Why more women close their businesses

There has been a high rate of South African women closing down their businesses compared to the number of those starting and successfully running one.

The Global Entrepreneurship Monitor (GEM) South Africa Report 2023/2024 by Stellenbosch Business School is of the view that more can be done to support women in growing their businesses.

The GEM report focuses on entrepreneurial activity levels and attitudes, the quality of the enabling environment and the contribution of entrepreneurship to national economies and jobs; and informs governments on strategies and policies to support new venture creation.

The gap between women and men

The report reveals gender inequality is present when it comes to entrepreneurship, as there are more men with established businesses compared to women (7.9% men and 4.1% women). The report views the reason for the gap as women are finding it difficult to sustain a business.

“The lack of business support tailored to women’s specific challenges and needs, puts South Africa’s women entrepreneurs on the back foot in realising their potential to make a greater contribution to economic growth and job creation,” says Prof Natanya Meyer, lead author of the report.

She stresses the importance of having women entrepreneurs, as half of the global population is made up of women. However, despite this, women are still less engaged than men in entrepreneurial activities.

“It thus makes sense to find out how better to invest in and support women’s entrepreneurship, with its high potential to be one of the most effective means to achieve sustainable economic growth.”

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Women focus on family

Meyer adds women naturally would allocate more of their funds towards their families’ health, education, and overall welfare.

“Moreover, supporting women entrepreneurship potentially has a significant impact on development.”

GEM report also focuses on motivations, progress in business, and support needs of women entrepreneurs in the country. The need to start a business for social impact is one of the motivations for women to start their own businesses listed in the report.  

Why are women closing their businesses?

34.4% of women said they closed their businesses because of a lack of profitability, making it the top reason. However, 21.5% of men also expressed the same reason for closing their businesses.

The other reason why 21.5% of women said they closed their start-up include personal and family matters, which is almost double the 12.1% of men. Women also said they closed their businesses due to problems obtaining finance.

“After lack of profitability, men mostly exited their businesses due to an opportunity to sell (18.7% of men and 10.8% of women).”

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Unequal opportunity

Meyer says women face unequal access to business finance, support resources, gender stereotypes and prejudice. “As women bear the majority share of caregiving and family responsibilities, they face a greater burden of managing conflicting demands on their time as they juggle business and family needs.”

Usually, women in business have to balance being an entrepreneur and running their home life, this is normally because of societal expectations of women as primary homemakers and caregivers.

“This influences how women in business are perceived, by funders, for example, resulting in adverse outcomes.”

Gap in business growth

The report reveals that there is a gender gap in business growth, as 11.8% of men’s businesses end up employing 20 or more people, while in women-owned businesses only 4.9% have done so.

“Women were more likely to be ‘solopreneurs’ at 4.9% compared to 1% of men.”

Women’s involvement in entrepreneurship showed a healthy increase from 9.5% in the 2022 GEM SA survey to 13.5% in 2023, men’s involvement showed a greater increase, from 11.1% to 19.9%.

“Given women’s higher unemployment rate – although it is positive to see an increase in their entrepreneurial activity, it is concerning that it remains low and lags behind that of men.”

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