SA’s entrepreneurs are not thriving, warns survey

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South African entrepreneurs are not thriving and more needs to be done to improve the country’s entrepreneurial ecosystem.

That is according to the State of Entrepreneurship in South Africa report, released by Seed Academy after surveying more than 1,000 entrepreneurs across the county.

It found the South African startup ecosystem remains difficult to navigate with several entrepreneurs reporting they do not know how to access available support. Key challenges for entrepreneurs include inability to raise funds, finding customers, customers paying late and unpredictability of business conditions.

“We’ve undertaken this survey for four years and it is SA’s largest and most referenced entrepreneur survey,” said Donna Rachelson, chief executive officer (CEO) of Seed Academy.

“We see small progress in terms of business survival rates, revenue increases and more women entrepreneurs but what we really need is for stakeholders in the ecosystem to pull together and make major trajectory changes that support all entrepreneurs from seed through to scale-up stages. We still don’t have the basics right: early stage funding and high impact business support throughout the entrepreneurial journey.”

The number of for-profit social enterprises has increased by 10 per cent since 2017, demonstrating that businesses that address social and community issues are on the rise. Of the businesses that are post revenue, only five per cent have a turnover of greater than ZAR5 million.

Keys to success for entrepreneurs remain strong personal networks, proper business planning, access to business support services and the ability to present for new market opportunities. Business focus is necessary but 47 per cent of businesses are engaged in business to business, business to consumer and business to government initiatives at the same time – making market focus difficult.

Accessing funding remains the biggest concern and challenge for entrepreneurs. Entrepreneurs are largely self-funding and are not applying for funding because they don’t know where or how. The risk appetite for funding early stage and perceived “risky” entrepreneurs is low. In addition, the angel network and banks as funding options remain ineffective.

Rachelson recommends real conversations over what is needed to be done differently to develop an ecosystem that develops sustainable businesses that create jobs. Funders need to play a far more active role in educating entrepreneurs about their processes and put in place interventions that assist entrepreneurs to become ‘funding ready’. They should also be allocating risk-based funding to early-stage entrepreneurs together with appropriate business development support.

“Align the support provided by government and other role players as the current ecosystem is disjointed with very little cooperation and coordination. This results in  misalignment to the sectors that are highlighted in key economic policy documents. We also need to design interventions that are appropriate for women,” she said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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