South Africa is one of the toughest countries in the world to be an entrepreneur but, as the country emerges from the economic shocks of the COVID-19 pandemic, there are encouraging signs of increased entrepreneurial activity and of more small businesses making it beyond the startup stage.
That is according to the latest Global Entrepreneurship Monitor South Africa report, released by Stellenbosch Business School in partnership with the Global Entrepreneurship Monitor (GEM) and the Small Enterprise Development Agency (Seda).
The report found that while South Africa’s supportive environment for entrepreneurship is rated lower than global averages, there are positive signals in increased early-stage entrepreneurial activity and rising entrepreneurship rates among women and young people.
Early-stage entrepreneurial activity, which means the percentage of adults who were starting or running a new business, rose to 17.5 per cent in 2021, up from 10.8 per cent in 2019. Those owning or managing an established business, in operation for at least 3.5 years, were at 5.2 per cent, up from 3.5 per cent.
Although South Africa ranked 45th out of 50 countries in the GEM National Entrepreneurial Context Index, a measure of the favourability of the environment for entrepreneurship and new business creation, GEM SA lead author Angus Bowmaker-Falconer, research fellow at Stellenbosch Business School, said the uptick in the established business rate was particularly encouraging.
“Having survived the startup phase, these businesses would now have a real possibility of contributing to the country’s economy. It means more early-stage entrepreneurs made it to the established business stage between 2019 and 2021 despite the constraints on business due to COVID-19, and if these rates can continue this upward path, it should lead to a greater depth of established businesses in South Africa,” he said.
“Given the generally high failure rate of startups, the overall positive entrepreneurial activity in 2021 is to be welcomed. However, there were also mixed signals around the confidence of entrepreneurs, fear of failure, business exits, and adoption of digital technology. This tells us that there is still much to be done to strengthen the enabling environment and ease of doing business so that we can truly unlock the potential of entrepreneurs to contribute to economic growth and job creation.”
The full report can be downloaded from the Stellenbosch Business School website.