Tag: TEA

Report reveals that 2017 entrepreneurial activity in SA 4.1% higher than 2016

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The recently released 2017-18 Global Entrepreneurship Monitor (GEM) report for South Africa revealed that entrepreneurial activity in the country is at its highest level since 2013. The report also shows that total early-stage entrepreneurial activity (TEA) is at 11.0% – 4.1 percentage points above the 2016 score of 6.9%.

Kobus Engelbrecht, spokesperson for the 2018 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS says that it is particularly encouraging to see that entrepreneurial intentions in the country have increased in the last few years, currently sitting at 11.7% (up from 10.1% in 2016-17).

Engelbrecht says that with these statistics, it is ever important to keep up the momentum by celebrating local entrepreneurs for the work they do in building the local economy, creating jobs and developing their communities with the view to inspire others to follow in their footsteps.

“We often casually refer to entrepreneurs being the backbone of the economy, but when the economy is still trying to recover from a number of macro-economic stumbling blocks, entrepreneurs show their invaluable worth.” He adds that job creation is one of the key aspects identified as areas which will help grow the economy – and this is one specific area that entrepreneurs can make tangible contributions.

Engelbrecht adds that in celebrating the work of entrepreneurs, business competitions do well to motivate and inspire business owners. He points to the recent launch of the 2018 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS which is now open for entries. “In our 30th year of celebrating and rewarding entrepreneurs, we want to encourage established entrepreneurs to enter this year’s competition – not only for the cash prize money at stake, but for the value received through the stringent judging process, business mentorship prizes as we as the resultant exposure.”

Engelbrecht adds that entrepreneurs have until 31 May 2018 to enter the competition and can do so by visiting www.eoy.co.za. Prizes are valued at over R 2 million, which includes cash prizes of R 70 000 for each main category winner, and R200 000 for the overall winner. Competition winners will also receive valuable mentorship support, networking opportunities and national media exposure.

Who’s the best?

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South Africa vs. Sub-Saharan Africa entrepreneurs

There has been much talk around the rise of the African continent and many comparisons have been made between entrepreneurship and business levels in South Africa and other African regions.

According to Christo Botes, spokesperson for the Sanlam / Business Partners Entrepreneur of the Year® competition, while some countries report higher entrepreneurship levels, this doesn’t necessarily mean that the small and medium enterprises operating within them are more financeable or sustainable than those in other regions. “It is unfair to compare entrepreneurs of different countries, as each region contains its own strengths and weakness, all of which can impact a business, either positively or negatively.”

Botes says that as an economy develops, so does its entrepreneurial opportunities, but that these opportunities differ depending on a country’s economic structure. “The recent economic boom in Africa has seen many sectors develop and expand and it therefore isn’t surprising that more individuals are exploring entrepreneurship as a possible career choice to capitalise on the continent’s expansion and growth.”

He points to the latest Global Entrepreneurship Monitor (GEM) 2013 Global report, which revealed that Sub-Saharan Africa has the highest Total Early-stage Entrepreneurial Activity (TEA) rates globally. Leading these figures are Zambia and Nigeria with 39.9% of the adult population involved in early-stage population activity, while South Africa, only has a TEA rate of 10.6%.

Botes adds however that although countries, such as Nigeria, have become a hub for investment opportunities, South Africa remains Africa’s gateway to sustainable business and investment opportunities, due to the country’s infrastructure and economic structure.

“Countries around the globe are divided into factor-driven, efficiency-driven and innovative-driven economies, depending on their economic structure and development levels. Countries such as Ghana, Zambia and Nigeria, operate in a factor-driven economy, which thrives on advantages such as low cost labour and untouched natural resources. However, this type of economy is also susceptible to global economic cycles, commodity prices and exchange rate fluctuations.

“In an efficiency-driven economy, such as South Africa, an economy has become more competitive, enabling it to produce and deliver more advanced products, this aids the establishment of more sustainable businesses.”

Botes adds that job creation is also a key differentiator when comparing the countries entrepreneurial business ventures.

“In the recently released 2013 South African GEM report, it indicates that while Sub Saharan Africa displayed higher rates of TEA, only an average of 5.5% of early-stage entrepreneurs between 2001 and 2013 will create over 20 jobs. On the other hand, South Africa, which reported a lower number of TEA, indicated 14.6% of early-stage entrepreneurs will create over 20 jobs during the same period.”

Botes says that, ultimately, factors such as investment in infrastructure, access to investment capital and investor security, play a vital role in the success of a business. “While the rest of Africa is home to many growing and successful entrepreneurs, more developed and established business owners are prevalent in South Africa, due to the country’s developed infrastructure, investor security, as well as the established and successful international and local trade relationships.

He adds that the regulations within a country can also impact a business. “The World Bank’s Doing Business 2014 report, which investigates the regulations that enhance business activity and those that constrain it, revealed that it takes an average of 19 days to register a new firm in South Africa, which is roughly a week longer than it takes in higher-income countries, but 10 days less than countries in Sub-Saharan Africa. With the introduction of the Small Business Development Ministry in South Africa, with its promise to cut the red tape for SMEs, the amount of days should improve further which will bodes well for entrepreneurs in the country.

Botes says that it will however be interesting to witness the shift in factors motivating entrepreneurs in South Africa as other Sub-Saharan Africa regions continue to boom. “This can also be an important motivating factor for South African entrepreneurs to continually ensure their competitive advantage, in order to be sustainable for years to come,” concludes Botes.

Who’s the best? South Africa vs. Sub Saharan Africa entrepreneurs

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There has been much talk around the rise of the African continent and many comparisons have been made between entrepreneurship and business levels in South Africa and other African regions.

According to Christo Botes, spokesperson for the Sanlam / Business Partners Entrepreneur of the Year® competition, while some countries report higher entrepreneurship levels, this doesn’t necessarily mean that the small and medium enterprises operating within them are more financeable or sustainable than those in other regions. “It is unfair to compare entrepreneurs of different countries, as each region contains its own strengths and weakness, all of which can impact a business, either positively or negatively.”

Botes says that as an economy develops, so does its entrepreneurial opportunities, but that these opportunities differ depending on a country’s economic structure. “The recent economic boom in Africa has seen many sectors develop and expand and it therefore isn’t surprising that more individuals are exploring entrepreneurship as a possible career choice to capitalise on the continent’s expansion and growth.”

He points to the latest Global Entrepreneurship Monitor (GEM) 2013 Global report, which revealed that Sub-Saharan Africa has the highest Total Early-stage Entrepreneurial Activity (TEA) rates globally. Leading these figures are Zambia and Nigeria with 39.9% of the adult population involved in early-stage population activity, while South Africa, only has a TEA rate of 10.6%.

Botes adds however that although countries, such as Nigeria, have become a hub for investment opportunities, South Africa remains Africa’s gateway to sustainable business and investment opportunities, due to the country’s infrastructure and economic structure.

“Countries around the globe are divided into factor-driven, efficiency-driven and innovative-driven economies, depending on their economic structure and development levels. Countries such as Ghana, Zambia and Nigeria, operate in a factor-driven economy, which thrives on advantages such as low cost labour and untouched natural resources. However, this type of economy is also susceptible to global economic cycles, commodity prices and exchange rate fluctuations.

“In an efficiency-driven economy, such as South Africa, an economy has become more competitive, enabling it to produce and deliver more advanced products, this aids the establishment of more sustainable businesses.”

Botes adds that job creation is also a key differentiator when comparing the countries entrepreneurial business ventures.

“In the recently released 2013 South African GEM report, it indicates that while Sub Saharan Africa displayed higher rates of TEA, only an average of 5.5% of early-stage entrepreneurs between 2001 and 2013 will create over 20 jobs. On the other hand, South Africa, which reported a lower number of TEA, indicated 14.6% of early-stage entrepreneurs will create over 20 jobs during the same period.”

Botes says that, ultimately, factors such as investment in infrastructure, access to investment capital and investor security, play a vital role in the success of a business. “While the rest of Africa is home to many growing and successful entrepreneurs, more developed and established business owners are prevalent in South Africa, due to the country’s developed infrastructure, investor security, as well as the established and successful international and local trade relationships.

He adds that the regulations within a country can also impact a business. “The World Bank’s Doing Business 2014 report, which investigates the regulations that enhance business activity and those that constrain it, revealed that it takes an average of 19 days to register a new firm in South Africa, which is roughly a week longer than it takes in higher-income countries, but 10 days less than countries in Sub-Saharan Africa. With the introduction of the Small Business Development Ministry in South Africa, with its promise to cut the red tape for SMEs, the amount of days should improve further which will bodes well for entrepreneurs in the country.

Botes says that it will however be interesting to witness the shift in factors motivating entrepreneurs in South Africa as other Sub-Saharan Africa regions continue to boom. “This can also be an important motivating factor for South African entrepreneurs to continually ensure their competitive advantage, in order to be sustainable for years to come,” concludes Botes.

Entrepreneurship attractive on the continent

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But SA hesitant to take the leap

South Africa’s economy is projected to steadily grow with 2.7% in 2014 and 3.2% in 2015, and according to Kobus Engelbrecht, spokesperson for the Sanlam / Business Partners Entrepreneur of the Year® competition, this growth will result in many opportunities for local entrepreneurs. He says that as South Africa’s economy grows, so will the amount of business opportunities available for entrepreneurs to take advantage of.

“South Africa currently offers many new and exciting opportunities for entrepreneurs. However, in order to capitalise on these opportunities, the country’s entrepreneurial spirit needs to be both promoted and encouraged amongst the public.”

The recently released Global Entrepreneurship Monitor 2013 Global report, which measures the levels of entrepreneurial activity between economies, revealed that in the Sub-Saharan African (SSA) region an average of 69% of all respondents believe that there are opportunities available to start a business, 47% have intentions to start a business and 74% are confident in their own skills to start a business.

Engelbrecht says that these figures are extremely encouraging for the growth of an entrepreneurship culture in the region, yet South Africa – ranked as the largest economy in Africa by the World Bank – achieved levels below average in these categories. He says that when taking a closer look at the attitudes and perceptions of South Africa, the report reveals that despite slight increases from 2012, perceptions of entrepreneurship in South Africa remained rather low.

“The 2013 report reveals that only 37.9% (up from 35% in 2012) of respondents believe that there are opportunities to start a business in the country, and 42.7% (up from 39% in 2012) believe that they possess the perceived capabilities to open and run a business. These figures highlight the need for a culture of entrepreneurship to be fostered as opportunities are abound and many individuals possess entrepreneurial characteristics. Awareness around how to capture these opportunities and how to develop these skills just need to be created.”

The report also revealed that SSA had the highest average of Total early stage Entrepreneurial Activity (TEA), which refers to those individuals in the process of starting a business and those running new businesses less than 3.5 years old, when compared to the other global regions.

“While SSA reported an average of 26.6%, South Africa’s TEA is however only 10.6%, and the lowest in the SSA region.”

The report also revealed that South Africa’s established business ownership rate is only 2.9%, which ranks the country last in the SSA region. When comparing South Africa to Brazil, a fellow BRICS economy, the country reported an average of 17.3% and 15.4% for TEA and established business ownership rate respectively.”

While TEA contributes to dynamism and innovation in an economy, established businesses are an important source of stable employment for the economy. Engelbrecht says South Africa’s low business ownership rate is concerning.

“These figures need to remain balanced as while it is important that entrepreneurship is promoted, it is also key to support business growth in order to ensure that SMEs survive the first three year of existence, which are the most risky.”

“Government has acknowledged that small businesses play a pivotal role in job creation and economic growth, and in order to grow both these numbers, investment into small business must be provided. As a result training development initiatives offered by Government, such as Small Enterprise Development Agency (Seda), have been put in place to assist with the development of entrepreneurs and therefore minimise risk.”

He says that the culture of entrepreneurship in the country is growing slowly and it is starting to be viewed as a legitimate career option. “The 2013 report highlighted that 74% of respondents in South Africa, believe that entrepreneurship is a good career choice.

“While many respondents regard entrepreneurship in a positive light, this doesn’t always translate into individuals actually starting a business. Fostering a culture of entrepreneurship in the country and promoting entrepreneurship as a career path, along with support and advice on how to turn an idea into a reality, is important for improving entrepreneurship levels in the country.

“Individuals starting their entrepreneurial journey do however need to be aware of the challenges they may face so that they are prepared for the ups and downs of running a business. Although they may experience bumps along the road, it will be the most rewarding challenge they have ever undertaken,” concludes Engelbrecht.

Ministry of entrepreneurship necessary in SA

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Entrepreneurial leader, Mark Lamberti, recently called for the creation of a Ministry of Entrepreneurship in South Africa at the recent Sanlam / Business Partners Entrepreneur of Year® competition launch. This was echoed by Professor Dilip Garach, of Garach & Garach Financial Advisory Services who called for a Small Business Ministry to be established locally.

According to Nazeem Martin, MD of Business Partners Limited and spokesperson for the 2013 Sanlam / Business Partners Entrepreneur of Year® competition, following President Jacob Zuma’s State of the Nation speech last week, which referenced government programmes that support small business, the formation of an entrepreneurial Ministry would be a significant step forward in tackling SA’s unemployment crisis.

Martin says that he endorses these proposals and says that the efforts that are currently being made to support and grow entrepreneurship do not seem to be effective enough, as South Africa’s ranking in various entrepreneurial reports still seems to be slipping.

According to Professor Garach, it is evident that government understands that small and medium enterprises (SMEs) are an important source of jobs. “Minister Gordhan said in his Budget speech of 2011 that businesses which employ fewer than 50 workers account for 68% of private sector employment. But the government has shown very little commitment towards solving problems that directly impact on experienced entrepreneurs and small businesses.”

He says that South Africa recorded a 7% total early-stage entrepreneurial activity (TEA) level in 2012, which is a 2 percentage point decrease from the 9% recorded in 2011. “While South Africa is better off than it was in 2004 when the TEA level was at 5,4%, the country still has much to work towards.”

Professor Garach says that an entrepreneurial Ministry will be able to focus on reducing the cost of doing business, simplify the current business registration process and SME tax system, create access to finance and create appropriate incentives for South African entrepreneurs.

He says that a step in the right direction may also be government entering into a public / private partnership in order to set up an entrepreneurial academy. “The academy could develop schools that focus on entrepreneurship, as well as provide education in business skills and promote mentorship and training.”

He says that in 1995 Malaysia formed the Ministry of Entrepreneur Development, which clearly demonstrates the importance that the Malaysian government places upon the issue of entrepreneurship and entrepreneurial development. “The Ministry acts as the lead agency for the development of entrepreneurs as well as to co-ordinate entrepreneurship activities in general.”

Among the specific services currently offered by the Ministry are a one-stop entrepreneurship information centre, franchise and vendor development programs, entrepreneurial training, and subsidised business premises for qualified entrepreneurs.

He says that other examples of economies that have implemented this type of body include the US, which has a Small Business Administration Cabinet position which arranges loans, loan guarantees and other assistance to small businesses, as well as Croatia, which has implemented a Ministry of Economy, Labour and Entrepreneurship, which carries out proactive employment policies.

“The SA government target was to create five million jobs by 2020. Although it may not be possible to create this amount of sustainable jobs in the long-term, government however can create an enabling environment to set up one million entrepreneurs who then in turn create five million jobs,” concludes Professor Garach.