Some of the major obstacles facing the growth of the SME sector in South Africa include school and university teaching of the ‘science’ of entrepreneurship instead of the practical aspects of owning and operating a business, as well as a lack of business and financial skills among entrepreneurs. This is according to a new report released by the South African Institute of Professional Accountants (SAIPA).
Perhaps the most pressing issue, the report continues, is the need for an efficient schooling system that provides high-quality education for all citizens. This, it states, is ‘’undoubtedly the most cost-effective way of supporting South Africa’s long-term economic growth and development’’. The incorporation of the essential practical elements of entrepreneurship into the curriculum should be reinforced, it recommends.
Greater focus, the report states, is also needed on initiatives that develop the financial and business management skills of entrepreneurs, supported by the government and promoted through public-private partnerships.
Factors that would create a more enabling environment would be mentorship programmes that connect aspirant businesspeople with mentors, and development by universities of the ‘science’ of entrepreneurship, including measuring the impact and efficacy of mechanisms introduced by policymakers to ensure that scarce resources have the best possible effect on the promotion of entrepreneurship and job creation.
In addition to lack of skills and inadequacy of business education, the report cites other barriers to small business success as difficulty in obtaining finance and a lack of knowledge of available funding options. ‘’A government-led task team should collaborate with banks to develop a credit bureau to overcome issues of asymmetric information and facilitate lending to entrepreneurs and small and medium enterprises,’’ the report recommends.
“South Africans are told repeatedly that entrepreneurs hold the key to employment creation and economic prosperity,’’ says Thomas Höppli, Economic Research Analyst at SAIPA. ‘’Yet, five out of seven small start-up businesses fold in the first year. Clearly, South African entrepreneurs need a far more conducive environment to realise their potential.’’
The SAIPA Entrepreneurship Report, which was compiled following consultation with a wide range of stakeholders, examines the current situation and seeks solutions. It is the first independently produced report of its kind on entrepreneurship in South Africa.
‘’The Global Entrepreneurship Monitor (GEM) reveals that entrepreneurial activity in South Africa falls short of that in other comparable economies,’’ he says. At 2,3%, South Africa’s rate of established businesses is the second lowest of 69 economies surveyed in 2012.
‘’Many people have brilliant ideas, but lack the business and financial skills to translate them into viable and sustainable businesses,” says Höppli. ‘’The fear of failure, which carries a social stigma, is another obstacle. We can learn from countries in which entrepreneurs are admired for their courage, even if they fail at their first attempt.’’
More focus should be placed on the promotion of the potential rewards of starting one’s own business and on strengthening the profile and prestige of the entrepreneur. Celebrating women in business and increasing the visibility of government initiatives targeting women in small businesses will also help to encourage greater female entrepreneurship.
The report also advocates alignment of the proposed Business Licensing Bill with the Tax Administration Act to avoid duplication of efforts and increased compliance costs. This is just one area where unnecessary red tape for entrepreneurs and small business owners could be avoided and reduced.
South African Institute of Professional Accountants (SAIPA)