The local organiser of the Global Entrepreneurship Week, an annual awareness project taking place in several countries this week, is ratcheting up the rhetoric in an effort to focus South Africa’s attention on what he describes as a “ticking time bomb” in the economy.
Only the effective fostering of entrepreneurship can transform the unsustainable structure in an economy in which five to six million taxpayers pay for the needs of 45-million non-taxpayers, says Malik Fal, chief executive of the local branch of Endeavor, an international entrepreneurship support organisation.
The country’s few taxpayers subsidise close on 14-million social grant beneficiaries. More than 4.3-million people, according to Stats SA, are unemployed out of an active population of about 15-million people.
Government can either raise taxes, which are already high compared with other countries, or broaden the tax base by increasing the 1.5-million tax-paying private businesses in South Africa, says Fal, who was due to address the second State of Entrepreneurship summit in Cape Town on Wednesday.
The summit was to bring together economists, local economic development experts, business owners and high-profile entrepreneurs such as Discovery Health’s Adrian Gore and Rand Merchant Bank’s Paul Harris.
Fal says government had set clever systems in place to foster entrepreneurship, such as its black economic empowerment system’s emphasis on enterprise development, which, by some counts, has amassed R22-billion for entrepreneurship support.
What seems to be missing, he says, is a refined understanding of what kind of support actually works. “The evidence has shown that the scarce resources should be applied to people who have already proved their value as entrepreneurs.”
Financial resources, mentoring and coaching and infrastructure should not be wasted on someone who has no track record as an entrepreneur.
The best indication that someone will use scarce public resources productively to create jobs and grow the economy is if they are already in a growing business.
“At Endeavor we look at people who have been in business for at least six to eight months, who have a proven track record, who have gone through the difficulties of raising funding on their own, investing in a concept that they really felt strongly about. It’s almost like a self-selecting process.”
This is counter intuitive for governments, which tend to distribute scarce resources as widely as possible to the poorest of the poor, who are not likely to use them to create jobs, says Fal. He hopes that the structure of this year’s summit will help to correct the focus of entrepreneurship support.
The summit will look at entrepreneurship support in different sectors: agribusiness, ITC, tourism, mining and energy, the creative industries and professional services.
This is in contrast to last year’s summit, which looked broadly at the main entrepreneurship
issues such as capital, skills, support and business culture across all the sectors.
Fal believes that although a broad look at generic issues is important, the thinking tends to be theoretical.
As soon as policymakers start looking at specific sectors, however, it becomes more practical and realistic about what kind of entrepreneur needs to be supported to create jobs.
The findings and recommendations of the summit will be compiled into a white paper and made available to the public, he says.