SA has too few entrepreneurs, report states

South Africa’s rate of established entrepreneurship is extremely low compared to other African countries, according to a recently published report.

The Unseen Sector, published by the World Bank and the International Finance Corporation (IFC) in partnership with SA’s National Treasury, provides an in-depth assessment of the micro, small and medium enterprise (MSME) landscape in South Africa – but it said the MSME sector has been relatively stagnant over the last decade.

“Based on Statistics SA research, there were 2.3 million MSMEs in 2017, compared to just over two million in 2008.

“Given the limited growth in MSME numbers, it appears that the sector is not making as meaningful a contribution to the South African economy as expected,” the report stated.

“Given its GDP per capita, South Africa should have a rate of early-stage entrepreneurship three times greater than the current rate.

“With fewer start-ups and a low rate of survival, there is a thin pipeline of businesses with a high chance of scaling.”

It said a significant portion of informal entrepreneurial activity was driven by necessity, largely by unemployed individuals with no alternative source of income.

One of the key findings of the report was that the sector was not contributing significantly to youth employment creation, which represented 25% of South Africa’s MSME ownership.

“Youth MSME ownership has stagnated since 2008 in the 25-34 age bracket, and declined in the 18-24 age bracket. Entrepreneurial activity is also less in the 18-24 and 25-34 age groups than in age brackets above 35 years.”

The report said MSMEs face serious challenges to access finance, skills and access to markets.

According to the department of small business development’s annual report for the 2018-19 financial year, the bulk of its budget (over R840 million) was transferred to the Small Enterprise Development Agency (Seda) and over R350 million was utilised internally for grants.

Through Seda, the department said it made substantial headway in supporting SMMEs, with over 4,700 enterprises and 350 cooperatives receiving support.

In addition, 2,860 entrepreneurs participated in the incubation programme, with 199 graduating.

“Overall, the work of Seda has contributed to the sustenance of over 19,000 jobs and helped to create over 6,400 jobs within the SMME sector, thereby increasing the total turnover of supported enterprises to R1.7 billion,” said Minister of Small Business Development Khumbudzo Ntshavheni.

In addition, the Small Enterprise Finance Agency had given financial support to enterprises based in the rural areas to the tune of R549 million, women-owned businesses got R482 million and black-owned enterprises received R897 million.

– gcinan@citizen.co.za

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