South Africa: Fertile Ground for Entrepreneurship

Ernst & Young have released the EY G20 Entrepreneurship Barometer 2013 that determines the best places to be an entrepreneur amongst the #G20 countries. While the survey is limited, it does highlight a positive aspect of the South African economy that is often missed in the general panic about the country’s economic performance. South Africa ranks well in the survey, outperforming other emerging economies in the G20 in categories such as “access to funding” and “tax and regulation”.

The EY survey has grouped the G20 countries into four quartiles, with the first quartile representing countries that lead in the fostering of entrepreneurship. This group includes the United States, United Kingdom, South #Korea, #Australia and #Canada. South Africa ranks in the second quartile with the likes of Germany and Japan, beating out its BRICS partners, who feature in the third and fourth quartiles.

The EY survey rates countries on five areas, “access to funding, “coordinated support”, “education and training”, “tax and regulation” and “entrepreneurship culture”. South Africa performs above the G20 average on all areas except on entrepreneurship culture. Entrepreneurs surveyed all felt that it was difficult to find finance in their countries; however it is positive to see that South Africa ranks at six, ahead of France, Japan, and South Korea in this area. Governments are encouraged to provide a range of mechanisms that will enable entrepreneurs to source various forms of capital to support their businesses. This area has been identified as an important area for improvement in G20 countries.

South Africa has created institutions to fill the gaps in capital generation left by traditional organisations. The state has eight national funding institutions including the Industrial Development Corporation (IDC) and the National Youth Development Agency, as well as various provincial agencies. Tax and regulation are other important points listed in the survey, and South Africa is ranked at five in this area, ahead of the likes of Australia and Germany. The survey shows entrepreneurs are a lot more positive about the regulatory system in South Africa and don’t feel that entrepreneurial opportunities are restricted by tax or regulation. South Africa ranks above the G20 average on tax and regulation but falls below the average on government incentives.

This survey’s results are a reflection of the diversity of perceptions about Africa’s largest economy. Whilst South Africa tends to get pilloried in the media and in business circles about restrictive policies, the country remains one of the best places to do business in emerging markets, with strong financial institutions as well as a comprehensive legal regime to protect business. South Africa has had a fertile entrepreneurial environment that recently spawned the likes of #Mxit, a social media platform giving global giant Facebook a run for its money amongst young mobile users in Southern Africa. South Africa has also bred innovators such as Mark Shuttleworth, who is making his name in software development with the open-source operating system #Ubuntu. While there remain a number of policy lapses that do hinder entrepreneurship, these are often acknowledged by the South African government which has established a number of institutions to support small business and entrepreneurs with advice, technical assistance as well as financial aid.

In its survey Ernst&Young recognises the importance of entrepreneurship as an engine of growth. Entrepreneurs are viewed as important agents of change in developing new products, business models and industries, as well as creating jobs. While big business will remain the major contributor in terms of jobs and revenue in the economy, increased entrepreneurship in South Africa would go a long way in resolving the challenges of poverty, inequality, and unemployment that plague the country.

Whilst the perception of South Africa as a friendly environment for entrepreneurship is very positive, there is still a lot of progress to be made in closing the opportunity divide in the country. The high unemployment rate amongst youth in South Africa puts the country in a perilous situation. Government programmes are still not reaching large numbers of young people and there is a perception that one has to be politically linked to receive the benefits of state funds.

 The route of entrepreneurship is a great way of occupying the energies of a youthful population that may feel it has no stake in modern South Africa. South Africa’s ranking within the G20 entrepreneurship should encourage the government to find ways to ensure that entrepreneurship is a viable route for many more South Africans. This will lighten the burden on the state, which has to fund the welfare of millions who are unemployed.

Originally published on the africapractice blog: http://www.africapractice.com/blogposts/page/30/?id=2883