Women’s entrepreneurship is on the rise globally. In the past year, 163 million women were starting businesses across 74 economies worldwide, while 111 million were running established businesses. This is according to the Global Entrepreneurship Monitor (GEM) 2016/17 Women’s Report released today with sponsors Babson College, Smith College, Korea Entrepreneurship Foundation, Tecnológico de Monterrey, Universidad Del Desarrollo, and Universiti Tun Abdul Razak.
“This not only shows the magnitude of impact women entrepreneurs have across the globe, but highlights the contribution they make toward the growth and well-being of their societies,” said Babson College Professor and report co-author Donna Kelley. “Women entrepreneurs provide incomes for their families, employment for those in their communities, and products and services that bring new value to the world around them.”
Among the 63 economies surveyed in both this and the last report produced in 2014/2015, GEM found that Total Entrepreneurial Activity (TEA) among women increased by 10%, and the gender gap (ratio of women to men participating in entrepreneurship) narrowed by 5%.
These same economies show an 8% increase in women’s ownership of established businesses, and across Europe, North America, and Asia, close on 10% increase in the positive perceptions that women have that there are good opportunities to start a business.
The 2016/17 GEM Women’s Report also adds a new consideration, notably that women are active entrepreneurial investors. While participation rates vary across different regions, the fact that more women are now investing in entrepreneurship is good news for business owners who will have stronger resource base on which to build.
Sub-Saharan Africa leads with highest TEA in the world
Female entrepreneurship rates vary significantly across the economies surveyed. GEM groups economies into five levels of economic development (using criteria identified by the World Economic Forum) and six geographic regions: East and South Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, North America, and Sub-Saharan Africa.
Sub-Saharan Africa maintains the highest regional average TEA rate (25.9%) and strong average growth expectations, which translates into a lot of employment by women entrepreneurs in this region. On the flip side, however, it also sports the highest discontinuance rate (8.4%). Around 56% of women entrepreneurs in the region cite either unprofitability or lack of finance as a reason for closing down their business.
In South Africa, discontinuance rates are below the regional average at 5.2%. The vast majority of women entrepreneurs (71.6%) have also started a business because they are taking advantage of an opportunity rather than out of necessity suggesting that while TEA rates are the lowest in the region (5.9%), the types of businesses being started in South Africa are more sustainable. This is consistent with findings across the study that as levels of development increase (South Africa is classified as an efficiency-driven economy and is one of the best developed economies in the region), TEA rates decrease but so does business discontinuance.
Policy insight for better support of women entrepreneurs
GEM, now in its 18th year, has gained widespread recognition as the most authoritative longitudinal study of entrepreneurship in the world and, as such, it offers valuable insights to guide future research and policy decision-making as well as the design of interventions that can enhance female entrepreneurship, said GEM Executive Director Mike Herrington.
The data from this latest report highlights several key trends and paradoxes, he said. “As economic development and educational level increases, entrepreneurial participation among women declines and the gender gap increases, but business discontinuance also slows down. While the female discontinuance rate exceeds that of males in the first three levels of development, although only by about 10%, fewer women in highly developed innovation-driven economies have exited businesses, and at only two-thirds the rate of men.”
Also of note for policy makers is the finding that, on average, women exhibit a 20% or greater likelihood of citing necessity as a motive for starting a new business when compared to men – especially in the lesser developed economies. A positive finding is that that women entrepreneurs have a 5% greater likelihood of innovativeness compared to men. The highest level of innovation occurs in North America, where 38% of women report having innovative products and services.
While there are no clear cut answers in the report, the data provides an important foundation for the support of female business growth and the creation of both economic and social value around the world, commented Herrington.
“In many respects this report shows that women entrepreneurs across the world are more different than similar in terms of personal demographics, attitudes, and the types of businesses they run,” he said. “This suggests that support initiatives for women entrepreneurs need be tailored and customised per economy – rather than taking a one-size-fits-all approach.”
Total Entrepreneurial Activity (TEA)
- Among 63 economies (out of 74) featured in both this report and the previous one issued two years prior, overall female TEA rates have increased by 10 percent and the gender gap (ratio of women to men participating in entrepreneurship) narrowed by 5 percent.
o This continues the positive trend revealed in the previous report, which showed an average increase in female TEA rates of 7 percent and a narrowing of the gender gap by 6 percent over the prior two-year period among 61 economies.
- The 74 economies examined in this report show substantial differences in women’s TEA rates, ranging from 3 percent in Germany, Jordan, Italy, and France, to 37 percent in Senegal.
- In five of the economies, women participate at equal or higher levels than men.
o These high-parity economies come from two regions: Asia (Indonesia, Philippines, and Vietnam) and Latin America (Mexico and Brazil).
o None of these economies are at the innovation-driven stage of development, where, on average, women start at 60 percent the rate of men.
o The gender gap is greatest in Jordan, an efficiency-driven economy, where female entrepreneurship rates are about one-fourth the male level.
- On average, at all development levels, women exhibit a 20 percent or greater likelihood of citing necessity motives compared to men.
o However, opportunity motives account for the majority of entrepreneurs. Even in the factor-driven economies, there are over one and a half times as many opportunity as necessity entrepreneurs.
o This is even more pronounced in the innovation-driven group, where women are over three and a half times as likely to cite opportunity versus necessity motives.
- Entrepreneurial intentions increased among women by 16 percent from 2014 to 2016 across the 63 economies participating in both this report and the previous one.
o However, the gender gap is slightly narrower for entrepreneurial intentions than it is for TEA. This suggests that women’s intentions are closer to that of men compared to TEA.
o While not everyone’s intentions translate into action, the implication is that more women than men may be dropping off in this transition between phases.
Established Business Ownership
- Across these same economies, established business rates increased by 8 percent, on average.
o Additionally, the gender ratio improved by 9 percent.
o Like TEA, as economic development increases, established business activity among women declines and the gender gap increases.
- However, while there is greater demand for entrepreneurship in developing economies than in developed economies, comparatively fewer enterprises have transitioned to the mature stage.
o Women in innovation-driven economies, on the other hand, are less likely to start businesses than those in economies at earlier stages of economic development, but women who start are more likely to have sustainable businesses.
- Established business ownership among women is lowest in MENA.
o This region also reports the widest gender gap, where women are running established businesses at one-third the rate of men.
- Latin America also exhibits a wide gender gap in established business activity, which contrasts with a relatively narrow gender gap in TEA.
- The opposite effect can be seen in North America, which reports the narrowest regional gender gap in established business activity, despite showing a wide gap relative to men in TEA rates.
- In three Southeast Asian countries—Thailand, Vietnam, and Indonesia—established business ownership rates among women are equal to or higher than TEA rates.
o Additionally, there are equal or greater proportions of established business owners among women compared to men.
- Relative to TEA, the highest level of exits per entrepreneur is in the factor-efficiency transition stage, where there are four exits for every ten women starting or running a new business.
o This declines to a little over two exits for every ten female entrepreneurs in the innovation-driven economies.
- The female discontinuance rate exceeds that of males at the first three levels of development, although only by about 10 percent more.
o But given that women are less likely than men to be starting businesses, this means that, despite a smaller pool of businesses, there are more exits for women.
o On the other hand, very few women in innovation-driven economies have exited businesses, and at only two-thirds the rate of men.
- From a regional perspective, discontinuance is highest in sub-Saharan Africa, followed by Latin America.
o This is, of course, related to the fact that more women start businesses in these regions. But it appears that these women often struggle with unprofitability, and slightly more often than men.
o Sub-Saharan Africa also cites the highest level of finance issues associated with closing a business, compared to other regions.
- The highest participation in entrepreneurship among women can be seen in the 25-34 and 35-44 year olds.
o This is true, on average, across the development levels and regional groups. It is also the case among men.
o In general, the relationship between the genders with respect to entrepreneurship rates holds throughout the age groups, when viewing averages by development level and geographic region.
- While TEA rates tend to decline with development level, the proportion of entrepreneurs with a college or higher level of education increases. To some extent, this is reflective of the general population.
o A small proportion of female entrepreneurs (14 percent) in the factor-driven stage have at least a college degree, while the majority (61 percent) of those in the innovation-degree have this level of education.
- Parity with male entrepreneurs in education levels also increases with economic development.
o In the factor-driven stage, women entrepreneurs are about two-thirds as likely as males to have a post-secondary degree or higher.
o In the efficiency-driven and higher levels of economic development, women entrepreneurs are as likely, or more likely, to have reached this level of education.
o North America shows the highest education rates among women entrepreneurs, with 84 percent having earned a post-secondary or higher education.
o Europe is notable for having more highly educated women than men entrepreneurs: 22 percent more, on average.
Attitudes and Affiliations
- Opportunity perceptions range from 57 percent of women in the factor-driven economies believing there were good opportunities around them, down to 39 percent holding these beliefs in the innovation-driven group.
- The gender gap on this indicator is relatively narrow, however; overall, opportunity perceptions among women are at 90 percent of male perceptions.
- While 67 percent of those at the factor-driven stage believe they have the capabilities for starting businesses, this declines to just under 35 percent among the innovation-driven economies.
- Additionally, the gender gap in capabilities perceptions is widest in the innovation-driven economies, at just over two-thirds the level reported in men.
Personal Affiliations with Entrepreneurs
- Despite the high visibility of entrepreneurs in American culture, only 27 percent of women in this country know one.
o A similar percentage is reported in Europe.
- In contrast, over half the women in sub-Saharan Africa personally know an entrepreneur.
- What appears to stimulate personal connections are simply the presence of entrepreneurs in one’s community. In the lower economic development levels, with high TEA rates, more than half of women know an entrepreneur personally. This declines to just over 30 percent in the innovation-driven group.
- On average, across the entire sample, 10 percent of women entrepreneurs operated their businesses solely and had no intentions to add any employees in the next five years.
- In over three-fourths of the economies, women were as likely, or more likely, than men to have self-employment businesses.
- Europe has the highest frequency of one-person female business activity, while North America, containing two advanced economies, has the lowest.
- In Netherlands, half of the women entrepreneurs were operating solely, nearly two and a half times the frequency of men in this country.
- Across the regions, the lowest average female growth expectations can be found in Latin America.
o While there are many entrepreneurs in this region, proportionately few expect to grow their businesses.
o Additionally, there is a wide gender gap, with growth expectations barely reaching 60 percent of the male level.
- Interestingly, although sub-Saharan Africa also has a wide gender gap on this indicator, average growth expectations are higher than in Latin America.
o Together with the highest regional average TEA rate, this translates to a lot of employment by entrepreneurs in this region.
- The MENA region reports the highest average female growth expectations at 37 percent, and with the highest gender parity, where women with growth expectations are just under 80 percent of the male rate.
- Over half of the women entrepreneurs in UAE, Qatar and Tunisia expect to hire six or more employees in the next five years. Moreover, women in Saudi Arabia and Morocco are more likely than men to have these ambitions.
- Innovation levels increase with economic development, with the innovation-driven economies exhibiting a substantial jump from the other development levels.
- Overall, innovation represents the indicator with the greatest female-to-male gender ratio; across all 74 economies, women entrepreneurs have a 5 percent greater likelihood of innovativeness compared to men.
- The highest level of innovation occurs in North America, where 38 percent of women report having innovative products and services.
- In sub-Saharan Africa, on the other hand, 18 percent of women state their offerings are innovative. Yet both regions, as well as Europe, show gender parity.
- Among entrepreneurs in MENA, women not only report high innovation levels, but are 60 percent more likely than men to state their offerings are innovative, with seven of the ten countries in this region reporting higher innovation levels among female than male entrepreneurs.
- The level of international sales varies dramatically, spanning from zero or less than 1 percent in three Latin American countries (Brazil, Guatemala, and Ecuador) and three Asian countries (Malaysia, Thailand, and Vietnam) to over three-fourths of women entrepreneurs in the UAE and over half in Saudi Arabia.
- On average, more than one-fifth of women entrepreneurs in innovation-driven economies state that 25 percent or more of their sales are to customers outside their economies. This is four times the level of the factor-driven group.
- Regionally, only 6 percent of sub-Saharan African women entrepreneurs are internationally-oriented, and this is somewhat more than half the level of men. On the other hand, 29 percent of women entrepreneurs in MENA are considered international, and at a higher rate than men.
- Wholesale/retail trade accounts for about 60 percent of female entrepreneurial activity among the first three development levels.
o By comparison, at the highest level of development—among the innovation-driven economies—only one-third of women entrepreneurs compete in this sector.
o This is fairly consistent with male participation in this sector; across the entire sample, women entrepreneurs are just 16 percent more likely to be starting wholesale/retail businesses.
- Over half of women entrepreneurs in the innovation-driven group are in government, health, education, and social services.
o This is the business category that women entrepreneurs dominate relative to men at all development levels.
o On average across the entire sample, they are two and one-fourth times more likely to be starting in this sector.
- Where women are less likely to be seen in the entrepreneurship ranks, is in the ICT sector. Overall, fewer than 2 percent are starting business here, amounting to a little more than one-fourth that of males on average.
- Overall, 4.6 percent of women in the 74 economies provided finance to entrepreneurs in the past three years.
o This ranges from 1 percent in Morocco to 16 percent in Cameroon.
o Entrepreneurial investment in the innovation-driven economies is a little more than one third the level reported in the factor-driven group.
- While male investment rates also decline with economic development level, this decrease is not as steep as it is for female investors, leaving a wider gender gap with higher levels of development.
o Overall, women invest in entrepreneurs at less than two-thirds the rate of men.
- About 5 percent of women in North America, Latin America, MENA, and Asia have personally provided funds to entrepreneurs.
o The other two regions, however, show contrasting results. Only 3.5 percent of women are entrepreneurial investors in Europe, while 9 percent in sub-Saharan Africa have funded entrepreneurs.
Top Sectors For SMEs In 2019
“As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
While the South African economy has been underperforming for a number of years, the first positive signs of turnaround started to become visible by the second quarter of 2018, and by the end of the third quarter, data supplied by Statistics South Africa showed that the economy had indeed grown by 2.2 percent, compared to the previous quarter. This uptick is expected to have a positive effect on business confidence in 2019.
This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that certain business sectors have already seen an increase in opportunities for small businesses and start-ups.
“While these sectors will not be without challenges, the following four industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year.”
The World Travel and Tourism report 2018, revealed that the direct contribution of the travel and tourism sector to South Africa’s GDP has been projected to rise from R136bn in 2016 to R197.9bn by 2028 – set to make up a total of 3.3 percent of the country’s total GDP, says Lang.
“Although this sector experienced some setbacks in 2018, such as the drought in the Western Cape and stricter visa regulations for children entering the country, both the water restrictions and visa regulations have been relaxed and the sector is once again poised for growth,” he says.
Statistics South Africa has credited this industry with being the biggest driver of growth in the country’s GDP, having expanded by 7.5 percent in September 2018, says Lang. “To bolster this, Government has made a concerted effort to stimulate small business growth in this area with initiatives such as the Black Industrialist Programme and the SA Automotive Masterplan.”
He adds that businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.
“The debate around land expropriation has occupied most of the discussions surrounding the agricultural sector in 2018, with some questioning growth prospects of this sector. However, this industry has a lot of growth ahead of it, as demonstrated by its 6.5 percent growth over the last three months of 2018,” explains Lang.
“Further to this, the industry is also already taking significant advantage of seven climatic regions in South Africa, with the export of a wide variety of high quality fruit and vegetables increasing substantially,” he points out. The recent outbreak of foot and mouth disease that has resulted in the suspension of the country’s FMD-free status will however significantly impact meat exporters.
In terms of opportunities for SMEs, he says that these may most likely be found in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.
Data and information technology
Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa, says Lang.
“With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.”
It has also been reported that South Africa is awaiting the arrival of three international data centres, and large players in the communications sphere, including Vodacom, Telkom and Vumatel, are making huge strides in drastically growing the country’s fibre optic backbone, he adds. “As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”
In conclusion, Lang says that as South Africa’s economic growth has started to turn around, business owners should keep their ears to the ground as 2019 is highly likely to be a year of opportunity.
Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative
Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.
Leading organisations at the SME Summit
SME Insurance Checklist For New Year
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers, advises SMEs to consider the following factors when reviewing their policies.
Business owners who are planning for the year ahead should not overlook the importance of reviewing their insurance policies to ensure they are adequately covered against insurable risks.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says, every year businesses face unique challenges ranging from credit and market risks, technological disruptions, compliance, operational and regulatory risks, amongst others. As a matter of precaution, insurance policies should at least be reviewed or updated once a year.
He advises SMEs to consider the following factors when reviewing their policies:
- Employee movements – if there are any employees who have left or joined the company, ensure that your policy is updated accordingly.
This type of cover normally depends on the role and contribution of the employee to the business. For instance, directors may be covered for Key Person Insurance and Directors & Officers Liability insurance.
- Protest Actions – this year is the national election year and leading up to elections we can expect to see an increase in the frequency and severity of protest actions, riots and strikes. Thus, it is essential to ensure that adequate special risks cover is in place from the South African Special Risks Insurance Association (SASRIA).
SASRIA provides cover to both individuals and businesses against special risks like civil commotion, public disorder, strikes, riots and terrorism at affordable premiums.
- Cyber risks – it is essential to communicate with your insurer or broker and find out if there are any new risks that your business should be protected against. Cyber incidents continue to be a major risk for businesses especially in the SME sector. Over the last couple of years there has been a major increase in the number of reported cyber incidences.
More businesses are now facing increased cyber threats due to their increased dependency on technology, relating to their internal and customer data being compromised by fraudsters. It is therefore essential to have some form of cyber risk insurance cover and/or enhancement of data security protocols.
- Regulatory changes – every year there are a number of regulatory changes that impact businesses directly or indirectly, which may result in fines and penalties for non-compliance.
- Natural catastrophes – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on businesses.
Businesses should ensure they are adequately protected against these risks to avoid incurring sever financial losses.
- Business changes – should a business consider moving to a new location, purchasing new premises or venture into new business activities, these types of changes could have a major impact on its risks profile. As a result, the policy needs to be updated accordingly.
- New and Enhanced products – An innovative culture has taken over the insurance industry and ever so often we see the introduction of new products or the enhancement of existing products. Get in touch with you broker to advise you on any new products that might add value to your existing insurance portfolio.
“Reviewing your policy regularly gives you peace of mind knowing that you can focus on running your business effectively, without worrying about unforeseen risks,” concludes Maupa.
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