/ 23 November 2018

South Africa’s entrepreneurs remain elusive

A trader weighs onions at a New Delhi market. India’s unemployment rate is about 7%
A trader weighs onions at a New Delhi market. India’s unemployment rate is about 7%, 23-million people are artisans and small businesses employ 40% of the workforce. (Roberto Schmidt/AFP)

I can still recall a time when wanting to become an entrepreneur was a bit taboo. The common sentiment was for one to study further and get a “good steady job”, preferably in government. In a time when job security seems to be a thing of the past and finding employment, even among the educated, becomes harder than finding the golden egg-laying goose, why is becoming self-employed still the last resort for most?

When we compare the Brics (Brazil, Russia, India, China and South Africa) countries, South Africa is the least populated and has the highest average annual salary of $18 300 a year. But, at 27.5%, it also has the highest level of unemployment, which limits its capacity to increase the country’s economic growth.

What are the other Brics nations doing differently to South Africa?

Part of the shift to democracy was placing greater emphasis on university qualifications over other post-basic education paths. Several artisan colleges and trade schools were either closed or merged with existing technikons or universities, creating many skills shortages. Yes, we are now trying to remedy this faux pas, but it will take some time.

Artisan professions are among the most useful skills for being self-employed: plumbing, carpentry, handicrafts, being a chef. The artisan sector is said to be the second-largest employer in developing countries, after the agricultural sector. Finding the exact number of artisans in most countries is difficult because such statistics are poorly documented. 

In 2014, Brazil had about 8.5-million artisans who created a variety of handicrafts as their main source of livelihood, but it still faces a skills shortages. In India, it is estimated that 23-million people rely on creating handicrafts for a living and small, micro, and medium-sized enterprises (SMMEs) contribute 33.4% to its manufacturing output.

It is estimated that the number of registered artisans in South Africa has dropped from 30 000 in the 1970s to about 3 000 in 2000.

South Africa has similar developmental issues to Brazil and India. These include limited quality infrastructure and a low share of international trade. Imports to South Africa have surpassed its exports, so the country has a trade deficit.

Funding is one of the major problems facing SMMEs in the Brics countries.

Another problem in South Africa is its labour law, which owners of SMMEs say make it difficult for them to retrench employees if they can no longer afford to retain them.

One of the new buzz phrases is the fourth industrial revolution. How is South Africa equipping its youth to become creators of opportunity?

In Brazil, the average annual salary is $6 974 and the unemployment rate is 11.9%, as of September 2018. About 3.5-million SMMEs were registered as of 2007, employing 60% of the workforce and contributing to 40% to the gross domestic product (GDP).

Russia has had a 1.7% growth in GDP over the past year, .2% higher than that of South Africa. The average annual salary is $9 252 and the unemployment rate is 4.5%.

As of 2007, there were about 1.1-million registered SMMEs, accounting for 13% to 17% of its GDP and employing 45% of the workforce. There has been little government support in the way of stimulating entrepreneurship, and an additional problem faced by SMMEs in Russia is excessive bureaucracy.

One standout feature of Russia’s SMMEs is their international reach at an earlier stage compared with those in other Brics countries.

In India the average annual salary is $1 434 and it has the lowest unemployment rate, at close to 7%, of the Brics countries. India’s SMMEs employ 40% of the workforce and have had a 10% annual growth in overall numbers in the past few years. 

Historically, there was more of a hands-off approach by the Indian government towards entrepreneurship, though the government recently introduced reforms to assist SMMEs, such as eradicating indirect taxes and pushing for more products to be manufactured in India.

China is one of the highest growth nations globally. It has focused its efforts on being a manufacturing powerhouse, catering to the world. This was made possible by government assistance to SMMEs for finance and technology to drive them to internationalise their products. The average annual salary is $13 530 and the unemployment rate is 3.9%. It is estimated that SMMEs employ up to 75% of the workforce.

As of 2016, there were about 2.3-million SMMEs in South Africa, and about 1.6-million are informal or survival businesses. This is comparable to India, which also has a high number of unregistered businesses. South African SMMEs contribute between 21% and 40% of the country’s GDP and employ about 60% of the workforce.

South Africa’s racially exclusionary past still affects the demographics of SMMEs, posing a problem for stimulating entrepreneurship among the historically sidelined.

There doesn’t seem to be a clear-cut “right way” for stimulating and supporting entrepreneurship. Among Brics nations, it can be said that the spirit of self-reliance stems from there being almost no government support structures; people identify gaps in the market and opportunities for making a livelihood.

Why then in a country such as South Africa, where various programmes, funds and support structures are available, are entrepreneur numbers so low? Is it less about support mechanisms and more about the general attitude people have towards being self-employed and self-reliant?

Has the tender system, having created tenderpreneurs, inadvertently created a perception that being an entrepreneur means being a middleman or “selling” solely to government?

How do we help people to realise that they are ultimately responsible for their livelihoods and that skills such as creating cultural handicrafts have a global market?

Could the solution simply be for the government to stop trying so hard?

Unéné Gregory is the founder of Ambulation Technologies, a prosthetics start-up. She also writes for The Contemplating Entrepreneur blog