The real power of a successful economy does not lie in big corporates but in the thousands of small businesses led by entrepreneurs, managing director of Old Mutual Wealth Kerrin Land said.
Land said that it was estimated that in South Africa, small and medium-sized enterprises (SMEs) make up 90 percent of formal businesses; contribute roughly 34 percent towards Gross Domestic Product (GDP); and provide employment to about 60 percent of the labour force.
According to Land, in economic terms, the four factors of production, which include land, capital, and labour, describe the inputs used in the making of goods or services required to generate economic growth.
“The entrepreneur, the fourth key resource, is the individual who takes an idea and brings it all together,” she said.
She warned that without the proper support from the public and private sectors, as well as civil society, young entrepreneurs are more likely to fail.
“Research estimates that approximately 70 percent to 80 percent of small businesses fail within the first five years. According to an article published by the University of the Western Cape, 40 percent of the success achieved by small-scale enterprises is dependent on the business owner’s skills,” said Land.
“While personal attributes like initiative, innovativeness and a love for learning describe the strengths of the most successful entrepreneurs, a survey claiming to be the largest of its kind in South Africa by a start-up incubator Seed Academy suggests that a significant outcome of business success was due to the entrepreneur’s prior work experience.”
The ‘State of Entrepreneurship’ study published in 2016 and 2017 by Seed Academy suggests that 84 percent of successful business owners had worked for at least one year before starting their first enterprise, while entrepreneurs still in business for longer than 2.5 years tend to have more than ten years prior work experience.
Amid high levels of youth unemployment and low economic growth, Land believes mentorship in place of formal employment can go a long way to provide the support and guidance young entrepreneurs need to make their business ventures a success.
“Mentorship, guidance and the transfer of important skills has the potential to combine the youthful determination of millennials with the experience of successful entrepreneurs. Professionals working in corporate jobs and retired business people have the ability to give back by helping to build businesses that create jobs and unlock the economy,” said Land.
She said that the private sector needs to play a more important role in supporting the youth for the sake of social cohesion and economic sustainability.
“Government has committed to play its part, however, to move the dial on youth unemployment, the private sector will need to assist by investing in education initiatives that develop and groom young people.”
– African News Agency (ANA)