in 2013 and 35.5 percent in 2009.

“Despite these positive indicators, these figures haven’t translated into higher entrepreneurial intention figures, which sharply declined from 19.6 percent in 2010 to just 10.9 percent in 2015. This ultimately means that 1 in 10 South African adults currently have entrepreneurial intentions.”

So what has changed since 2010 for South Africa to reach such entrepreneurial lows?

Engelbrecht says the declining economy has played a role. Economic growth slowed from 3.1 percent in 2010 to 1.3 percent in 2015, and recent reports suggest the economy will grow at less than a percent this year.

“The 2010 FIFA World Cup, and the build-up to the event, created many business opportunities for both existing and aspiring entrepreneurs to capitalise on, from tourism to infrastructure development, thus stimulating entrepreneurial activity in the country. The ensuing years have failed to present a similar excitement around entrepreneurship despite public and private initiatives to support entrepreneurs, including black economic empowerment policies and enterprise development programmes,” adds Engelbrecht.

Engelbrecht also notes banks and other financiers have seemingly become more cautious in their approval processes, making access to business finance more difficult for aspiring entrepreneurs.

“However, the long-term effects created by the restructuring of institutions to stimulate youth entrepreneurial activity – such as the Umsobomvu Youth Fund which had been established to finance young entrepreneurs – cannot be underestimated.”

Engelbrecht stresses, despite this sluggish growth, entrepreneurship should be promoted as an answer to revive the country’s current flagging economy.

The report highlights three main constraints limiting entrepreneurial activity: Government policy (61 percent), access to finance (44 percent), and education and training (42 percent).

“South Africa’s established business rate is also lower than the average for efficiently-driven economics, which, at 8 percent, is more than double South Africa’s rate of 3.4 percent. The country also has the lowest established business rate of all economics that participated in GEM 2014, and was ranked 53 out of 60 economies.”

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