The biggest challenges that slow the growth of local entrepreneurship is black economic empowerment (BEE) and tentative venture capital investment by large organisations.
This was one of the highlights revealed by local business experts at the third State of Entrepreneurship Summit, hosted by Endeavor SA, in partnership with FNB and SAP.
Vinny Lingham, CEO and founder of Yola, said: “The problem is that BEE stifles entrepreneurship.
“BEE takes away the power of small companies, because the talent is being sucked up by large corporates in order to match their BEE quotas; which offer higher salaries that a start-up cannot compete with. Another challenge that we have is that angel investors put their money into a start-up, but there's no follow-through in financing. The money is there, but venture capitalists are trained to avoid risk.”
According to Malik Fal, MD of Endeavor SA, entrepreneurship is the only way for SA to create jobs and transform its growing economy. “There is a correlation of how entrepreneurial a country is and the average level of economic income.
“SA is an emerging market, where it has a formal corporate sector, but big pockets of informal and rural economies. As companies begin to formalise, we see a surge in entrepreneurship because there's more per capita income and opportunities that emerge.”
According to Fal, the percentage of skilled entrepreneurs in the 18 to 64 age category in SA increased from 5.9% to 8.9% from 2009 to 2010. In comparison, Brazil grew from 15.3% to 17.5%. The global average rose from 11.2% to 11.7% during the same period.
He said SA is starting to see some traction in the entrepreneurial market, and while last year's Soccer World Cup played a part to spur this growth, start-ups have gained momentum more out of necessity.
Fal said that around 67% of businesses try again after they've failed. “Culture and attitude indicators are more important than any other indicators to explain entrepreneurship performance and success.”
Derek Kudsee, COO of SAP SA, noted that companies must foster a culture of innovation and 'intertrepreneurship' within their organisations and channel ecosystems. “I think that SA is trying to replicate entrepreneurship that's a global phenomenon from Western economies. We need to be entrepreneurial about entrepreneurship and explore the role of local small business.”
He added: “I think we need to encourage the mentality of self-employment versus the whole persona of what the entrepreneur should look like and [how it should] behave. It's not how much you know; it's what you do and how much you do. You don't need to invent Google to be an entrepreneur; entrepreneurship is available to each and every person, every single day.”
According to Frikkie Herbst, professor in marketing management at the University of Stellenbosch Business School, Cape Town is regarded as the entrepreneurial hub and Stellenbosch as the Silicon Valley of SA. “The wealth is there as well as the opportunities, but there needs to be more mentorship and infrastructure to support entrepreneurship.”
This week sparks Global Entrepreneurship Week, an initiative created by the US-based Kauffman Foundation to establish entrepreneurship as the leading force for sustainable economic development in emerging countries.
Share