Tackling South Africa’s Entrepreneurship Roadblocks

by Jace | May 28, 2010 | Entrepreneurship

The first paragraph of a report published by the University of Cape Town: General School of Business in 2002 reads as follows.

“South Africa is less entrepreneurial than other developing countries, a fact which could impact negatively on the country’s economic growth and job creation prospects. According to the 2002 Global Entrepreneurship Monitor (GEM), released at the United Nations last week, South Africa is below the average rate of entrepreneurial activity when compared to the 36 other countries taking part in the survey and ranks lowest of all developing countries including Chile, Brazil, Mexico, India, Argentina and Thailand. [i]”

Which poses a very important question. Why is that? And have things changed under Mbeki and Zuma? For the most part, a lot of people would say no, while others hope that the upcoming Wolrd Cup will be the answer to all their problems. We know that this is however not so, and it is necessary to identify and remedy the various problems that plague South Africa’s entrepreneurial climate and provide a clear path for future entrepreneurs to have the environment necessary to actualize their business ideas and to foster development in new enterprise.

PROBLEM RECOGNITION

Charting the Bureaucratic Red Tape – The report “Counting the Cost of Red Tape” – November 2004 identifies the first and by far the most severe of the problems associated with entrepreneurialism in South Africa is just this, red tape. Decentralized regulatory environment, lack of information, and high costs all create a climate that is disadvantageous to the entrepreneur.

A life less Educated – deeper problem rests in the lack of skilled labor. Companies cannot adequately grow if labor requirements for growth are not met, training of individuals is an option, and the South African government has made stipends to foster training within organizations, however, the lack of information regarding these programs, and the risks that entrepreneurs are taking by creating their own businesses coupled with risk associated to the expenditure of time for training has to be taken into consideration as well; here we talk about local based SME’s – if you’re looking at something akin to an international business model, the problems run even deeper, especially considering many well educated South Africans have emigrated abroad diminishing the country’s talent pool.

Show me The Money – While there is plenty of capital in South Africa, the problem rests with acquiring it – aside from X seed funds are far and between – and BA / VC activity heavily lags behind other growing companies.  There are however a few initiatives for Entrepreneurs worth looking into.

The Small Medium Enterprise Development Program (SMEDP) – a cash, tax free, grant for new investment and major expansion project. It is capital investment based and is receivable over a three year period, with a maximum level of R100m for the level of qualifying assets.

A Foreign Investment Grant (FIG) – Coexisting to the SMEDP, the FIG is available to refund relocation costs of plant and equipment shipped to South Africa from abroad.

Skill Support Program (SSP) – a supplement to an approved SMEDP project which provides subsidies to training and personnel development costs. It is provided in conjunction with the South African Department of Labor [ii].

And although they are there, they are also subject to the same problems of red tape.

Where the Roads Have no Names – Infrastructure is key to any economy and more so a growing one. But aside from road and rails, what South Africa needs more than anything is an adequate IT infrastructure. Drastic changes, deregulation, and private investment in the sector are key in facilitating easier access to information by and for potential entrepreneurs; speeds, lowered costs, and widespread access are KSF’s (Key success Factors) to fostering any real business development in the country.

How do we tackle these issues and help foster growth in entrepreneurial activity within South Africa? We’d like to as you, and we’ll have our own answer this coming Monday.