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By Sinazo Mkoko

While the COVID-19 pandemic has seen affected businesses in the country, with others permanently shutting down, entrepreneurial intentions are more prevalent in South Africa and the total early-stage entrepreneurial activity in the population is increasing positively.

This is according to the latest Global Entrepreneurship Monitor South Africa (GEMSA) released last week by the Stellenbosch Business School in partnership with the Global Entrepreneurship Monitor and the Small Enterprise Development Agency (SEDA). The global monitor is a large-scale international research collaboration that measures entrepreneurship and its associated characteristics in a manner that is consistent over time and space. The research programme has measured entrepreneurship in 120 countries for the past two decades, covering all geographic regions and all economic levels and the annual reports have gained widespread recognition as the most informative and authoritative longitudinal study of entrepreneurship globally. 

The report looks at societal attitudes and self-perceptions regarding entrepreneurship, reviews overall entrepreneurial activity and provides profile demographics on current South African entrepreneurs. 

“Entrepreneurship has a pivotal role in achieving inclusive economic participation, a renewed economic vibrancy and overall economic growth in South Africa. Building a deep culture of entrepreneurship requires reflection on our current status as a country, a vision for the future, and developing strategies that enable policies to help achieve this,” the report said.

Director and Professor at the Stellenbosch Business School, Mark Smith, said the potential for entrepreneurship to contribute to economic development and greater inclusion and to promote a more vibrant economy is enormous for South Africa. 

“Other encouraging signs are that entrepreneurship rates continue to rise for women and young people. Entrepreneurship is not a single magic bullet to address all economic and social challenges. Yet, it should be a key part of a coordinated strategy for growth and the creation of decent work,” he said. 

The report also indicated that societal values regarding entrepreneurship in South Africa showed a very positive upward trend over the period 2003 to 2021. “Specifically, there has been an increase from 2017 to 2021 in the number of individuals who see entrepreneurship as a good career choice (from 69.4% to 81.8%) and who consider a high status attributed to successful entrepreneurs (from 74.9% to 81.9%).” 

On Entrepreneurial intentions in South Africa 2003-2021, the report showed that 20% of the adult population not involved in any entrepreneurial activity indicated that they intend to start a business in the next three years. “While this is significantly higher than reported in 2019 (11.9%), South Africa is still lagging behind the average of the African region (40.6%) and that of level C Economies (38%). On a positive note, we are slowly closing the gap considering the global average, which stood at 23.4% for 2021.”

“The increase to 20% reported in 2021 might be due to the COVID-19 pandemic where people have contemplated starting a new venture due to the push effect (pushed into entrepreneurial activities due to negative factors such as losing formal employment or not being able to find new employment) or the pull effect (emerging opportunities, new market demands or the need for innovation and the disruption of existing business models).”

It was stated that women and youth in entrepreneurship are critical levers for economic growth and development, both in South Africa and other African/developing countries. “Research evidence indicates that economic participation by women has wide-reaching impacts on and long-term benefits for local communities as well as overall economic growth.”

“While traditionally, the business world, including the world of new businessmen, has been advantaged, successive GEM reports have shown that this landscape is changing in some countries. Closing the gender gap and providing the necessary support to increase women’s entrepreneurial activity would substantially increase the number of new businesses as well as provide new jobs and income opportunities, often to those who need them most.”

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The report also indicated that societal values regarding entrepreneurship in South Africa showed a very positive upward trend over the period 2003 to 2021. “Specifically, there has been an increase from 2017 to 2021 in the number of individuals who see entrepreneurship as a good career choice (from 69.4% to 81.8%) and who consider a high status attributed to successful entrepreneurs (from 74.9% to 81.9%).” 

On Entrepreneurial intentions in South Africa 2003-2021, the report showed that 20% of the adult population not involved in any entrepreneurial activity indicated that they intend to start a business in the next three years. “While this is significantly higher than reported in 2019 (11.9%), South Africa is still lagging behind the average of the African region (40.6%) and that of level C Economies (38%). On a positive note, we are slowly closing the gap considering the global average, which stood at 23.4% for 2021.”

“The increase to 20% reported in 2021 might be due to the COVID-19 pandemic where people have contemplated starting a new venture due to the push effect (pushed into entrepreneurial activities due to negative factors such as losing formal employment or not being able to find new employment) or the pull effect (emerging opportunities, new market demands or the need for innovation and the disruption of existing business models).”

It was stated that women and youth in entrepreneurship are critical levers for economic growth and development, both in South Africa and other African/developing countries. “Research evidence indicates that economic participation by women has wide-reaching impacts on and long-term benefits for local communities as well as overall economic growth.”

“While traditionally, the business world, including the world of new businessmen, has been advantaged, successive GEM reports have shown that this landscape is changing in some countries. Closing the gender gap and providing the necessary support to increase women’s entrepreneurial activity would substantially increase the number of new businesses as well as provide new jobs and income opportunities, often to those who need them most.”

The report warned: “There are emerging indications that women-led businesses may have borne the brunt of the impacts of the pandemic, so some of the progress made towards greater gender equality in entrepreneurship in recent years may be jeopardised in the near future. For example, women entrepreneurs were most affected as a result of lockdowns and restrictions since they were mostly the ones managing both the absence of childcare and school closures.”

Sources:

https://www.usb.ac.za/wp-content/uploads/2022/07/GEM-SA-National-Report_Online_July-2022.pdf

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