South Africa faces real, urgent economic development challenges. The Global Entrepreneurship Monitor South Africa (GEM SA) 2019/2020 report, published by the University of Stellenbosch Business School (USB) and funded by the Small Enterprise Development Agency (SEDA), focuses on how startups can contribute as engines of growth and social change in this era of exponential change. Angus Bowmaker-Falconer, a research fellow at USB, and Mike Herrington, who established GEM SA in 2001, authored the report and shared some of the key findings in this article.
How does entrepreneurship in SA compare to entrepreneurship worldwide?
South Africa’s entrepreneurial ecosystem was rated one of the most challenging in the sample of participating economies in 2019 and has exhibited little sign of improvement over the past few years. In 2019, South Africa ranked 49th out of 54 economies on GEM’s National Entrepreneurship Context Index, ahead of only Croatia, Guatemala, Paraguay, Puerto Rico and Iran. This index provides a single composite number that can express the average state and quality of the entrepreneurial ecosystem in a country, and be compared to those of other economies.
What did SA’s GEM report find?
Titled Igniting startups for economic growth and social change, South Africa’s GEM report provides answers to this question: How do we ensure that more entrepreneurs flourish in South Africa? Solutions range from strengthening, to aligning learning, mentorship and support for entrepreneurs. It also includes providing entrepreneurial education for the Fourth Industrial Revolution (4IR) and the digital economy.
Why is insight on entrepreneurship so important?
Entrepreneurship is an engine of economic growth. It promotes the innovation needed to exploit new opportunities, promote productivity and create employment, while also addressing societal challenges, which now include the economic shock wave created by the COVID-19 pandemic. The promotion of entrepreneurship will be central to restoring the economy due to this pandemic.
What are some key findings from the GEM report?
- Societal values regarding entrepreneurship show an upward trend from 2003 to 2019. Specifically, there has been an increase from 2017 to 2019 in the number of individuals who see entrepreneurship as a good career choice (from 69.4% to 78.8%) and one with high status (from 74.9% to 82.2%).
- There has been a substantial increase (from 43.2% in 2017 to 60.4% in 2019) in the number of individuals who perceive that there are good entrepreneurial opportunities in South Africa and, importantly, believe that they possess the necessary skills and capabilities to start a business venture. This number is relatively high compared to other economies, especially those of countries in Latin America and Europe.
- According to the 2019 findings, only 11.9% of respondents have entrepreneurial intentions. This means one in every eight South Africans may be considered latent entrepreneurs intending to start a business within the next three years. This is in stark contrast to the average of 40% in the rest of Africa.
- There was a small increase in the total amount of early-stage entrepreneurial activity (TEA) in the country between 2016 and 2017. This momentum was not, however, carried through to 2019, which showed no real increase from 2017 at only 10.8%. This TEA rate was below the average of 12.1% for the African region in 2019.
- South Africa’s business exit rate decreased from 6.0% in 2017 to 4.9% in 2019, but is still higher than the established business rate of 3.5%. This confirms that more businesses are being closed down, sold or otherwise discontinued than being started.
- There is clear evidence of purpose-driven entrepreneurship taking hold at grassroots level – an encouraging sign of a collective will for future business sustainability.