Economy cannot be kickstarted without small business start-ups

You cannot kickstart the economy without start-ups, but in a country that celebrates small business’ role in economic success, South African start-ups still face a litany of challenges that cripple the ambitions of entrepreneurs.

A study by the Small Business Institute revealed that only around 30% of small businesses in South Africa survive beyond their first year, while research by the University of the Western Cape found that South Africa has the highest start-up failure rate in the world.

However, most of these challenges can be overcome, says Chris Govender, co-founder and COO of start-up turned successful medium-sized business, Rentoza, that was started by four friends with a vision and now employs 112 people after only three years and has already received funding worth R120 million.

“The start-up landscape may be tough, but it is crucial for our country’s economic success. Take it from someone who has been down that road. There is always a way to overcome,” says Govender.

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Challenges for small business start-ups

One of challenges start-ups always face is funding. “Funding is hard to access when you are growing and stringent vetting criteria from financial institutions certainly do not help. Start-ups often have to graduate to larger funding pools with good rates, consistent cash flow and financial management.”

South Africa faces numerous economic challenges and Govender warns that start-ups will be the first to feel the pinch. “As our country relies heavily on direct foreign investments, negative economic factors shrink funding pools. It is difficult to find the right partners who align with your ambitions and specifically for us, partners who share our risk appetite.”

Govender says in general the aversity to risk causes a lot of tension when backing a start-up, as businesses are expected to have a proven working business model with solid traction before you can access the funds you need to take your business to the next level.

He says skills are also an issue as talent in South Africa are all too comfortable to put their roots down in a corporate. “The start-up journey is challenging and not for everyone. There is an element of risk that can be scary, but the reward can be more than anything most corporates can give you.”

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Promising startup landscape in SA

Despite these challenges, Govender says the start-up landscape in South Africa is diverse and promising, with most start-ups focusing on fintech solutions, ranging from financial data extraction to payment ecosystems.

Agritech is also experiencing tremendous growth, with companies solving agricultural challenges through innovative technologies for scaled farming and crop management. Govender says edtech has also seen a surge in growth since the pandemic, while logistics and last-mile solutions are steadily developing to meet consumer needs.

To overcome the challenges faced by start-ups in South Africa, Govender advises entrepreneurs to adopt several strategies. Firstly, it is crucial to identify limited resources and setting clear objectives, followed by prioritising the top three initiatives and relentlessly driving efforts toward them to maintain focus and optimise resources. Speed is essential, as repeating and learning from solutions can only happen once an initial version is in place.

“It is vital to mitigate the challenges start-ups face, build a strong team with a clear vision and unwavering determination. By fostering a collaborative and driven culture, entrepreneurs can create an environment where innovation overcomes obstacles. A proactive approach to problem-solving and a willingness to adapt and evolve will help start-ups overcome the hurdles.”

While the start-up landscape in South Africa poses significant challenges, Govender says it is not an insurmountable barrier to success.

“By recognising the common obstacles and implementing effective strategies, entrepreneurs can break the cycle of failure and achieve sustainable growth. The journey may be tough, but with the right approach, perseverance and adaptation, start-ups in South Africa can thrive and contribute to the country’s economic success.