Around the world, entrepreneurship is regarded as a conduit for economic development and a significant contributor to employment. But in order for entrepreneurship to grow and thrive, the right ingredients must be in place.
For entrepreneurship to thrive, it is essential that a robust support framework is created and maintained. A healthy entrepreneurial ecosystem comprises interconnected key stakeholders – education, corporations, financiers, government, support services – operating within an enabling regulatory environment and a culture that is supportive of entrepreneurial activity. The question is, how do we embed these to grow a flourishing entrepreneurial ecosystem in South Africa?
Possibly, the most important starting point is to make entrepreneurs central to all solutions aimed at boosting entrepreneurship. When it comes to the promotion and development of entrepreneurship, we need to see involvement and collaboration from all sectors – private, public, academic and civil society. It is no longer feasible for government to see itself as the custodian of the entrepreneurial ecosystem. Ideally, government should facilitate entrepreneurship through creating enabling and flexible policies, leaving the sector to self-generate and regulate as it grows within the context of what is happening on the ground. It is not an area government should own or hold undue influence over.
This is not to say we are not seeing movement in the right direction. The department of small business development is in the process of crafting the National Small Enterprise Masterplan. This policy instrument will ensure the delivery of integrated, targeted and effective support interventions aimed at promoting entrepreneurship as well as providing financial and non-financial support to qualifying small enterprises. The master plan advocates a partnership approach, with consultations across all levels of government and with other key stakeholders – including labour, business and civil society – currently under way.
I was heartened by the recent launch of the #PayIn30 initiative, where 50 South African corporations committed to paying small- and medium-sized suppliers within 30 days of invoicing. This is a significant step by corporate South Africa to ensure the sustainability of a sector that was particularly hard hit by the Covid-19 pandemic. But, as positive as this development is, we need to ensure that large companies and government are held accountable to deliver on this commitment.
The policy problem
One of the biggest impediments to a successful entrepreneurial ecosystem is South Africa’s restrictive regulatory and policy environment. Not only is our position in the World Bank’s Ease of Doing Business rankings unacceptably low – 84th out of 190 countries – our laws are not enabling business owners to navigate times of economic crisis. To highlight this point, in New Zealand, which ranks top in the Ease of Doing Business index 2020, it takes just a single day to register and start a business. In South Africa the process takes 40 days.
Additionally, what I saw this year was that many business owners had to decide whether they would try and save their businesses or close them down. The reality is that inflexible labour laws, for instance, meant that business owners were less likely to engage with their staff around wage negotiations and retrenchments for fear of being taken to the Commission for Conciliation, Mediation and Arbitration to defend their decisions. Although I do not encourage retrenchments, I do believe we should be having a conversation about the flexibility of our laws, which, in some cases, need to adapt with business to encourage solutionist thinking designed to save firms, rather than closing down for fear of reprisal.
Adding to South Africa’s entrepreneurial struggle is the country’s low levels of entrepreneurial activity – strongly aligned with an entrepreneurial mindset. Although the Global Entrepreneurship Monitor 2019 suggested that 60.4% of South Africans believed there were good opportunities for entrepreneurs locally, only 11.9% of respondents had any intention of embarking on an entrepreneurial venture. This needs to change. We must start encouraging entrepreneurship from an early age in families, schools and universities. This is where academic institutions have a vital role to play.
Education around entrepreneurship must move from the merely academic to the practical. This requires more entrepreneurial universities – institutions focused on creating entrepreneurs through giving them the academic, mentorship and infrastructural support they need to build skills and competencies as entrepreneurs. Some of the leading universities in the country are doing excellent work in this regard. We, however, need to get more academic institutions on board to teach and develop entrepreneurial skills and competencies, and then support aspirant entrepreneurs as they embark on their business journeys.
The private sector also needs to come on board. This requires a shift from reluctant compliance with enterprise and supplier development obligations towards active transformation of corporate procurement practices and supply chains as a business imperative. Corporate South Africa has a significant role to play in building an entrepreneurial ecosystem that will support entrepreneurs and the businesses they create so that these enterprises will ultimately enhance the country’s economy, creating a win-win across the board. There are benefits to business, the economy and society when individuals, and their businesses, actively contribute to the economy rather than continuing to rely on government and corporates for support.
A helping hand
In addition to providing markets for small businesses, the private sector has the resources to support small business owners through mentorship and coaching support. This is probably one of the most sure-fire ways to help entrepreneurs as they grow their businesses, adding a depth of exposure and insight from mentors which they can incorporate into their skills set. Mentorship from industry professionals would add to the entrepreneur’s understanding of the corporate culture and what is expected of them in terms of service and product delivery.
Ultimately, we want to create entrepreneurs who are able to innovate and create solutions to build South Africa’s economy. With the combined support of a variety of stakeholders, we have to take a serious look at our collective mindset around failure. As a country, we have a tendency to punish those who fail. This fosters a fear of failure. And a fear of failure does not encourage innovation. People have to be allowed to fail, and perhaps even encouraged to fail fast in the business world, so they can learn from their mistakes and extract valuable lessons – that is, fail forward. In other words, entrepreneurs must be encouraged to take calculated risks, knowing they will have the safety net of a supportive environment should things not work out as planned.
Ultimately, if we gear our policies and programmes to meet the needs of entrepreneurs, if we create enabling environments, if we give entrepreneurs the confidence to innovate and fail and then innovate some more, and if we ensure they have the meaningful support of government, business and academic institutions, I believe we can create a strong and robust entrepreneurial ecosystem that will generate productive entrepreneurship, economic growth and much-needed jobs.
Hosking is executive director of social education at the University of Pretoria’s Gordon Institute of Business Science (Gibs)