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.

Perception shift needed among SA youth to create next generation of entrepreneurs

It was recently revealed by a UN agency report that global youth unemployment has risen to near its crisis peak and predicted that it will keep on rising over the next five years. According to Nimo Naidoo of the Sanlam/Business Partners Entrepreneur of the Year® competition, South Africa is in a similar situation and says that the most effective method to counteract this crisis it to create a desirability around entrepreneurship amongst the youth.

Naidoo says that although youth unemployment is a global issue, South Africa’s situation is dire. “According to the recently released Global Entrepreneurship Monitor (GEM) 2012 South Africa report, entrepreneurship does not seem to be a desirable career choice amongst the youth. Approximately 20% of South Africa’s youth population are potential entrepreneurs, and only 15% possess entrepreneurial intensions.”

She says that the rising levels of youth unemployment can be effectively curbed through the promotion of entrepreneurship as a viable career choice for South Africa’s youth. However, it requires a committed change in South Africa’s public perception and culture.

As the youth unemployment rate in South Africa is a very high 48%, Naidoo says that many youth are being driven to entrepreneurship through necessity, which is not necessarily appealing. “Many of today’s youth view informal, survivalist businesses as undesirable, and therefore do not choose to possess entrepreneurial intensions and often find entrepreneurship undesirable.”

She says that by uplifting local entrepreneurial role models, communities will be able build a society that appreciates entrepreneurial activity. “Entrepreneurs which employ a handful of people are effectively assisting to combat the unemployment crisis and should therefore be celebrated.

“A method of instilling a system which celebrates entrepreneurial success could inspire the youth to consider entrepreneurship as a career.”

Naidoo says that according to the GEM report, where perceived opportunities are concerned, South Africa’s rate for perceived opportunities for its youth (39%) is the lowest of the sub-Saharan African countries, as well as substantially below the average of 64%.

She says that the manner in which a country supports and recognises its entrepreneurs determines the culture of entrepreneurship and ultimately moulds the future of the country’s economy. “A positive entrepreneurial culture is not something that can be simply put in place. It begins at the roots of society and needs to be carefully nurtured.

“The level of desirability of entrepreneurship to an individual has an influence on whether or not that person will ultimately pursue an opportunity. Cultural and social norms play significant roles in the lives of individuals and may influence the extent to which an individual perceives entrepreneurship as a desirable option.

According to the Branson Centre of Entrepreneurship’s Young Upstarts 2010 Report, most young people reported not having enough role models to look to or learn from and found it easier to settle for the comfort and predictability of a job, instead of perusing a risky entrepreneurial venture.

Naidoo says that the perception of entrepreneurship amongst the youth in South Africa needs to be raised. “Marketing and strategic platforms, such as entrepreneurial competitions, is a method of doing so, as a great deal of positive exposure is generated around successful entrepreneurs.

“By creating South African entrepreneurial role models out of the Sanlam / Business Partners Entrepreneur of the Year® winners, we are effectively building role models for the youth to imitate,” concludes Naidoo.

Entrepreneurship could cure SA’s growing youth unemployment crisis

Youth unemployment in South Africa has reached boiling point and has spurred on heated political debates and mass protests ending in violence. Governments around the world have tried to react to the mass youth protests and the swelling problem by implementing labour market policies, such as subsidised wages, tax incentives and encouraging school-work transition through apprenticeships and training programs. However, the unemployment figures have continued to soar and have not shown signs of slowing down.

According to Nimo Naidoo of the Sanlam/Business Partners Entrepreneur of the Year® competition, the rising levels of youth unemployment can be effectively curbed through the promotion of entrepreneurship as a viable career choice for South Africa’s youth. However, it requires a committed change in South Africa’s public perception and culture.

She says that the UN estimated last year that 74.8 million young people, between the ages 15 and 24, remained unemployed worldwide, while 6.4 million youths dropped out of the labour force globally. According to an International Labour Organisation (ILO) report, the youth of today are three times more likely be unemployed in comparison to adults, while 1 in 5 young working people live on R8/day.

Naidoo says that recent statistics, released by the latest Labour Force Survey, paints a dire picture for South Africa’s youth. “Youth unemployment has increased by 9.9% since last quarter and is now standing at a staggering 42%. Government has tried to absorb the high unemployment numbers through various state programs and have been actively promoting entrepreneurship in the hopes of reaching their goal of 5 million jobs created by 2020. However, according to Adcorp, a large discrepancy exists in the formal employment market. 800 000 vacancies are available in the private sector, yet 600 000 university graduates remain unemployed.”

“The 2011 South African GEM report, released last week, has also revealed a significant decline in entrepreneurial levels among South Africa’s youth. Entrepreneurship levels of people aged between 18 and 34 have declined significantly by 16% between 2010 and 2011. Evidence, from the recent released GEM report, shows that young entrepreneurs in South Africa chose self-employment out of necessity rather than being motivated by attractive opportunities.”

Naidoo says that these statistics are very worrying and show signs of an unhealthy entrepreneurial culture in South Africa. “The manner in which a country supports and recognises their entrepreneurs determines the culture of entrepreneurship and ultimately moulds the future of the economy. A positive entrepreneurial culture is not something that can be simply put in place. It begins at the roots of society and needs to be carefully nurtured.

Naidoo believes that the roots to South Africa’s entrepreneurial problem can be linked to South Africa’s educational structures. “Both South Africa’s formal and informal educational structures do not prepare the youth to become skilled entrepreneurs. Not only has the structure ill-equipped the youth to become entrepreneurs, but it has created a culture where young South African’s dream of becoming employee’s rather than employers.”

He says that not all individuals posses the qualities to become an entrepreneur and therefore these qualities and talents need to be developed accordingly. “Youth should be exposed to entrepreneurship via the South African education system, as well as leaders and managers of businesses where they work.”

As the business world continues to rapidly evolve an increasing amount of young entrepreneurs, such as Facebook’s Marc Zuckerberg, are emerging as successful entrepreneurs and outright market leaders in their respective industries. Sanlam and Business Partners, the competition’s co-sponsors, would like to recognise the ability and deserved success of South Africa’s young entrepreneurs by encouraging them to enter the 2012 Sanlam/Business Partners Entrepreneur of the Year® competition, which boasts an array of advantages for both finalists and winners.

More female entrepreneurs needed in SA

South African women make up approximately half of the country’s work force and therefore play a crucial role in the development of the economy. However, the low level and quality of female entrepreneurship in South Africa is hampering entrepreneurial growth and activity, as well as the country’s economic development.

According to Nimo Naidoo, project manager of the Sanlam / Business Partners Entrepreneur of the Year® competition, the profile of South African entrepreneurs has remained largely unchanged in the recent past.

“Although female entrepreneurial activity participation has gradually increased in 2010, South Africa is still behind the curve when compared to other emerging economies as men are still substantially more likely to be involved in Small and Medium Enterprise (SME) development than women”

Naidoo says the 2010 GEM Women’s Report – which gauges entrepreneurship in 59 countries – states that women are equally likely to view entrepreneurship as an attractive opportunity as men, but tend to doubt their own personal capacity and ability, which may be attributed to their lack of personal contact with other female entrepreneurs.

“Research shows that the probability of a woman becoming an entrepreneur is vastly improved when she is exposed to fellow female mentors and role models.”

She says female entrepreneurs tend to pursue small-scaled necessity-based entrepreneurship, predominantly in the informal sector. “The 2010 GEM Report stipulates that the key to unlocking potential economic growth and job creation is through investing in ‘opportunity entrepreneurs’ and not ‘necessity entrepreneurs’. Men are twice as likely to be involved in opportunity-based entrepreneurship when compared to women.”

The latest Labour Force survey, conducted by Statistics SA, indicates that the female unemployment rate of 28% is 5.5% higher than that of their male counterparts. Naidoo says it is therefore crucial that improved entrepreneurial attitudes among women are created in order to improve female employment rates.

Naidoo explains that most policy makers and academics commonly recognise entrepreneurship as a key ingredient that fuels economic growth and job creation. “Not only does entrepreneurship positively impact a country’s economy, but it improves the social well-being of the country. Research from the GEM report conclusively illustrates a direct link between the level of entrepreneurial activity and per capita income.”