Business Day columnist Tim Cohen yesterday lamented the state of entrepreneurship in South Africa, saying we have too much of the wrong sort. Stephen Grootes obliquely backs him up in this regard in this morning’s Daily Maverick. Both columns are worth reading.
Cohen says the latest Global Entrepreneurship Monitor makes or worrying reading. The study, conducted by the University of Cape Town’s Centre for Innovation and Entrepreneurship (CIE), based at its Graduate School of Business, shows a 40% fall in the number of start-ups last year compared with the previous year. It also warns that existing entrepreneurs are struggling to survive.
CIE director Mike Herrington says the problems facing entrepreneurship in SA can be divided into long-term and short-term issues. The long-term issues include several we already know lots about; education, crime and unemployment, says Cohen. “The poor education level — both historical and at present in SA — is a substantial issue which, of course, extends well beyond the ambit of entrepreneurship. However, the other big headache — crime — is much more important than commonly thought, and this problem worsened due to the recession. Crime statistics for 2008 -09 indicate a 45% increase in robberies at small businesses. Overall, more than 70% of robberies targeted small businesses last year. The high level of crime was ranked as the second-most problematic factor for doing business in SA in last year’s survey.”
Access to finance is often cited as a problem but, in fact, says Herrington, SA is in no worse a position in this regard than most other countries. The problem, or at least the short-term aspects of the problem, can to a certain extent be attributed to problems of an onerous regulatory environment. Reducing the amount of red tape has been the subject of at least three budget speeches and two state of the nation speeches, but Herrington says little has been achieved.
The biggest problem, however, is culture. The study shows that SA was included among the 10 Global Entrepreneurship Monitor countries with the highest share of pessimistic entrepreneurs last year. “In SA, entrepreneurial activity continues to be hindered by a poor skills base as well as severe environmental limitations including poverty, a lack of active markets and poor access to resources,” the UCT wonk said. “It is, therefore, perhaps not surprising that many South Africans do not regard entrepreneurship as a positive and viable career choice,” Herrington says.
Adds Cohen: “Too many young South African s regard going into politics as the entrepreneurial effort most likely to be fruitful. That perception, not entirely false as it happens, is severely depressing the level of real entrepreneurship — and that is not a small problem by any means.”
I can but agree, as does Grootes, writing about the governing African National Congress’ upcoming policy-making National General Council in September. Writing about the national tenderpreneur-in-chief, ANC Youth League President, Julius “Juju” Malema, he implies there is a growing cohort of young people who see politics, as much as preferential access to government tenders via “political connectivity”, as the road to riches.
That cannot be good.