Raising entrepreneurs

2014-02-14 00:00

SCHOOLS and universities should teach students more about the practical aspects of owning and operating a business, according to a new study.

A South African Institute of Professional Accountants (Saipa) report has found that some of the major obstacles facing the growth of small business includes school and university teaching of the “science” of entrepreneurship, instead of the practical aspects of owning and operating a business, as well as a lack of business and financial skills among entrepreneurs.

Durban Chamber of Commerce and Industry chief executive officer Andrew Layman said however that operating a business was probably too complex to teach to children at school.

“In my view the child needs to come out of school with a broader understanding of self sufficiency and enterprise, as opposed to entrepreneurialism,” he said.

A child with this kind of confidence was more likely to succeed in business, as opposed to children who had been “spoon-fed” by a school system, he said.

Saipa said initiatives to develop financial and business management skills, supported by the government and promoted through public-private partnerships, were needed to bolster the small business sector.

Factors that could create a more enabling environment for entrepreneurs included mentorship programmes. Universities should develop their stud­­ies of the “science” of entrepreneurship to include measuring the efficacy of mechanisms introduced by policymakers.

Other barriers to small business success included the difficulty of obtaining finance and a lack of knowledge of funding options, the report said.

Layman said while the lack of funding for small business is often mentioned, there are occasions where people have business plans drawn up by other professionals because they lack the skills to draw up their own, they did not present a novel business idea or they didn’t have sufficient experience to convince the lenders that the business idea will work.

“Saipa are right, but its not the whole story on this issue,” said Layman.

“A government-led task team should collaborate with banks to develop a credit bureau to overcome issues of asymmetric information, and facilitate lending to entrepreneurs and small and medium enterprises,’’ the report recommends.

“South Africans are told repeatedly that entrepreneurs hold the key to employment creation and economic prosperity,’’ said Thomas Höppli, Economic Research Analyst at Saipa.

“Yet, five out of seven small start-up businesses fold in the first year. Clearly, local entrepreneurs need a far more conducive environment to realise their potential.’’

The Saipa Entrepreneurship Report is the first independently produced report of its kind on entrepreneurship in South Africa.

The Global Entrepreneurship Monitor (GEM) reveals that entrepreneurial activity in South Africa falls short of that in other comparable economies.

At 2,3%, South Africa’s rate of established businesses is the second lowest of 69 economies surveyed in 2012, according to the GEM report.

“Many people have brilliant ideas, but lack the business and financial skills to translate them into viable and sustainable businesses,” said Höppli.

“The fear of failure, which carries a social stigma, is another obstacle. We can learn from countries in which entrepreneurs are admired for their courage, even if they fail at their first attempt,’’ said Höppli.

More focus should be placed on the promotion of the potential rewards of starting one’s own business and on strengthening the profile and prestige of the entrepreneur.

The report also advocates alignment of the proposed Business Licensing Bill with the Tax Administration Act to avoid duplication of efforts and increased compliance costs.

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