South Africa has had persistently low levels of entrepreneurial activity relative to other countries. South Africans, however, continue to report strongly positive societal attitude towards entrepreneurship. Given that a significant challenge faced by South Africa is chronically high levels of unemployment and underemployment, the persistent trend of low entrepreneurial intention is of concern.
Entrepreneurial intentions in South Africa are significantly lower than for the African region as a whole – the regional average is four times higher than for South Africa – while the average for the efficiency-driven economies is more than double South Africa’s score.
Problems accessing finance, in particular, remain a significant constraint – as was the case in 2015 – with more than a quarter of entrepreneurs exiting their businesses for this reason. This is also a more pressing problem for South African entrepreneurs, compared to their regional counterparts – 50% more South African entrepreneurs discontinued their businesses because of lack of access to finance, compared to the average for Africa. South African entrepreneurs are almost three times more likely to exit their businesses because of problems accessing finance, compared to the average for entrepreneurs in efficiency-driven economies.
Half of all early-stage entrepreneurs are active in the wholesale/ retail sector – the same as the average for Africa as well as for the efficiency-driven economies. Almost 10% of South African early-stage entrepreneurs are involved in transportation An encouraging finding is the substantial increase in early-stage entrepreneurial participation in the finance sector. South Africa is ranked 19th out of 65 economies in terms of participation in this sector; however, given the low levels of education and skills in South Africa – particularly in maths and science – this sector remains inaccessible to most potential entrepreneurs.
Although innovation levels have declined since 2015, South African early-stage entrepreneurs remain more innovative than their African counterparts. Of particular concern in the South African context is the marked drop in entrepreneurs who believe that few/ no businesses offer the same product. In 2016, the majority of entrepreneurs in South Africa (57%) report experiencing high to moderate levels of competition. Twenty-two per cent of South Africa’s entrepreneurs in 2016 had products that were new to all or some customers AND few/ no businesses offered the same product, compared to 30% in 2015. South Africa’s marked dip in innovation levels is of concern, particularly given that business sophistication and innate level of innovation are important factors for efficiency-driven countries hoping to move up the value chain to the next phase of economic development. For businesses to become competitive, develop relationships with customers and suppliers and have easier access to business-related information, it is important that they have access to technology as well as have the capacity to use it effectively.
Just over half (55%) of early-stage entrepreneurs in South Africa use latest or new technology, compared to an average of 45% for the Africa region. A quarter of South African entrepreneurs use the very latest technology. An area of concern is that 45% of South African entrepreneurs have a low technology orientation (i.e. use no new technology). Reasons for this may include the low level of technological and science skills in the majority of the South African population, as well as the high cost of new technology which is beyond the means of many small businesses. South African entrepreneurs display relatively high levels of strong international orientation, with a quarter of entrepreneurs reporting that 25% or more of their revenue comes from international sales. This is 2.7 times the average for the African region.
