Entrepreneurship, with its potential for job creation and economic growth, is often cited as a solution to South Africa’s high unemployment rate. However, the lack of quality education as a solid platform upon which to develop entrepreneurs is a major impediment for small business development in the country. The South African Institute of Chartered Accountants’ 2015 SME Insights Report found that small, medium and micro-sized enterprises (SMMEs) also list government-generated red tape, BBBEE Codes, labour laws, rising growth finance and tax laws as obstacles to growing their businesses.
Overview of CSI spend
Entrepreneurs and small businesses were supported by 33% of companies and received 5% of CSI expenditure in 2016.
Guidelines for effective funding
- Establishing business hubs that focus on a single sector or type of product line can be very effective. Through these hubs, resources can be pooled, innovation encouraged, skills transferred, information exchanged and a platform for networking provided by pulling entrepreneurs into each other’s orbits.
- Incubator and entrepreneurial programmes with a higher entry threshold generally have improved outcomes and impact. However, this marginalises entrepreneurs with limited education, experience and resources.
- Banks tend to view SMMEs as risks rather than opportunities. Cash flow is often a problem, so funders can play a role in offering favourable terms, such as shorter settlement terms and providing access to partners who may be able to offer discounts. Funders can also work with enterprise development colleagues to leverage their ability to remove barriers to accessing finance and resources.
Big picture figures
- According to the Bureau for Economic Research’s (BER) 2016 report, titled The small, medium and micro enterprise sector of South Africa, the number of SMMEs in South Africa increased by only 3%, from 2.2 million in the first quarter of 2008, to 2.25 million in the second quarter of 2015.
- According to the same BER report, the contribution of SMMEs to South Africa’s GDP increased from 33% in the fourth quarter of 2010, to 42% in the first quarter of 2015.
- Based on the 2015/16 Global Entrepreneurship Monitor (GEM) report, entrepreneurial intentions in South Africa dropped from 15% in 2013 to 11% in 2015, and almost halved when compared to 2010.
- The number of South African adults who regard entrepreneurship as a good career choice increased from 70% in 2014 to 74% in 2015.
- The 2015/16 GEM report also showed that, in 2015, 62% of small businesses closed because either they were not profitable or they encountered problems in accessing finance to sustain the business.
- Compared to 2013, entrepreneurs in 2015 were almost four times more likely to anticipate no job creation besides their own self-employment, according to the 2015/16 GEM report.
- The 2015/16 GEM report also found that the most entrepreneurially active South Africans are aged between 25 and 44 years, accounting for 50 to 60 percent of all early-stage activity.
- The gender gap in terms of entrepreneurial involvement widened from eight women for every ten men in 2014, to six women for every ten men in 2015.
- According to the World Bank, in 2015 South Africans required 46 days to start a business, compared to the initial 36 days needed in 2003.