‘We anticipate some of the reasons are the environment or the enabling environment for businesses to thrive or survive in is deteriorating at the moment and people are scared to take that chance,’ says Professor Natanya Meyer, co-author of the Global Entrepreneurship Monitor South Africa report.
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JEREMY MAGGS: The very latest 2023 Global Entrepreneurship Monitor South Africa (Gem SA) report released today, says the country’s early-stage entrepreneurial activity has declined to below pre-pandemic levels. Regarding entrepreneurial intention, fewer people than ever before are considering starting a new business. This sounds serious.
More now from Professor Natanya Meyer, who is co-author of the Stellenbosch Business School’s monitor report. First of all, professor, welcome and can you then elaborate for me on the key factors contributing to this decline?
NATANYA MEYER: Yes. so just to give a little bit of background, we are currently standing at about 8.5%, and during 2021 it peaked at 17.5%. Now this is definitely strange, if you think it was Covid times, but the rationale behind this is that many people during Covid lost their jobs. They were restricted from movement because of lockdown and so on and obviously a lot of things went online. This also forced a lot of businesses to go online and to make sure that their product is also available in more technologically advanced ways than it was before. It also made access to the market or ease of entry a little bit easier because of this online approach and not having to have a traditional brick and mortar.
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So a lot of people started businesses during that time. Unfortunately, some of these businesses were also started out of necessity and not possibly out of potential or seeing an opportunity, which is a bad thing because that means or meant that a lot of them also didn’t succeed or last very long. So in a nutshell, that is what we analysed or took from this spike in the early-stage entrepreneurial activity during that time.
JEREMY MAGGS: So fewer people, if I understand you correctly, are considering starting new businesses. What are they afraid of?
NATANYA MEYER: Yes, if you look at when we measure the entrepreneurial intention or, as you mentioned, starting new businesses, there are certain things that actually affect this choice or this thought or action to behave in a certain manner and to actually start something. This is obviously something like good career choice.
So fortunately, we do see that people still think that being a business owner or entrepreneur is a good career choice. It’s still seen by the public as a high status.
If you’re your own boss or entrepreneur, you are seen as a status symbol. We know that the media is putting a lot of attention on this to be the so-called cure for all our economic problems, which, unfortunately, at this stage is not doing the way it should.
But the thing that you mentioned now and what is really hindering people to actually take that first step and start, is fear of failure and this is one of the variables that we measure that we saw has actually increased. Just look around you, if you have a look at our ecosystem, everything that’s happening in the country, all the crime, problems with access to electricity, there are so many other things, and this is actually making people fearful or making them think twice before actually starting a business. We anticipate some of the reasons are the environment or the enabling environment for businesses to thrive or survive in is deteriorating at the moment and people are scared to take that chance.
JEREMY MAGGS: And all of that, of course, is perfectly understandable because economic risk in South Africa is growing exponentially.
NATANYA MEYER: Yes, definitely. You must remember that when a person takes a cognitive decision to start a business, some people just jump in and they just start, and that’s your kamikazes or your risk-takers. Maybe it works, maybe it doesn’t. But most people are more realistic and obviously it takes a lot of planning, finances, getting your product or service set up and people are really scared to take that chance because there’s a lot at stake if it doesn’t succeed.
But just on a positive side, we also received the latest, latest data, which we’re starting to write up now and it has improved slightly. So maybe that initial fear after Covid and so many businesses failing, people are starting to see that there is potential and there is hope. So that’s at least a positive, I don’t want to end this conversation just on all the negative notes.
JEREMY MAGGS: I will certainly take that on board, and I’ll come right back at you then and ask what then should the specific measures be that you recommend or suggest to foster a more robust entrepreneurial culture that can take advantage of this increased positivity?
NATANYA MEYER: Okay, so we also measure what we call the entrepreneurial framework conditions. These are 13 conditions that through a lot of research and over the years we’ve developed, we meaning the global team behind the Gem, and we look at certain things that need to be in place for a business to actually firstly, start or a person to have the intention to start a business, to set the business up and then obviously to survive, thrive and eventually grow because that’s what we want.
So I’m just going to run through a few of them, because we can have a whole morning’s discussion on them, but obviously we need to have sufficient entrepreneurial finance. So businesses need finance to start, and again, this is a topic on its own.
There should be access to finance specifically for entrepreneurs because you get different ones.
Government support, there are two aspects we look at. Firstly, support and relevance and then taxes and bureaucracy. Unfortunately, we are not faring too well on those two indicators.
Then the access or availability of government entrepreneurial programmes. We do see that there are a lot of them available. But again, the management and the (implementation) and the success rate of these are sometimes not as we want to see. Something very close to my heart is education. We do see that, especially in school education, we do not see that this entrepreneurial culture among kids is being created. Post-school, it’s a little bit better.
Then obviously, we need to look at research and development, infrastructure, market dynamics, physical infrastructure and then the last one is having a culture, so social and cultural norms. All of these indicators, unfortunately, in the last survey measured below five, although again, there was an increase from the year before, but they are still all below average. So these are the things, in different orders, if you want to put it, that really need to be worked on for businesses to have a better conducive environment to start, survive and thrive in. Those are the three things we look at.
JEREMY MAGGS: Professor Natanya Meyer, thank you very much indeed.