/ 2 September 2023

How to unlock the untapped potential of SA’s women entrepreneurs

Successful South African Women
There are several ways to advance progress for women in the labour market as entrepreneurs. (Photo by Per-Anders Pettersson/Getty Images)

As South Africa’s Women’s Month draws to a close, the significance of women’s involvement in the social and economic advancement of a nation cannot be understated. But high unemployment rates combine with gender gaps that continue to hinder women’s labour market participation and involvement in different activities, sectors, and jobs. 

Around the world entrepreneurship has been seen as a solution to some of these gendered problems. Our recent contribution to Stellenbosch Business School’s Women’s Report explores these challenges as well as opportunities.

Entrepreneurship offers women an avenue to achieve economic autonomy and surmount a variety of barriers that slow their progress and empowerment. Women entrepreneurs can also be influential in advancing economic growth, particularly in less industrialised nations, where they can contribute to formalising economic activities while boosting women’s economic and social influence, and having a positive effect on their communities. Yet to unleash the potential of female entrepreneurs, an understanding of the challenges affecting women is imperative, as these obstacles extend beyond the labour market and are not unique to South Africa.

The gender disparities evident in the labour market are illustrated by the higher unemployment rate among women compared to men, a trend observed across the globe but starkly in South Africa. The country grapples with a severe unemployment crisis, as indicated regularly by Stats South Africa’s reporting which shows an official unemployment rate of 32.9% in 2023. Black African women face the highest unemployment rate, at 39.9%. The youth segment, aged under 35, remains particularly vulnerable, with an unemployment rate twice that of the overall rate. Again, young women, in particular, face an additional disadvantage with an unemployment rate of 32.2%. Of concern is the doubling of graduate unemployment over the past decade suggesting a fall in the protective effect of higher education. 

There are numerous cultural factors contributing to the disadvantages faced by women in the labour market. Societal norms, often rooted in traditional gender roles, reinforce the notion that women’s economic participation is secondary to that of men. The prevailing perception that men are breadwinners and women are homemakers, or at best second earners, persists across different cultures and races, hindering progress to a more gender equitable society.

Overall, small and medium-sized enterprises in Africa now generate about four-fifths of total employment, with women contributing about 13% to Africa’s GDP. The Mastercard Index of Women Entrepreneurs ranks countries based on women’s entrepreneurial activity. Some less wealthy countries such as Uganda, Ghana, Malawi, and Madagascar have demonstrated notable progress, with the share of women-owned businesses rising to more than 25%. 

Informal cross-border trading in Africa is largely driven by women, underscoring their vital role in the continent’s economic landscape. Furthermore, women’s ability to reinvest a significant portion of their income in health and education emphasises the socioeconomic impact of supporting women’s entrepreneurship. 

For South Africa, the same Mastercard Index indicates a recent improvement in relative ranking and reports a slight increase in the proportion of women-owned businesses. Although the country performed well in the women’s “Advancement Outcome” component, showing progress in women’s participation in various roles, challenges persist in knowledge assets, financial access, and entrepreneurial conditions.

There are several ways to advance progress for women in the labour market as entrepreneurs. Fundamental to many of the inequalities women face are the traditional gender roles and challenging these is critical for greater equality on the labour market as both employees and entrepreneurs. Encouraging women’s involvement in economic activities, providing personal growth programmes, and involving family and community leaders are strategies that can help address these barriers. 

But, beyond tackling these gendered cultural barriers, the creation of robust entrepreneurial ecosystems is an essential step in fostering more entrepreneurship for women and men. These ecosystems can be thought of as encompassing supportive policies, a conducive culture, access to finance, high-quality human capital, business-friendly markets, and institutional and infrastructural support systems. Policy can address some of these ecosystem elements in the support of women’s entrepreneurship. 

A conducive culture would help cultivate an entrepreneurial mindset from an early age which is essential for women to embark on entrepreneurial ventures. The societal expectations and gender norms that prioritise traditional job-seeking over entrepreneurship need to be balanced with entrepreneurial possibilities. Here family, communities, and education systems play a pivotal role in shaping women’s perspectives toward entrepreneurship.

Developing high-quality human capital can help address the lack of accessible education and training which is a major contributor to women’s underrepresentation in entrepreneurship. Entrepreneurship education should emphasise practical skills and offer real-world development projects to equip graduates with practical experience. Indeed, the institutions providing such education can combine instilling an entrepreneurial mindset with practical skills. Here technical business assistance and mentorship is crucial.

Finally, access to finance is a key barrier women face and addressing gender gaps in financing is imperative. Policymakers must focus on enhancing women’s access to the digital economy. Innovative funding sources such as stokvels — local savings or investment societies — can play a vital role in this aspect.

The ecosystem approach underlines that the journey to empowering women’s entrepreneurship in South Africa demands a comprehensive and collaborative approach. Overcoming entrenched barriers and biases requires concerted efforts from government, businesses, finance, and civil society. By nurturing an entrepreneurial culture, enhancing education and training, challenging gender norms, and improving access to finance, the country can unlock the untapped potential of its future women entrepreneurs.

Thobile Radebe is a lecturer in strategic management at Stellenbosch Business School and Professor Mark Smith is the director of Stellenbosch Business School.