The State of Startup Entrepreneurship in South Africa

21 Jun The State of Startup Entrepreneurship in South Africa

According to the Global Entrepreneurship Monitor (GEM) Report 2013, a quarter of young people in South Africa between the ages of 18 and 34 years old believe that they have the skills and knowledge to start a business and that there are good opportunities to exploit. The rate of potential youth entrepreneurs in South Africa is substantially below the average for sub-Saharan Africa (60%). Sixty percent of young people surveyed believe that lack of knowledge of how to start a business is a substantial barrier to entrepreneurship, while more than half of the youth think that becoming an entrepreneur in South Africa is difficult or very difficult. Only 13% of the non-entrepreneurial youth, i.e. not currently involved in setting up or running a business, indicated an intention to start a business in the next three years. 61% of young people believe that most young adults that start their own business have to work too hard for little money.

South Africa’s early-stage entrepreneurial activity rate (TEA) for its youth is 7%, the lowest of the 10 sub-Saharan African countries, and far below the average for the 10 countries of 29%.

And last but not least, South African support environment has been flourishing since 2012, namely with a larger number of new institutions, projects and the increasingly larger number of entrepreneurs included. With the launch of the new Small Business Development Department, we are still yet waiting to hear what the ministry has to offer, that wasn’t already there. In this, individual elements of the ecosystem’s services don’t lag behind the offer abroad that much.

The main difference lies in the way that these services are offered – they are very fragmented in South Africa, while in benchmarked ecosystems, they are integrated into uniform products such as business accelerators, which represent a combination of financial, mentoring, consulting and infrastructural products in one place. This way they offer an integrated support and achieve better visibility, as well as make it more attractive for startup teams.

South Africa already has a fairly developed entrepreneurship environment in many parts. Its development started 20 years ago, but was designed without considering that the entrepreneurship structure is made up of a very diverse group of companies: self-employed individuals, small companies, growing companies, big companies, social entrepreneurs, etc.

All individuals who initiate a company and lead it are entrepreneurs, but there are great differences between them in regards to their ambitions, contribution to the development and their needs for various types of support. The support to high-tech companies with potential for quick growth clearly has different demands than the general support of entrepreneurship, as it has numerous specifics that do not concern other types of entrepreneurs.

The lack of understanding of these differences prevents the creation of a suitable and successful entrepreneurship policy and the creation of the most efficient support mechanisms, as each of these types of entrepreneurs demands a different support ecosystem.