According to the latest Global Entrepreneurship Monitor (GEM) report, entrepreneurial activity in South Africa has persisted despite the tough economic environment of the past two years.
The report, published on Tuesday, shows that the country’s total early-stage entrepreneurial activity increased from 10.8% in 2019 to 17.5% in 2021, while established business ownership rose from 3.5% to 5.2%.
The report measures entrepreneurship across global economies. The 2021 report looks at 50 economies including four in Africa – South Africa, Sudan, Morocco and Egypt. By assessing entrepreneurial development across various economies, the study allows for the monitoring of the evolution of entrepreneurship over a period of time.
“There can be little doubt that entrepreneurs have experienced a taxing two and a half years, thanks to the pandemic, the unrest in July 2021, and the current landscape of exchange rate volatility, high inflation and load shedding,” says Capital Connect CEO Steven Heilbron in a statement.
“Nonetheless, entrepreneurs remain resilient despite these challenges.”
Rather than deter South African entrepreneurs, the report found that a desire to make a difference, build wealth and earn a living motivated them to find innovative entrepreneurial solutions to these challenges.
“Our country’s entrepreneurs are risk-takers who spot opportunities that others miss,” says Heilbron.
“They are willing to invest in growth and progress, even when the odds appear insurmountable to others.”
One of the sectors to benefit from this attitude is the wholesale and retail arena, which has seen the most innovation over the last five years, with competition intensifying as the various players try to maintain their relevance to consumers.
“Change spells risk and opportunity,” says Heilbron.
“As we saw from the rise of fast delivery services like Checkers Sixty60 during the pandemic, there’s opportunity in crisis. Ambitious entrepreneurs in retail are showing resilience and agility in creating new businesses to disrupt the status quo and target evolving consumer trends and tastes to compete in a new normal world.
“Whether it’s investing in a coffee shop and bistro for their shop or putting solar panels and batteries in place to keep trading through load shedding, South African retailers are getting in front of today’s risks and opportunities.”
Despite the positive sentiment, the report found that several barriers remain. This is indicated in South Africa’s below-average rating on several key factors that play a significant role in ensuring entrepreneurial success.
Most notably, in terms of assessing internal market burdens or entry regulations for entrepreneurs trying to enter into new markets, the country ranked 41 out of the 50 assessed economies. It scored 3.6, well below the general average of five and the GEM average of 4.4.
“This indicated that there had been a decline in how entry into new markets, especially the cost and red tape, are perceived by industry experts,” states the report.
“For businesses to start and grow, market access should be simplified. The reduction in this rate could also be linked to the high discontinuance rate.”
When it comes to government policies on support and relevance for entrepreneurs, the country ranked 38 out of 50, receiving a score 3.4, below the GEM average of 4.4 for 2021.
For government policies on taxes and bureaucracy, South Africa ranked 45 out of 50 economies, receiving a score of 3.5, below the GEM average of 4.7.
Listen as Fifi Peters talks to Annabel Bishop of Investec about how red tape is intensifying the energy crisis and hindering the country’s growth prospects (or read the transcript here):
This article originally appeared on Moneyweb and was republished with permission.
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