Entrepreneurship Declines 20% in SA

Entrepreneurship Declines 20% in SA


Entrepreneurial activity in South Africa declined by 20% in the past year, according to the 2012 annual survey of the Global Entrepreneurship Monitor (GEM), released last month.

  • GEM’s assessment of early-stage entrepreneurial activity shows a drop in the country’s score from 9.1% in 2011 to 7.3% in 2012.
  • Fewer than 14% of South Africans planned to start a business in the following three years. This is 13% below the global average for comparable countries, such as Argentina, Brazil, and Malaysia.

Yet increased entrepreneurship could provide a much more effective way of empowering apartheid’s former victims than racial set-asides under employment equity and black economic empowerment rules.

Barriers to entrepreneurship

Many more black people could also start their own micro businesses if the socio-economic environment were not so skewed against them. Instead, they are held back by:

  • Poor skills
  • Limited capital
  • Costly and uncertain electricity supply
  • High wages
  • Onerous labour laws
  • Pedestrian rates of economic growth.

Red tape hobbles new business

Red tape also plays a major part in hobbling small business, as the National Development Plan (NDP) has warned.

The Department of Trade and Industry (DTI) has nevertheless recently unveiled the Licensing of Businesses Bill of 2013 (the Bill), under which every business will have to obtain a licence to operate from its local municipality.

Failure to produce a licence on demand will be punishable by fines and/or prison terms of up to ten years.

NDP vs Licensing of Businesses Bill

There is a stark contrast between the Bill and the NDP, with its call to ‘reduce regulatory red tape’ to help small business grow. Yet the NDP is supposed to be the Government’s ‘overriding’ policy blueprint.

The NDP has been roundly rejected by the Congress of South African Trade Unions, which is preparing to launch a general strike against it. The Bill suggests that Rob Davies, minister of trade and industry, is also doing his bit to stifle the NDP at birth.

Increased entrepreneurship is vital in empowering black South Africans, but the country lags far behind its peers in getting small businesses going and growing. Proposed business licensing requirements will hobble small firms even more, while helping to stifle the NDP at birth.

Alison Job
Alison Job holds a BA English, Communications and has extensive experience in writing that spans news broadcasting, public relations and corporate and consumer publishing. Find her at Google+.