The emergence of a growing community of women entrepreneurs has been a significant economic and social development across the globe. In South Africa, government has prioritised entrepreneurship and the advancement of small, medium and micro-sized Enterprises (SMMEs) as the catalyst to achieving economic growth and development.
According to a report by SEDA 80% of women entrepreneurs are involved in the informal sector compared to 65 per cent of their male counterparts. Although this represents a significant percentage, there is limited literature available on female entrepreneurs in the informal sector in South Africa.
In rural settings, where there is a strongly pronounced patriarchal African society, a woman is not expected to make economic decisions such as starting a business and requesting resources and goods to make it work but to rather tend to home responsibilities. Within this social structure, the achievement, motivation and self-assurance of female entrepreneurs can be negatively affected.
To understand the motivational factors that drive women entrepreneurs in rural settings, a study was conducted in 2017 aimed at women entrepreneurs in the Mahikeng area in the North-West province. The study sought to understand what drives these women in starting up informal enterprises, the barriers they experience and their developmental business needs.
The North-West Province where Mahikeng is situated, recorded the largest annual decrease in the official unemployment rate amongst the nine provinces in South Africa, from 26.8% to 25.2% according to a Stats SA report. Despite this fact, the province has a labour force participation rate of 2.3%. The majority of households are headed by women as men are mostly migrant labourers on mines. They live with fewer resources, fewer rights and fewer opportunities because of factors such as domestic violence, the lack of education and gender discrimination.
Research has indicated that there is a significant intersection between being a woman, working in the informal sector and being poor. A higher percentage of people in the informal sector relative to the formal sector are poor. Informal economic activities are unrecorded but are estimated at a value of 28% of South Africa’s total gross domestic product (GDP). That is R160 billion, which makes its value 2.5 times as large as the contribution of the entire agricultural sector, or 70% of the contribution of the mining sector to GDP.
The study on Mahikeng’s informal women entrepreneurs discovered that there were three key underlying motivational factors that drove them to becoming entrepreneurs. These were destitute conditions, an entrepreneurial spirit and a passion for their products.
A key driver cited by 83% of respondents for starting an informal business was to move away from ‘destitute conditions’. Destitute conditions are associated with factors such as having an insufficient family income and the difficulties in finding a job. These factors can be defined as ‘push’ factors and extrinsically motivated as women aspire to escape and move away from their unfortunate circumstances such as poverty and dependence on their male partners.
An entrepreneurial spirit
However, the need to transcend impoverished conditions and the need for self-determination were almost equally strong amongst the participants.
Self-determination can be linked to the entrepreneurial spirit which is described in terms of self-fulfilment, the need for independence and the need for a challenge. These are ‘pull’ factors as women aspire towards certain ambitions, which are intrinsically motivated. As high as 78% of the Mahikeng women entrepreneur respondents shared a passion for business and a high entrepreneurial flair.
The research pointed strongly to the fact that an entrepreneurial spirit mixed with the right amount of skills training could enhance the performance of informal female entrepreneurs. If fully developed, it could lead these women entrepreneurs to move out of survival mode into profit maximisation.
Passion for product
Mahikeng’s women entrepreneurs displayed a keen sense of confidence in their product, or the eagerness to develop a sideline interest into a profit-making venture. This factor is also perceived as a ‘pull’ factor which is intrinsically motivated, and 43% of respondents listed this factor as the third most important reason for starting a business.
Barriers to success
Women within the informal sector are less educated and have fewer marketable skills with most of the respondents not having a secondary qualification. Although the South African government has established many pro-women support structures over the last two decades to provide a variety of support to emerging entrepreneurs, the need for gender-specific and informal sector–specific training and development still exists. In terms of their training and development needs, 91% of the women interviewed indicated that they had never been exposed to any training programmes by government or a private organisation.
Lack of business and financial skills was ranked as the biggest obstacle to a successful business followed by the lack of a business network, which is necessary in maintaining and expanding an informal enterprise.
It is important that both the public and the private sectors acknowledge the importance of the informal business sector in South Africa. With a labour force participation rate of 2.3% the rural villages in the Mahikeng district in North-West do not paint a picture of growth and prosperity.
Informal women entrepreneurs are firstly propelled by the need to survive; in other words, the women do business to escape poverty. As an extrinsic motivation, it pushes them towards creating security for their family and not towards profit maximisation. They are driven to entrepreneurship out of necessity or destitution. Their entrepreneurial activities are viewed as a safety net that provides employment and income-earning opportunities for those excluded from formal sector employment. Many women engaged in the informal sector would in its absence be unemployed and unable to access alternate forms of income.
Competence is a necessary skill and an enabler of a self-efficacy; that is, the belief that one are the master of one’s own destiny. Building on strengths is more effective than trying to improve weaknesses. However, self-efficacy behaviour without the necessary support will take informal women entrepreneurs only so far. Access to basic infrastructure, training, funding and business networks will enable self-efficacy behaviour of women entrepreneurs in the Mahikeng district to move themselves and their communities from poverty to prosperity.
Global Guide For Entrepreneurs, Innovators Launches In Johannesburg
Startup Guide partners with SAP Next-Gen, Tshimologong Precinct to bring global guidebook to Johannesburg innovation ecosystem; calls for nominations.
Calling all entrepreneurs, accelerators, innovators, co-working spaces and experts in the City of Gold: Startup Guide, the leading global guide for start-ups in high-growth innovation hubs in Europe, the US and Middle East, is open to nominations in Johannesburg.
Founded in 2014, Startup Guide is a creative content and publishing company that produces guidebooks and tools to help entrepreneurs to connect to communities and resources in the leading start-up cities around the world. Its global footprint covers some of the most innovative and thriving start-up ecosystems in the US, Europe and the Middle East, including those of London, New York, Berlin, Tel Aviv, and Stockholm. After launching in Cape Town earlier in the year, Startup Guide now moves to Johannesburg.
According to Sissel Hansen, Founder and CEO of Startup Guide, South Africa’s largest city is emerging as a key innovation hub for start-ups.
“Johannesburg has recently emerged as a growing ecosystem for start-ups and entrepreneurs in Africa, particularly in the tech industry. We’re thrilled to have the opportunity to create a comprehensive guide of resources for aspiring founders wanting to do business in South Africa’s largest city.”
Startup Guide Johannesburg was launched at Wits University’s Tshimologong Precinct, one of Johannesburg’s newest high-tech addresses in the vibrant inner-city district of Braamfontein. Tshimologong, which means “new beginnings” in Setswana, focuses on the incubation of digital entrepreneurs, commercialisation of research and the development of high-level digital skills for students, working professionals and unemployed youth. Lesley Williams, CEO of Tshimologong Precinct, says: “South Africa is fast-becoming a go-to source for innovation, especially in the tech sector. We believe the introduction of a dedicated resource for the startup ecosystem in Johannesburg will unlock significant opportunities for innovation hubs such as ours to more easily connect with entrepreneurs, experts and other roleplayers, ultimately providing a more supportive environment for growth.”
Startup Guide has partnered with SAP Next-Gen, a purpose driven innovation university and community for the SAP ecosystem enabling companies, partners and universities to connect and innovate with purpose linked to the UN Sustainable Goals for Development. Ann Rosenberg, Senior Vice President and Head of Global SAP Next-Gen says:
“We strive to connect digital innovators in an open innovation community to drive the future success and growth of industries through the use of technology. As we have witnessed in other high-innovation cities around the world, the introduction of knowledge resources – supported by opportunities for collaboration and partnership in an open ecosystem – enhances the overall success of entire start-up communities. Johannesburg’s world-famous energy and business acumen will greatly benefit from the launch of Startup Guide Johannesburg and the support of industry partners, including SAP Next-Gen and the Tshimologong Precinct.”
Cathy Smith, Managing Director of SAP Africa, adds that the partnership with Startup Guide aligns well with the company’s commitment to the UN Sustainable Development Goals. “As an organisation we are committed to achieving the high ambitions set out by the SDGs. However, it is virtually impossible to do so alone: the concept of partnership with likeminded purpose-driven organisations and initiatives is vital not only to realising the SDGs but to foster a greater and more inclusive innovation ecosystem in Johannesburg and across the African continent.”
Nominations for the Johannesburg edition of Startup Guide are now open. If you know a start-up, entrepreneur, programme, space, accelerator, or experts and would like to see them featured in the book, please visit https://startupguide.com/shop/startup-guide-johannesburg and submit your nomination.
Aspirations For SMMEs In South Africa
Research released earlier this year, revealed that there are only 250 000 formal SMMEs in South Africa.
Entrepreneurs who have started up a business over the past 10 years have done so in an environment that has been largely negative, with slow economic growth and an unstable political landscape. “So, all in all, a very difficult setting to launch, grow or even maintain a business,” says Bizmod MD, Anne-Marie Pretorius.
Pretorius says that many entrepreneurs who operate in South Africa can be forgiven for often wondering if the slog is worth it. Yet they continue – despite economic uncertainty, strikes, retrenchments and downscaling. “It is this tenacity that sets entrepreneurs apart, and I often wonder how much more successful they would be in an easier and more supportive environment.”
Below, Pretorius shares her ideal pro-entrepreneur outlook for the future:
- Greater policy certainty on all key government policies from land reform to regulations surrounding labour broking.
- Being able to do away with bad policy faster. An example of where this did not happen was in the changes of visa requirements; leading to an unnecessary dent in our tourism industry, an industry that should be targeted for growth.
- Lower compliance requirements for companies with a turnover under R50 million. The cost of compliance for smaller enterprises is significantly higher in comparison to their income and the cash they have available. Smaller companies need simpler frameworks where compliance is required. A portal similar to SARS e-filing, which makes compliance across various pieces of legislation clear and simple, would be ideal.
- The Labour Relations Act is a key piece of legislation that has done a lot to protect the rights of the employee. It has attempted to balance the power relationship between employee and employer. Some innovation is however required in labour practices, allowing for mutually beneficial flexible working relationships that keep pace with the changing work environment.
- Buy small, buy South African! A framework whereby large corporations and government would have to allocate a certain minimum percentage to buying from smaller local companies. There are encouraging signs that this is happening more, however this is still not an ingrained practice. In addition, consumers should be more informed on what items are South African produced, in order for them to be encouraged to purchase locally.
- Easier access to funds enabling entrepreneurs to grow their businesses. There are currently a few options available, but all of the options require significant governance and red tape. Whilst this is understandable from the lenders perspective, it does hamper the agility and growth of companies.
- Make good financial governance aspirational, attractive and easily accessible.
- The process for tenders to be corruption free and fair, enabling more companies to add value.
- Pay SMME’s on 30 days or less. Enormous pressure exists on smaller companies when not paid on time. They simply do not have the cash flow to carry a debtor’s book of 90 days and this inevitably hampers their growth.
- Tax SMME’s at a lower tax rate. Profit tax should be lowered in order to drive entrepreneurship.
- Creating a platform that makes it simpler to employ young individuals with potential and create support programmes for SMMEs to upskill them. There is a significant financial and time investment required to train a young person, which can make SMME’s sometimes wary to do so.
“If we are able to make only some of these ideals a reality, there is no doubt that we would see economic growth, entrepreneurial growth, and more employment opportunities,” concludes Pretorius.
Related: A – Z Easy Small Business Ideas
South African Students Win R50 000 In The Universities Business Challenge
Students from Mangosuthu University of Technology beat 500 students from 13 different universities across South Africa.
The Overlings from Mangosuthu University of Technology are the 2018 winners of Cognity Advisory’s Universities Business Challenge (UBC), sponsored by General Electric (GE). The winning team of four students are walking away with R50,000 to turn their business idea into reality.
Launched in July this year, the UBC has seen 500 students from 13 different universities across South Africa participate in a business simulation competition designed to develop entrepreneurship skills.
When the competition launched, all teams were challenged to form virtual companies and to virtually manufacture and sell bicycles.
The final 10 teams were from the University of Limpopo, Mangosuthu University of Technology, Vaal University of Technology, University of KwaZulu-Natal and North-West University.
During the two-day final, the teams played six rounds of simulations. Each simulation gave the teams a chance to re-evaluate their progress and better certain areas that needed improving. The winning team realised during one of their simulations that in order to maximise profits they would need to introduce two new products and market it differently from their initial product. They paid special attention to their customer’s needs.
The aim of the UBC was designed to tackle South Africa’s high level of youth unemployment. Statistics South Africa (Stats SA) that South Africa’s official unemployment rate increased by 0.3 of a percentage point to 27.5% in the third quarter of 2018.
Nkosinathi Sokhulu from the winning team said, “Even though we didn’t have a great presentation we made the most profit. This experience taught us a lot about ourselves and business. Most of the decisions that we made came from serious debates. We learnt that market research is crucial when starting a business. We learnt that marketing starts and ends with the customer.”
“Based on this market research information we realised that it was important for us to introduce two new products and this, in addition to the main product we were selling, helped us to maximise profits. We saw an opportunity to add more products and it paid off” said Mbali Tshozi.
Tope Toogun, development advisor and CEO of Cognity Advisory said, “All the teams showed tremendous promise and I was very impressed by their levels of engagement with one another and their tenacity.”
“We really want to ensure that students are equipped with the necessary skills to not only start a business but to run it effectively. While we have selected one winner, our hope is that each team has benefitted by having learned the skills needed in the workplace.”
“The competition is designed to develop the ‘soft skills’ that are important for those wanting to set up their own business or simply be successful at work. With rising unemployment and ongoing talent shortages, having these skills is crucial for those wanting to get a job.”
The UBC, now in its second year in South Africa, will continue into its third year in 2019 and will run as the Africa Enterprise Challenge (AEC).
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