This is according to Mark Paper, Chief Operations Officer at Business Partners International (BUSINESS/PARTNERS), following the recent publication of the 2017/2018 Global Entrepreneurship Monitor's (GEM) Report, which ranked South Africa’s entrepreneurial spirit at 42 out of 54 countries. While the report showed some positive signs for South Africa, including that the country’s entrepreneurial activity is at its highest level in recent years, Paper states that South Africa’s low ranking is an indication that more still needs to be done to lay the groundwork for entrepreneurship and small business development in the country.
The positive news is that total early-stage entrepreneurial activity in South Africa is at 11%, which is an improvement of over 4 percentage points compared to the 6.9% recorded in 2016. These numbers are however still relatively low, and even with entrepreneurial activity showing such a substantial increase, it is still ranked only 27th of the 54 countries surveyed.
“We believe that some of this improvement is due to the slight uptick in economic outlook in South Africa during 2017. There has also been a realisation on the need to promote small businesses in the country, as well tax relief for small businesses which has probably had a positive impact on the sector. A lot of work has also been done to improve access to business funding and to create an easier regulatory environment.”
However, Paper states that there are still some significant barriers that could continue to keep South Africa’s GEM ranking at its current disappointing position. “This research highlights that the quality of entrepreneurship in South Africa is weaker than in other African countries. Looking at the calibre of South African SMEs’ housekeeping, governance, innovation and ability to function in a regulatory environment, I would however, disagree with this notion,” he says.
“We need to change the way we view entrepreneurship as a country, getting over the mind-set that entrepreneurship is a back-up plan but rather an inspiring and viable career choice. Entrepreneurship should be celebrated and rewarded, and these exceptional individuals should be rewarded for their contributions to the economy. This is probably one of the most effective methods of getting more South Africans interested in entrepreneurship as a career.”
In addition to this, Paper states that Government also has a role to play, and by working to further improve the regulatory environment for businesses, a significant impact can be made. “There has been some movement in this regard, the regulatory environment is still a major challenge for many South African SMEs. For example, there are some 39 steps - from registering a company to registering for VAT - that SMEs need to go through in order to become real businesses. If we look at some of the countries that feature higher up on the GEM list, we note that one of the reasons for improvement is that many of them are moving toward simplifying regulations and reducing red tape. Fortunately, it seems that with the recent changes in South Africa’s leadership there is also an increased drive to address these challenges.”
Lastly, Paper says that while all stakeholders need to continue to work together to lower the barriers to entry for SMEs in the country, the report provides hope for the industry over the coming years. “If the trend of entrepreneurial activity improving in South Africa continues, there is a good chance that other indicators can increase significantly in the near future,” Paper concludes.