South Africa 2015 State of Entrepreneurship Address (Part I)

South Africa 2015 State of Entrepreneurship Address (Part I)

South Africa 20 Year Democracy AnniversaryAfter last week’s disappointing events in parliament, it is important that we restore some dignity back to “State of” addresses. Last week the Kauffman Foundation gave the sixth edition of their American State of Entrepreneurship Address.  It sparked a thought. The concept of a State of Entrepreneurship Address is a compelling one, particularly in a country like South Africa where any opportunity to elevate the prominence of entrepreneurship needs to be embraced. So what would be said in our 2015 State of Entrepreneurship Address?

The starting point would have to be the more recognised global measurements of entrepreneurial activity.  For this there would be a mixed to poor evaluation as we would again be reminded that our levels of entrepreneurial activity (7% of adult population) in the 2014 Global Entrepreneurship Monitor Report, is about a third of what it should be, and that we have very low levels of the adult population that either perceive entrepreneurial opportunities around them (37%) or perceive that they have the skills and abilities to start a business (37.6%). Particularly when these same measures average above 60% for the rest of sub-Saharan Africa.  This picture would be improved somewhat, as discussed last week, in the 2015 Global Entrepreneurship Index, largely due to the introduction of more measures of institutional capacity where South Africa fares better.

In more specific evaluations of African entrepreneurship, such as the Omidyar Accelerating Entrepreneurship in Africa Report  in 2013, while we would find more detail around weaknesses – the complexity of our legislation (SBP recently estimated that a company  with a turnover of R5 million would be spending 4% of turnover on red tape compliance) and strengths –  the important enabler of our financial sector, we would largely return to the overall theme of a South Africa not fully realising its entrepreneurial potential.

Yet these reports are difficult to summarise into an overall neatly packaged ‘state of entrepreneurship’. For this we need to turn to the Isenberg Ecosystem model which carefully organises the entire entrepreneurship ecosystem into six domains:

EES-Domains-and-Pillars-only-2

For the purposes of our State of Entrepreneurship Address this allows us to create a high level summary dashboard for our entrepreneurial performance. For each domain a positive (green), middling (orange) or poor (red) indication of status is given along with an assessment of the recent trend and a descriptive comment.

DOMAIN STATUS TREND COMMENT
Policy  red  arrow up Some positive developments in terms of the establishment of a Small Business Development Ministry as well as the revision of the S12J tax incentive for venture capital, but overall there is too heavy a legislative burden on new companies and a lack of urgency from leadership including a lack of understanding of the difference between new growing businesses and small business.
Finance  green  arrow up While there are areas in the financial continuum that need attention such as angel investors and venture capital, the overall sophistication of our financial markets is an important enabler for the country.
Culture orange  arrow up Entrepreneurial culture is improving with increasing attention and recognition given to entrepreneurs in more main stream platforms including the recent Dragon’s Den television show, and the continued momentum of in support of ecosystems from entities such as Silicon Cape, SiMODiSA  and TechInBraam. There is still work required on societal norms and attitude to failure.
Supports  green  arrow down South Africa has a strong combination of support from the depth in support professions (legal, accounting) and a wide range of supporting non-governmental institutions.  Until recently infrastructure has been a strength, but increasing pressure on energy may soon shift the rating of this domain.
Human Capital  red  arrow down While we have strong university institutions, the overall human capital pipeline in South Africa in almost every measure of significance is woeful. We simply do not have sufficient individuals with the skills to be successful entrepreneurs
Markets  orange  both ways We have a number of big corporations that can act as natural initial markets for new enterprises and there is significant enterprise development legislation to support this. However networks are not well developed and there is a lost opportunity in not fully harnessing the significant South African entrepreneur diaspora network which includes global entrepreneurship icons.

 

While the dashboard gives an indication of which areas need attention, such exercises can quickly become academic without an overarching target towards which we are all moving.  Thankfully we have this in the National Development Plan, and so it provides the ideal rallying point for the address, infusing the dry numbers and assessment with that life-giving inspiration of vision.  Simply the State of Entrepreneurship Address needs to benchmark our progress towards the 11 million new jobs required by 2030.

Of course this is not going to happen without a plan and no “State of” address would be complete without an action plan.  In a similar manner to our President’s Nine Point Plan for the country’s growth, after allowing our imagination to soar and our optimism to rise, a Nine Point Plan for Entrepreneurship in South Africa emerged.  It is built around the three pillars of “Better culture, better information and better skills”

But more on that next week. What would your SOEA dashboard look like?

 

 

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