Research house makes key recommendations for creating an entrepreneur-friendly South Africa
The Monitor Group released its recommendations in Johannesburg last week, following its local Entrepreneurship Benchmarking Survey. The survey was conducted both online and through in-depth interviews, followed by consultative workshops.
It was part of the Monitor Group and Omidyar Network's Accelerating Entrepreneurship in Africa initiative, which aims to identify the strengths and weaknesses of the entrepreneurial landscapes in Ethiopia, Ghana, Kenya, Nigeria, South Africa and Tanzania.
The Monitor Group narrowed its recommendations down to five critical areas that need to be addressed: using an "anchor firm" business model; increasing the voice of entrepreneurs in policy-making; improving coordination among service providers; decreasing the burden of compliance; and developing a standardised information resource for entrepreneurs.
Tebogo Skwambane, a young global leader for the World Economic Fund, managing director of the Monitor Group South Africa and head of its Africa region, said the recommendations were based on the realities in South Africa and models that had worked elsewhere.
However, the first critical issue that needed to be addressed was the question of who should spearhead a programme to ensure all the proposals were acted on, and should coordinate existing initiatives for business development in South Africa.
Although there may well be ample resources to support entrepreneurship in South Africa, she said, coordinating them and ensuring start-ups have easy access to them needs to be driven by a central body. One likely candidate would be the department of trade and industry.
She also noted the existence of a National Small Business Advisory Council, which might be "capacitated to deliver on this mandate".
Funding "not the biggest issue"
She noted that gaining access to finance was not necessarily the biggest hurdle start-up businesses in South Africa face. Compliance issues appear to be a bigger challenge.
"Over 40% of entrepreneurs fund their businesses themselves, with help from family," she said. "It's not just about gaining access to finance."
Speaking at the release of the Entrepreneurship Benchmarking Survey, Allon Raiz, founder and chief executive of business incubator Raizcorp, echoed this statement, saying: "There's more money chasing good ideas than good ideas chasing money." He said funding was available for entrepreneurs, but the onus was on them to put together a business case that is compelling enough to secure this funding.
The cost of compliance
Compliance is onerous and time-consuming for the entrepreneur, and this needs to be addressed, said Skwambane.
On average, compliance costs around 0.2% of a large enterprise's turnover and 8.3% of a small business' turnover, she said.
"We need to craft more nuanced legislation that differentiates between large and small business. And we need to look at streamlining processes. For example, when a business is registered, it could automatically kick off a SARS process."
Meeting the requirements of labour legislation is particularly difficult for entrepreneurs, she said. Monitor Group has found that an unwise appointment could be devastating for a start-up, both in terms of financial costs and time involved in terminating the appointment. Many local small businesses actively avoid hiring staff, Monitor Group found, due to the current labour legislation. This, the researchers noted, has the potential to stifle growth.
Skills emerged as a major concern during Monitor Group's research – both in terms of acquiring skills to grow a business, and in terms of the business skills of the entrepreneurs themselves.
Monitor Group felt that more emphasis needed to be placed on entrepreneurial skills development from primary school level.
"It starts with developing better problem-solving skills in primary schools," said Skwambane.