High entrepreneurial spirit not leading to job creation in South Africa, survey finds

A survey conducted by Seed Academy, a for-profit social enterprise focused on transforming the South African economy through entrepreneurship, has found out that high entrepreneurial spirit is not yet leading to job creation at the scale and rate South Africa urgently needs.

While 50% of the entrepreneurs surveyed were starting businesses for the right reasons [1], only 4% of entrepreneurs employed more than 10 staff.

Alarmingly, 38% of the startup entrepreneurs do not employ anyone at all.

“Job creation should be a key outcome of entrepreneurial activity, yet a large portion of our entrepreneurs have no employees,” said Donna Rachelson, CEO of Seed Academy.

The survey also revealed that entrepreneurs are taking long periods to gain traction – there are businesses five years and older that are not making sales.

The survey went on to show that business survival rates are on the increase. This was credited to entrepreneurs’ prior work experience – business owners that have been in existence for more than 2.5 years reported having more than 10 years prior work experience.

“While the percentage increase in the age of the businesses is small, the fact it is increasing is a step in the right
direction. Our entrepreneurs are resilient,”
said Rachelson.

Rachelson recommends that entrepreneurs starting a new business may wish to do so in parallel with full time employment.

As for female entrepreneurs, the survey revealed that they remain in the minority, and that the ethnic footprint of entrepreneurs does not mirror SA’s demographics – black startup entrepreneurs are underrepresented.

With 50% of SA’s youth (aged 15-24) currently unemployed, entrepreneurs need to come up with new, innovative ways to provide these young lads work experience, and help them develop skills and business acumen.

Rachelson outlines recommendations that all players in the small business ecosystem need to consider:

  • Enhancing the funding ecosystem by improving the effectiveness of Development Finance Institutions (DFIs), developing and incentivizing the angel network, working with banks and using seed funds,
  • Preparing entrepreneurs to be funding-ready,
  • Elevating marketing, access to markets and soft skills development for entrepreneurs,
  • Fast-tracking and deepening the development of women and youth entrepreneurs,
  • Facilitating stronger public/private sector collaborations, and
  • More aggressively embedding a culture of entrepreneurship across the country.

The survey was conducted earlier this year with almost 1500 startup entrepreneurs in South Africa taking part – their views were gauged. You can find the full result of the survey HERE.

Majority of the entrepreneurs have started businesses in the Information Technology (22%), Creative (12%), Wholesale and Retail (9%) or Social and Community Services (9%) sectors. Mining and Automotive were amongst the least popular sectors for aspiring entrepreneurs.

The survey built on the benchmarks established in 2015 when Seed Academy conducted the first startup survey to get a picture of the challenges startups face and the support they need to increase success rates.

“This year we sought an understanding of grassroots entrepreneurs, focused in on youth and women entrepreneurs and looked at the challenges faced by entrepreneurs in key sectors. We also gauged the progress made in funding for entrepreneurs,” said Rachelson.

Image Credit: CNN.

[1] They were starting businesses because of ideas that came to them from the environment in which they live, work and play.

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