2023 POLICY ROADMAP

Economic growth, as measured by real GDP change, has slowed in South Africa, falling from 2% in 2022
to an expected 0.4% in 2023. Shortages of electricity continue to disrupt business activity and to increase business costs. Inflation rose to 7% in 2022, and is expected to remain high at around 6% in 2023. Interest rates had increased to almost 12% by the end of 2023, placing huge pressure on businesses and consumers.

The National Small Enterprise Amendment Bill (2023) aims to provide support to small businesses by introducing an independent arbiter to deliver justice to small businesses outside of the complexity and expense of the formal legal system.

2023 Framework Conditions Review1

The quality of the overall entrepreneurial environment in South Africa, as assessed by its own national experts and summarized in the National Entrepreneurial Context Index (NECI), had improved from a score of 3.7 in 2021 to 4.1 in 2022, but fell back to just 3.6 in 2023, third lowest of the 49 GEM participating economies.

This reduction reflected declines in 11 of the 13 Entrepreneurial Framework Conditions (EFCs), with only Entrepreneurial Finance and Ease of Entry: Market Dynamics recording increases. The greatest fall was in Social and Cultural Norms, down from 4.5 in 2022 to just 3.3 in 2023. Such a large fall for this EFC is unusual, because Social and Cultural Norms typically change very slowly. Scores for other EFCs also fell substantially, including for both educational EFCs, for Government Entrepreneurial Programs, for Government Policy: Support and Relevance, and for Research and Development Transfers. No South African EFC was scored as sufficient (score ≥5.0) in 2023.

Although South Africa’s scores for women’s entrepreneurship were also less than sufficient, those scores were relatively better than for most of the EFCs. Experts assessed the social support for women entrepreneurs at 3.9, which, while low, placed South Africa 21st of the 49 GEM economies. The assessment for women entrepreneurs’ access to resources scored higher at 4.9, but this was 31st of the 49 economies.

2023 Entrepreneurial Activity Review

The parlous state of the South African economy was reflected in the GEM Adult Population Survey (APS), with nearly three in five adults reporting that their household income had fallen in 2023, a proportion little changed over the previous two years.

The entrepreneurial profile remains high in South Africa, with two in five adults knowing someone who had recently started a business, and two in three either seeing good opportunities to do the same or considering they have the skills and experience to start their own business. However, nearly three in five of those seeing good opportunities would not start a business for fear it may fail. Partly as a result, just 8% of adults expected to start their own business in the next three years.

In recent years, the level of Total early-stage Entrepreneurial Activity (TEA) in South Africa has fluctuated a great deal: from 17.5% in 2021 to 8.5% in 2022, and then up to 11.1% in 2023. Men are slightly more likely to be starting a business than women (male TEA = 12.7%, female TEA = 9.7%). Established Business Ownership, at 5.9%, was up sharply on a year earlier.

Seven out of 10 new entrepreneurs agreed with the motivation to earn a living because jobs are scarce, with slightly fewer (two out of three) agreeing with the motivation to build great wealth or very high income. Only one in five new entrepreneurs had customers outside of their own country, but three in five expected to use more digital technologies in the next six months. A respectable one in five new entrepreneurs expected to employ at least another six people over the next five years, more or less the same proportion as in 2022, but down from the three in 10 of 2021.

Overall, the level of entrepreneurial activity has held up relatively well in 2023, despite some deterioration in the quality of the entrepreneurial environment.

1 A brief description of the GEM approach is given in the footnote on p. 107 of the GEM Global Report.