SA's Entrepreneurship Levels - Some Good News

South Africa ranks second in Africa, and other highlights from the GEDI report


South Africa's entrepreneurship levels may not be as bad as previously believed. According to findings of the recently launched 'Entrepreneurial Ecosystem of South Africa: A Strategy for Global Leadership Report', South African entrepreneurs continue to make good strides with entrepreneurial activity and its continental peers. 

South Africa was ranked 55 out of the 137 countries surveyed globally. The ranking places Botswana in first place from Africa, followed by South Africa, Namibia, Gabon and Ghana.  

The report was commissioned by the Allan Gray Orbis Foundation and the South African Breweries (SAB) Foundation and was done by the Global Entrepreneurship and Development Institute (GEDI) - a research organisation that studies entrepreneurship and economic development. They covered 28 countries in the Africa region.

Launched this week at the Global Entrepreneurship Congress (GEC), the report questions the Global Entrepreneurship Monitor’s (GEM) 2016 South Africa report, which, at the time stated that entrepreneurial activity in the country was at an all-time low.

The GEM report stated that the number of entrepreneurs in the country had declined during 2015 to 2016 and entrepreneurial intentions in SA had dropped by almost 30% in 2015 compared to 2013. 

According to the two organisations, the new report was an attempt to offer a more balanced and accurate portrayal of entrepreneurship.

"The intention was also to benchmark South Africa globally, celebrate achievements and strengths, and to assess areas for improvement so as to know how best to guide resources and policy in the coming years," they state in a press release.

'An alternative view'

Anthony Farr, CEO of Allan Gray Orbis Foundation, and Bridgit Evans, SAB Foundation director say the new findings were not a surpriseThe GEM findings didn't correlate with what they were seeing within their own organisation.

Evans' organisation invests in local entrepreneurs through various initiatives with the aim of igniting a culture of entrepreneurship in South Africa. 

"We work with approximately 80 new entrepreneurs every year and have positive experiences of innovation and growth, along with a well-developed (if a little fragmented) entrepreneurship ecosystem. We have struggled to reconcile this with some misconceptions regarding South Africa’s lack of entrepreneurship and our perceived poor performance against other countries.  

"Along with Allan Gray Orbis Foundation, we wanted to give an alternative view. We are pleased with the results, which show that South Africans can congratulate themselves and be proud of what has been achieved in the entrepreneurial space, while still being realistic about what needs to improve in order to drive economic growth and job creation," says Evans.

​Farr's foundation works with entrepreneurs to provide access to education and entrepreneurial development.

"We have over 800 potential and actual entrepreneurs in our system, where we are developing this pipeline. So it's very important for us to understand what are the opportunities, what are the challenges in the ecosystem.  That helps us to better support these entrepreneurs, so that was the overlying reason for the research, to assist us in our work with our Allan Gray fellows and scholars.

See also: Why SA SMEs can expect better prospects in 2017

"There were things happening entrepreneurially in this country and yet there was a sense actually that South Africa didn't compare to other countries, that it was maybe the worst in Africa. It was all these different messages coming out and so we couldn't quite understand that," says Farr.  

He continues: "It confirmed what we thought, but now we have hard evidence, it's not just anecdotal which is very exciting. I think what did surprise us was, in terms of our conditions for entrepreneurship, South Africa has better conditions than at least 20 other countries that have higher per capita GDP than us."

It's not all good news, however -  the report also highlights some challenges and bottlenecks that still exist including the lack of startup skills, access to talent and access to risk capital. 

"We can't deny that there are still challenges, and those weren't complete surprises either, our human capital is essentially our weak point and we know that we need to work on that. What's interesting is that it gave some more insight into some of the other gaps," says Farr. 

Highlights from the report  

The good news

1. South Africa has been named one of sub-Saharan Africa’s entrepreneurial front runners, the report places the country in second place, after African counterpart Botswana. 

2. The report demonstrates the country’s position globally when it comes to new businesses, competitor position, new businesses offering new products and new businesses using new technology, and ranked the country in the top 25 percent of countries surveyed globally in these areas.

3. South Africa performs better in the report in the following: entrepreneurial aspirations, innovation, high growth, internationalisation and risk capital, which are the pillars that lead to economic growth. 

4. According to the report SA is also very strong on the depth of its capital markets, performing in the top 20 percent of countries. It also performs in the top 20 percent of countries for new products and new technologies and is a leading economy in terms of risk perception and competitiveness and regulation.

5. The report states that entrepreneurs in South Africa have overcome structural factors, including the country’s slow GDP growth rate and the number of large firms dominating the business market to produce some of the most successful enterprises on the continent.

Also according to the report, the country is poised to achieve further growth in years to come through entrepreneurship and indicates that South Africa is on par with other middle income countries around the world when it comes to entrepreneurship, and provides the institutional support necessary for high-growth businesses to startup and thrive.

6. The country provides better conditions for entrepreneurship when compared to 20 other countries with a higher per capita GDP, including Russia, Mexico, Brazil and China. 

Ongoing challenges

1. There are still factors that hold back South African entrepreneurship which can be narrowed down to these areas. They are: finance of new and growing firms, access to markets for firms both domestic and international, skills, education, networks and culture, regulation/ red tape and human capital. 

2. While South African institutions are strong relative to African countries they are rather weak compared to developed countries. 

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