Solving SA’s unemployment crisis through entrepreneurship

While the unemployment rate for the fourth quarter of 2016 as released by Statistics South Africa on Tuesday decreased from 27.1% (Quarter 3 of 2016) to 26.5%, urgent action and support structures are still required in order for local entrepreneurs to do what they do best – create jobs.

This is according to Kobus Engelbrecht, spokesperson for the 2017 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, who says that one of the surest ways to further bolster employment figures in South Africa is to place more emphasis on the promotion and development of entrepreneurship.

Engelbrecht points to the latest Global Entrepreneurship Monitor 2016-2017 which states that small and medium enterprises (SMEs) in South Africa contribute 36% to GDP. “However, we could improve this figure if we make business conditions more conducive to growth.” Engelbrecht references the 2017 World Bank’s Ease of Doing Business report ranked South Africa 74 out of 190 economies – down from 72 in 2016.

If SMEs are to increase their contribution to the local economy, and in turn, the number of jobs they create, we need to ensure that we have an enabling environment and entrepreneurial ecosystem that allows entrepreneurs to thrive, says Engelbrecht. “The number of people a small business can employ is ultimately determined by many factors including the sector it is in, its turnover and length of time it has been in operation. The more stable the business, the more staff it can employ fulltime.

“South Africa’s established business ownership rate – the percentage of owners/managers of businesses that have been in operation for more than 42 months – is ranked 61/65 in the GEM 2016, while its Total Early-Stage Entrepreneurial Activity (TEA) – businesses that have been in operation for less than 42 months – is ranked at 52/65. This highlights how more emphasis should be put on ensuring that entrepreneurs – in all business cycles – have the necessary support to grow their business from a start-up to an established, thriving enterprise.”

The South African Institute of Chartered Accountants (SAICA) SME Report 2016 reported that of the SMME respondents with a turnover between R100k and R5 million per annum, 47% employ between two and five people, 33% employ between six and 49 people, and only 4% employ over 50 people. The balance of 16%, don’t employ any people, except for the business owner. “More needs to be done to bolster these employment figures.”

Engelbrecht adds that it was encouraging that the recent State of the Nation Address listed the development of SMMEs as a key focus area in the Government’s Nine-Point Plan. “With more focus being placed on the development of opportunities for entrepreneurs, it will enable Government to work towards the National Development Plan’s target of ensuring that 90% of new jobs will be generated by SMMEs by 2030,” says Engelbrecht.

“South Africa is home to many motivated and aspiring entrepreneurs, with 72.6% of the adult population believing that entrepreneurship is a good career choice*. Through platforms such as the Entrepreneur of the Year® competition, we have seen the impact made by previous finalists, creating jobs and uplifting their respective communities. The challenge now is to provide the necessary programmes and support needed to upskill and develop future entrepreneurs,” concludes Engelbrecht.

*GEM 2015/16 data.

Entrepreneurial innovation is key to improving the local education sector

The South African education sector has been thrust into the spotlight again recently, eliciting many questions, debates and varying opinions about potential solutions to an ongoing challange. Amid all the negativity currently being reported on, 2016 Innovator of the Year® award winners, Ryan Harrison and Stacey Brewer of SPARK Schools, remain inspired as ever to use the opportunities presenting themselves within the sector.

It has been reported that South Africa has one of the highest rates of public investment in education in the world. Accounting for around 7% of gross domestic product (GDP) and 20% of total state expenditure, the government spends more on education than on any other sector. Yet, Ryan, says that this is currently not translating to tangible results.  

Ryan and his co-founder Stacey, started the SPARK Schools network in response to the growing opportunities that became available to fix a struggling education system through creativity and innovation.

SPARK Schools is a network of primary schools dedicated to delivering accessible, high quality education by using a blended learning programme, which combines traditional classroom teaching and online learning, to individualise education for all students. The SPARK Schools model is the first of its kind for primary school students in Africa and the software SPARK School scholars use is adaptive, allowing for highly individualised student practice and assessment.

“The primary education division is one of the hardest areas to innovate because young children need much more stability and hands-on guidance to aid their development, whereas in senior levels, children are able to self-study, which allows for more creativity in the tools they are exposed to within the classroom,” says Ryan. “At SPARK Schools, we’ve only just begun to shake things up in the way our education model works, but there is a need for an overhaul and renewed creativity, in order to work towards a system that benefits all our learners – countrywide.”

As state schools currently have the monopoly within the education system, more competition is needed to drive change, says Ryan. He stresses the need for more entrepreneurs to get involved in this vital sector of the South African economy. “It’s not all about making money – sometimes we have to forgo the easy sell to make a quick buck initatives, and instead get really innovative for the sake of our, and our children’s, future.”

He explains that if parents were presented with more options to choose affordable, private education, as opposed to state school facilities, the sector would benefit overall. “As in any industry where a monopoly is present, we tend to accept mediocrity for lack of other options available. But the minute there is new competition in the industry, we as consumers are able to choose options that suit us better, according to our own personal preferences. Competition also forces businesses – and in this case, schools – to aim higher and perform better.”

Part of the innovation within SPARK Schools is the emphasis placed on teachers. The school prides itself in the amount of effort that goes into their recruitment process for teachers. “Teachers find themselves under a lot of scrutiny, and part of this is owing to the often inadequate training that they receive, which often does not sufficiently prepare them for the classroom,” says Ryan.

SPARK Schools has implemented a number of innovative activities for teachers at their school. These include a training programme to accustom new teachers to the SPARK Schools education model, and on-going professional development which includes weekly 4-hour skills-training sessions customised to a teacher’s particular needs, internal coaching to mentor and assess teachers in their classroom on a weekly basis, as well as ad hoc leadership training programmes outside of the classroom to assist teachers to grow into a principal role.

Overall, these positive, go-getter entrepreneurs have realised that when working in the education space, quality takes priority over everything else. “We want to instil a culture of innovation within our schools and this means that everyone employed here has to fit into our culture and mission. We work towards one common goal, which is to provide high quality private education at affordable rates,” says Ryan.

“We have many dreams and goals for the SPARK Schools network. Ultimately, we want to take our schools abroad. But for now, our core focus is on South Africa, and increasing SPARK Schools’ current network of 11 to 20 schools across the country. With a larger share of the education sector pie, we hope to inspire the sector to make a real difference in the quality of education that is provided to South Africa’s children and families.”

Financial advice from entrepreneurs for entrepreneurs

The 2016 Entrepreneur of the Year® winners share the best financial advice they have ever received.

Given the current challenging economic climate with South Africa’s GDP growth expected to remain flat at 0.1% for the year according to the International Monetary Fund (IMF), it is becoming increasingly difficult for entrepreneurs to ensure the financial sustainability of their businesses.

As there are many factors which contribute to the effective management of cash flow within a business, we asked some of the winners of the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS to provide us with the best financial advice that they have been given while growing their businesses.

“Remember that your business is a long-term investment.” Says Johan Eksteen of Agricon, 2016 Entrepreneur of the Year® winner. “Always look at the bigger picture and be aware of how any decision can impact the future. When it comes to short-term solutions, you can’t ‘buy yourself rich’, so rather focus on selling your product or service as this is a sure-fire way to generate a healthy cash flow.”

In the same breath, Meisie Nkosi of Bella Bonni Guest House and 2016 Small Business Entrepreneur of the Year® winner goes on to say that finance is the heartbeat of a business. “Keeping an eye on daily expenditure and auditing these periodically will help you manage day-to-day finances. In order to maintain a healthy profit margin, make sure you price your product or service correctly,” she adds.

“Also make sure you find the right investor,” points out Carl Pretorius of Just Trees and 2016 Medium Business Entrepreneur of the Year® winner, who says that it is important to ensure that whoever invests in your business shares your vision and expectations. “I would also advise finding an investor that is patient as things don’t always go exactly according to plan and they may need to wait for the return,” he explains.

Michael Roberts of Khonology, 2016 Job Creator of the Year winner says that when building a business, you should manage your cash flow as if your life depends on it, because your business does. “My mantra is ‘Revenue is vanity, profit sanity, and cash is reality’,’” he continues.

Vanessa Jacobs of Sow Delicious and 2016 Emerging Entrepreneur of the Year® winner shares the same sentiment as Michael and recommends running a business on a “cash” basis. “I try to use cash when it comes to making and receiving payments as I find this helps to monitor cash flow and make better decisions for my business while ensuring steady growth,” she concludes.

SA’s leading entrepreneurial competition now open for entries

The contribution of local entrepreneurs to the South African economy is generally underestimated. Small and medium enterprises (SMEs) contribute close to 50% of South Africa’s gross domestic product (GDP) and generate more than 60% of new jobs created in the economy. This is according to Ben Bierman, chief financial officer at Business Partners Limited (BUSINESS/PARTNERS), who was speaking at the launch of the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, in Johannesburg today.

Now in its 28th year, this renowned competition pays homage to courageous South African entrepreneurs who dedicate themselves to their enterprises / businesses driving growth, creating much needed jobs and contributing towards economic development in the country.

The latest Global Entrepreneurship Monitor (GEM) 2015 / 2016 Global Report states that while on average, 42% of working-age adults in the monitored economies see good entrepreneurial opportunities in their markets, as many as one-third of potential entrepreneurs are constrained from starting a business due to the fear of failure.

Speaking at the event, Bierman says that South Africa needs to pro-actively address this fear of failure by creating an entrepreneurial ecosystem that provides support and business finance and celebrates entrepreneurs’ hard work and achievements. “When SMEs are established and grow, new employment opportunities are created, staff is trained and skills are developed, company profits increase and ultimately the economy flourishes as a result.”

Bierman says that while South Africa has recently experienced tough economic conditions that may not necessarily enable SMEs to grow, opportunities do exist for those entrepreneurs who continue to identify gaps in the market and transform these into viable businesses. “We need to make a concerted effort to recognise and honour these entrepreneurs who continue to inspire others to venture into the world of business.”

He points to last year’s competition winners as examples of those succeeding in their industry and possessing true entrepreneurial spirit – persevering no matter how impossible it may seem at times.

“The 2015 Entrepreneur of the Year® overall competition winners, Gil Oved and Ran Neu-Ner, co-owners and founders of The Creative Counsel (TCC), were recently awarded the All Africa Business Leaders Award (AABLA), which recognises game changers on the continent. They were also acquired last year by French advertising giant, Publicis, in a deal understood to be the biggest in South African agency history. Most importantly, this year TCC launched an incubator programme for black-owned businesses as a way to inspire and grow the next generation of entrepreneurs.

“Our 2015 Innovator of the Year® and Medium Business Entrepreneur of the Year® title winners, Nadir Khamissa & Ahmed Shaazim Khamissa – owners and founders of Hello Group – were also recognised by the EY Southern Africa World Entrepreneur awards platform due to their remarkable tenacity and determination in building a leading business in the local fintech space.”

The Entrepreneur of the Year® competition, sponsored by Sanlam and BUSINESS/PARTNERS, is a platform to reward and acknowledge these entrepreneurs’ hard work. Prizes valued at R 2 million can be won, which includes cash prizes of R425 000. Competition winners will also receive valuable mentorship support, networking opportunities and national media exposure.

Bierman says that in 2016 the competition continues its search for entrepreneurial talent in all sectors of the economy. “The judges are looking for entrepreneurs that have succeeded against the odds, either by carving out a niche market for the product or service offering, or by succeeding in a very competitive environment. Perseverance and endurance, innovation and agility are some of the qualities we look for in the entrepreneur.”

Bierman adds that there are also a number of quantitative competition measures, such as turnover growth, profitability, owners’ equity growth, positive cash flows and job creation that play a part in the competition’s judging process.

Entrepreneurs interested in entering the competition can download entry forms online at www.eoy.co.za as well as interact with fellow entrepreneurs and entrants on the competition’s social media platforms www.twitter.com/@EOY_SA and www.facebook.com/EOY.SA. The closing date for the competition is National Youth Day, 16 June 2016.

21 years of entrepreneurial growth in SA

Christo Botes, spokesperson of the 2015 Sanlam / Business Partners Entrepreneur of the Year® competition, provides insight into how entrepreneurial activity has evolved over the last two decades in South Africa.

South Africa celebrates 21 years of democracy on 27 May 2015 – Freedom Day – which represents the liberty for individuals to follow the path he or she chooses. Entrepreneurship is one such path, and since the first democratic election in 1994, South Africa has witnessed the rise of small business in the country.

Economic activity in the country has experienced positive growth since 1994, and the GDP has almost tripled from $143.8bn in 1996 to $404.3bn in 2011. This in turn has improved the opportunities available to entrepreneurs and small business.

According to the recently released Global Entrepreneurship Monitor (GEM) 2014 South Africa report2, in 2001, 19.7% of the adult population perceived that there were opportunities available in South Africa to start a business. This figure has since increased to 37% in 2014. Over the years, small and medium enterprises (SMEs) have increasingly been recognised as the drivers of economic growth, and proof of the Government’s commitment to the sector was the establishment of the Ministry for Small Business Development – which was developed to review regulations, thereby easing the burden on small business.

Given the current economic environment South Africa finds itself in – with the International Monetary Fund (IMF) recently lowering the country’s growth forecast from 2.3% to 2% for 2015 – new entrepreneurial opportunities are limited, as when the market isn’t growing, it becomes tougher to penetrate due to limited opportunities.

With that being said, more entrepreneurs are entering the market compared to 10 years ago and entrepreneurial spirit in the country is on the rise due to positive shifts in societal attitudes. This has had a significant impact on how individuals view entrepreneurship, and has resulted in an increasing number of South African adults viewing it as a career choice. The GEM report reveals that 69.6% of respondents viewed entrepreneurship as a career choice in 2014, up from 48% in 2003, albeit down from 74% in 2013.

Whilst economic growth may be slowing slightly, rising consumer spending is driving growth in select sectors. A growing stronger middle class – particularly in the black community steadily moving from the lower to middle and upper income brackets – is supporting this consumer spending.

Sectors which have seen the most significant growth in terms of opportunities include the services industry, especially beauty and health, due to consumers becoming more health conscious. Other sectors worth mentioning is the vehicle manufacturing industry, which includes motor vehicle components that are produced locally, as well as the telecommunications industry, which is doing significantly better in comparison to 10 years ago.

There are however certain sectors that are facing challenges compared to a decade or two ago, such as manufacturing, which is not growing rapidly enough due to slowed economic growth. The sector, however, remains positive. Although the textile industry is making a recovery, this growth is artificial as Chinese and Indian products are still cheaper than locally-produced items.

When looking at the availability of financing for small businesses, there has been a shift towards the positive, as more players are availing financing for entrepreneurs. Although the 2008 recession made financial institutions more conservative, financiers are starting to relax lending criteria. Government agencies have also improved and the Department of Trade and Industry (the dti) has been instrumental in driving entrepreneurship in the country. Notably, the National Treasury, through its Jobs Funds, has created jobs by supporting initiatives that generate employment in innovative ways.

Sadly, while access to finance has improved, Government red tape and bureaucracy remain an issue as this has increased in the past few years as more acts are passed, therefore affecting the ease of doing business.

When taking all of the above into consideration, the general perception is that the environment is more favourable to entrepreneurship than 10 years ago, and with entrepreneurs possessing a can-do attitude, entrepreneurship will continue to thrive in the country.

21 years of entrepreneurial growth in South Africa

Freedom represents the liberty to follow the path one chooses, which includes an individual’s career path. Entrepreneurship is one such path, and since the first democratic election in 1994, South Africa has witnessed the rise of small businesses.

This is according to Christo Botes, spokesperson of the 2015 Sanlam / Business Partners Entrepreneur of the Year® competition, who says that economic activity in the country has experienced positive growth since 1994, with the country’s GDP almost tripling from $143.8bn in 1996 to $404.3bn1 in 2011, thereby improving opportunities available to entrepreneurs and small business.

Whilst unpacking South Africa’s entrepreneurial journey over the last 21 years, he points to the recently released Global Entrepreneurship Monitor (GEM) 2014 South Africa report2, which echoes this statement. “In 2001, 19.7% of the adult population perceived that there were opportunities available in South Africa to start a business. This figure has since increased to 37% in 2014. Over the years, small and medium enterprises (SMEs) have increasingly been recognised as the drivers of economic growth. Proof of the country’s commitment to small business is the establishment of the Department for Small Business Development, which reinforces Government’s commitment to the sector.”

Botes adds that given the economic environment South Africa finds itself in – with the International Monetary Fund (IMF) recently lowering the country’s growth forecast from 2.3% to 2% for 2015 – new entrepreneurial opportunities are limited. “If the market isn’t growing, it becomes tougher to penetrate due to limited opportunities.”

With that being said, more entrepreneurs are entering the market compared to 10 years ago, says Botes. “Entrepreneurial spirit in the country is on the rise due to positive shifts in societal attitudes. This has had a significant impact on how individuals view entrepreneurship, and has resulted in an increasing number of South African adults viewing it as a career choice. The GEM report2 reveals that 69.6% of respondents viewed entrepreneurship as a career choice in 2014, up from 48% in 2003, albeit down from 74% in 2013.”

Botes mentions that a growing stronger middle class is aiding consumer spend in South Africa. “The black community in particular is steadily moving from the lower to middle and upper income brackets, and driving consumer spending.”

Sectors which have seen the most significant growth in terms of opportunities include the services industry, especially beauty and health, due to consumers becoming more health conscious. Botes says that other sectors worth mentioning is the vehicle manufacturing industry, which includes motor vehicle components that are produced locally, as well as the telecommunications industry, which is doing significantly better compared to 10 years ago.

“There are however sectors that are facing challenges compared to a decade or two ago, such as manufacturing, which is not growing rapidly enough due to slowed economic growth. The sector, however, remains positive. Although the textile industry is making a recovery, this growth is artificial as Chinese and Indian products are still cheaper than locally-produced items.”

Remarking on the availability of financing for small businesses, Botes says there has been a shift towards the positive, as more players are availing financing for entrepreneurs. “Although the 2008 recession made financial institutions more conservative, they are starting to relax lending criteria. Government agencies have also improved and the Department of Trade and Industry (DTI) has been instrumental in driving entrepreneurship in the country. Notably, National Treasury, through its Jobs Funds, has created jobs by supporting initiatives that generate employment in innovative ways.”

Botes adds that while access to finance has improved, Government red tape and bureaucracy remain an issue. “Red tape has increased in the past few years as more acts are passed, therefore affecting the ease of doing business. Public sector employment has also grown significantly, thereby putting more pressure on governmental resources.

“The general perception is that the environment is more favourable to entrepreneurship than 10 years ago, and with entrepreneurs possessing a can-do attitude, entrepreneurship will continue to thrive in the country,” concludes Botes.

Local entrepreneurs to grab ecommerce opportunities

Technological advancements have changed the way in which the South African business landscape operates, and this is increasingly leading to many opportunities for local entrepreneurs and businesses.

One such advancement stemming from the evolution of the internet is the rise of eCommerce – a platform used to market, promote, sell and buy goods and services online. Christo Botes of the Sanlam / Business Partners Entrepreneur of the Year® competition says that with this sector experiencing rapid growth both locally and globally, South African entrepreneurs have a chance to capitalise on the opportunities which will arise, as the industry is still in its infancy on the African continent.

Botes says that the eCommerce sector in South Africa accounts for a very small percentage of the retail industry, and overall GDP contribution, when compared to developed markets. He points to a report1 by McKinsey & Company which states that Africa’s iGDP, the measure of the Internet’s contribution to overall GDP, remains low at 1.1%. South Africa reported 1.4%, which is significantly below that of global players such as the United Kingdom (5.4%), the United States (3.8%) and China (2.6%).

The rise in access to internet and mobile services, coupled with a growing middle class, will however see South Africa’s eCommerce figures rise in years to come. Earlier this year Google South Africa stated that the country’s eCommerce industry is expected to continue its growth in 2015, having seen a 37% increase in query volumes during 2014. The McKinsey & Company report also recently revealed that eCommerce could account for 10% of retail sales in Africa’s largest economies by 2025.

With the future of eCommerce looking bright in South Africa, local entrepreneurs should seek to establish themselves online, says Botes. “While business-to-consumer transactions are growing rapidly, with South Africans increasingly turning to online platforms to purchase goods and services, the growth of online business-to-business (B2B) transactions offers major opportunities for entrepreneurs as customers increasingly seek business services online.

“New online ventures offer a relatively low barrier to entry, and entrepreneurs can establish themselves on a playing field with larger competitors as in many cases the customer isn’t able to tell the difference between a small and large company,” says Botes.

Highlighting the rising opportunities for smaller players, PayGate CEO, Peter Harvey, revealed that five years ago the company would upload 10 start-ups onto its payment gateway for every established business, but that the ratio is currently 100:1.

Botes says that opportunities are abound for local businesses. “The rise of eCommerce includes various opportunities for small businesses ranging customer services, technical support or security and payment offerings for businesses e-platforms. It isn’t just limited to the selling of goods or e-tailing, and entrepreneurs should think out of the box when considering potential business ideas.”

While the eCommerce phenomenon offers entrepreneurs an opportunity to establish a business in this flourishing market, Botes says that entrepreneurs with an established business should also be looking at growing their online presence if they have not already done so.

“Entrepreneurs also need to adapt the way in which they communicate with their customers. Having an online presence has the ability to positively impact marketing and sales efforts, and entrepreneurs should be embracing these channels to discover how the Internet can transform and grow their businesses. A local bakery, for example, who may be predominately servicing its surrounding community, could expand its customer base across the city by introducing an online platform for their business in the form of social media platforms or a website.

“The development of a business website is no longer an expensive cost to the business, but instead can be designed affordably with easy to use, do-it-yourself website builders such as Woza and WordPress.”

He adds that it is important for entrepreneurs to gauge where their traffic is coming from, and what is the best platform to reach their target audience is. “Entrepreneurs need to ensure their communication channels are matched to their audience’s preferences, as there isn’t a one size fits all approach to online channels,” concludes Botes.

World Entrepreneurship Day a rallying call to aspiring SA entrepreneurs

Aspiring South African entrepreneurs need to take note of the successes being celebrated by their global counterparts on World Entrepreneurship Day (WED), 15 April 2012, as well as use the day as motivation to get better at spotting and taking advantage of ‘entrepreneurial gaps’ in specific industries, in order to create sustainable businesses.

This was the message from Nimo Naidoo, project manager of the Sanlam / Business Partners Entrepreneur of the Year ® competition, in the run-up to WED, who says that South Africa’s economic prosperity relies heavily on the actions and successes of the country’s existing and future entrepreneurs.

“The Global Entrepreneurship and Development Index (GEDI) recently revealed that South Africa’s global entrepreneurial ranking has fallen from 39 in 2011 to 45 in 2012, losing pace with smaller GDP countries such as Colombia and Peru. Entrepreneurship serves as a catalyst for economic growth and national competitiveness, and for an emerging economy such as ours this ranking is simply too low,” says Naidoo.

She says that in order to foster a culture of entrepreneurship locally, prospective entrepreneurs need to overcome barriers such as fear of failure and funding. “Tackling the first barrier is not always so simple, as South Africa’s society has a culture that neglects entrepreneurial activities, especially individuals who have failed in the past.”

Naidoo suggests that more needs to be done to identify and profile entrepreneurial role models, in order to give aspiring entrepreneurs an idea of the rewards and benefits of enterprise creation and reduce the stigma of failure.

“Initiatives such as entrepreneurial competitions, formation of bodies, government-sponsored awards and recognition from the private sector would all contribute to raising the profile of South Africa’s most innovative and successful entrepreneurs. In addition, these actions would also assist with creating a society that values and respects entrepreneurial spirit.

“Initiatives already in place to promote and grow entrepreneurship, such as Global Entrepreneurship Week in November and The Jobs Fund, under the custodianship of the Development Bank of Southern Africa, which co-finances projects by public, private and non-governmental organisations, have already had a positive effect with regards to job creation and entrepreneurial spirit in South Africa.”

She adds that role models are also key to educating South Africa’s youth about entrepreneurship. “There is a great opportunity for our youth to choose entrepreneurship as a career and become job creators rather than job seekers. Our education system should also promote entrepreneurship as a career. Entrepreneurship will then also address unemployment issues at a youth level by providing an outlet for the talents of many highly educated young people, such as college and university graduates, especially in globally-growing industries such as information technology.”

On the barrier of funding, she says that more support and attention in fiscal and government policy is necessary to stimulate entrepreneurial activity, which can ultimately lead to the country’s economic recovery. “We also need to investigate the implementation of new finance models and methods in order to broaden the access of finance to more entrepreneurs.”

Naidoo adds that the inclusion of structural policies that determines and clarifies the overall economic framework in which the local business sector operates, such as policies affecting labour markets, tax, competition, financial markets and bankruptcy laws, will also be conducive to entrepreneurial growth.

“As a group, entrepreneurs represent the best hope of creating sustained economic growth in South Africa. As we celebrate WED, we can see the tangible economic benefits that pro-entrepreneurial policies in emerging economies such as Brazil and India have achieved.

“It is now our country’s turn to create an entrepreneurship climate to create employment and build sustainable, high growth companies,” concludes Naidoo.

SA’s global entrepreneurial ranking needs to improve to ignite economic growth

Stimulating entrepreneurship is the key to igniting economic growth and job creation in South Africa. However, when compared to other global economies, the country’s entrepreneurial ranking is slipping and is significantly lower than what would be expected from an economy like South Africa’s.

This is according to Nimo Naidoo, Project Manager of the Sanlam / Business Partners Entrepreneur of the Year ® competition, who points to the 2012 Global Entrepreneurship and Development Index (GEDI), which measures a country’s entrepreneurial strengths and weaknesses, which reveals that South Africa’s global ranking has fallen from 39 in 2011 to 45 in 2012.

“Historically, entrepreneurship serves as a catalyst for economic growth and national competitiveness, and for an emerging economy such as ours this ranking is simply too low,” says Naidoo.

According to the latest GEDI rankings, of the 79 countries surveyed, South Africa has in the space of a year lost ground on nations such as Colombia and Peru, which have significantly smaller GDPs. “Losing pace with smaller nations is troubling, especially when the quality of South Africa’s commercial infrastructure should set it apart from other comparable economies.”

Naidoo says that most economically competitive countries in the world have significantly higher levels of entrepreneurial activity. “The way a nation perceives and supports this group defines a country’s culture of entrepreneurship and additionally, indirectly influences its economic growth. According to the 2010 State of Entrepreneurship in South Africa conference, South Africa’s society has a culture that neglects entrepreneurial activities, especially individuals who have failed in the past.

“For example, in the United States entrepreneurs are encouraged and respected and in 1790, 90% of the American population were self-employed entrepreneurs. It is commonly believed that this culture laid the foundation for building one of the world’s largest economies.”

Citing a more recent example of a growing economy sustained by entrepreneurial activity, Naidoo points to latest data gathered by Endeavor Brazil, which reveals that SMEs are responsible for 96% of the jobs in Brazil and represent 98% of all companies in the country.

“Rapid job growth stems from rapidly growing companies. Therefore, only when fast-growing new companies offer new products and services will developing countries such as South Africa be able to provide enough jobs for its rapidly growing population.”

She explains that promoting a culture of entrepreneurship is the responsibility of both the public and private sector. “It is essential that each party works together to create an environment within society that serves as a sustainable platform for a positive entrepreneurial culture to grow. Government also plays an important role in ensuring that policies and programmes are aligned with fostering entrepreneurial growth. However, it is important that the private sector satisfies the entrepreneurial demand by providing vital elements, such as financial support, research and development.”

Naidoo says that an initiative such as the Sanlam / Business Partners Entrepreneur of the Year ® competition, which promotes entrepreneurship in South Africa by celebrating entrepreneurial excellence, is crucial in the development of this sector. “It is important to showcase successful entrepreneurial role models in order to inspire future entrepreneurs that can actively contribute to growing our economy,” concludes Naidoo.

Only real entrepreneurs need apply

Making it in the tourism industry

New tourism statistics paint quite a rosy picture of an industry that is under sever strain.

The recession was bad news for most sectors, but the tourism industry was particularly hard hit as it depends on consumers spending what little money they have left.

Fortunately for many, the industry has had quite some time to reposition itself, including a stronger focus on the corporate market.

Nevertheless, the 15% increase in international tourist arrivals recorded last year did not necessarily produce the expected results.

Business Partners Limited Executive Director Gerrie van Biljon explains many small operators either entered the market or expanded their operations to cash in on the event.

“The net effect on bed nights from the Fifa Soccer World Cup was disappointing. I think people who entered the industry specifically for the tournament were disappointed,” he says.

Business Partners Limited is the founder and owner of the prestigious Sanlam / Business Partners Entrepreneur of the Year® competition and Van Biljon urges tourism operators to throw their hat into the award’s ring.

Where we stand

From an international and macro perspective, South Africa did exceptionally well and it significantly outperformed the international average growth in tourist arrivals of 6.7%.

At the same time the South African Tourism “20 Experiences in 10 Days” campaign is continuing to build on the momentum generated last year.

Tourism has also been earmarked as a major potential job creator so government focus on the sector and related spending should remain a priority.

For example, a new National Tourism Sector Strategy (NTSS) was launched at the end of March to help grow the industry.

“The vision of the NTSS is to position South Africa as one of the top 20 tourism destinations globally by 2020, and I believe our concerted and focused efforts as a sector will enable us to reach this goal,” Minister Marthinus van Schalkwyk said in a media statement.

“We all know that the tourism sector in South Africa, and its contribution to our gross domestic product, has grown tremendously in the last two decades. As a national department, and an industry, we believe we have not yet reached our full potential and the NTSS is intended to provide clear guidance on how to grow tourism’s absolute contribution to the economy.

The NTSS wants to double foreign arrivals to 15 million in the next nine years while increasing GDP contribution from R189 billion to R499 billion.

The strategy includes a number of incentives to reach it goals, including a strong focus on domestic tourism.

However, the current reality for smaller operators is somewhat different on the ground.

New domestic tourism statistics for 2010 show a fairly significant decrease in the amount of money spent by domestic tourists: R21.1 billion, down from R22.4 billion in 2009.

The good news is that the percentage of money spent on holiday as opposed to business travel or visiting friends and relatives increased to 31% of the total spend. This figure stood at 22% in 2009.

Nevertheless, the total amount of domestic tourism trips did not increase last year, meaning that it is unclear if the industry has turned the corner in the long term.

At the same time, consumers are still under considerable strain and the FNB / BER consumer confidence index showed its first noticeable decline in a year. The report says that consumers are increasingly worried about their personal financial positions.

Once again, this is a red light for the domestic tourism industry and SMEs operating in the sector.

“Occupancy rates among our clients are still under pressure. This has been the case to a large extent for the last 18 months,” Van Biljon says.

“Consumers are still reluctant to spend and operators are not expanding at the moment. There is a sense of scepticism in the industry and everyone is waiting for the status quo to change,” he explains.

“The available number of beds in South Africa tells us there is an oversupply in general. Obviously some operators will do better than others but competition is fierce.”

An entrepreneurial view

Van Biljon is quick to add that the sector is not a completely lame horse and that astute entrepreneurs will always be able to make money in tough times.

“We see that some operators are using their facilities in a different way to generate business. This includes hosting smaller corporate conferences for example.

“The corporate market still exists whereas the domestic tourism market is under severe strain…

We know that the industry will recover. The onus lies on you to still be in business when this happens.

“Before you enter the industry you have to ensure that your product is unique and that there is a market for it.”

Van Biljon adds that entrepreneurs should remember that tourism is a capital intensive industry and that detailed business plans are needed to succeed.

“If you want to sell beds you need to decide if want to do it as a hobby or as a business.

“If it is a business you need to look at economies of scale. In our experience the threshold is usually six or more rooms,” he says.

“One of the biggest challenges entrants usually face is the huge capital outlay needed. Then, you can only earn so much each month because there are a set number of beds that can be sold. As a result the return on investment is a relatively low percentage of the capital spent.”

He adds that the amount of money that can be borrowed has a ceiling if the business owner wants the business to be profitable: “The moment you are geared more than 50% you are doomed to failure. This is because all your income is used to service debt.”

Payday however, comes when that property is sold on. He explains that once the property has been paid off, it will only grow in value over time. Similarly, a going concern demands a premium, especially if it has been looked after.

“It is not a glamorous industry and it is tough with long and demanding hours. But, if you are the right entrepreneur there is money to be made,” Van Biljon says.