According to the latest Global Entrepreneurship Monitor (GEM) report, entrepreneurial activity in South Africa has continued despite the challenging economic environment in the past two years.
The report, published on Tuesday, shows that total early-stage entrepreneurial activity in the country increased from 10.8% in 2019 to 17.5% in 2021, while ownership of well-established businesses increased from 3.5% to 5.2%.
The report measures entrepreneurship across global economies. The 2021 report looks at 50 economies including four in Africa – South Africa, Sudan, Morocco and Egypt. By assessing the development of entrepreneurship in various economies, the study allows to monitor the evolution of entrepreneurship over a period of time.
Stephen, CEO of Capital Connect Heilbronn says in a statement.
“However, entrepreneurs remain resilient despite these challenges.”
Rather than deter entrepreneurs in South Africa, the report found that the desire to make a difference, build wealth and earn a living motivated them to find innovative entrepreneurial solutions to these challenges.
“Entrepreneurs in our country are risk takers who discover opportunities that others are missing out on,” Heilbrunn says.
“They are willing to invest in growth and progress, even when the odds seem insurmountable to others.”
One of the sectors that would benefit from this situation is the wholesale and retail arena, which has seen the most innovation over the past five years, with competition intensifying as various players try to maintain their relevance to consumers.
“Change portends risks and opportunities,” Heilbrunn says.
“As we have seen from the rise of express delivery services like Checkers Sixty60 during the pandemic, there is opportunity in crisis. Aspiring retail entrepreneurs are demonstrating flexibility and agility in creating new business to disrupt the status quo and target evolving consumer trends and tastes to compete in the new normal world.
“Whether it’s investing in a café and bistro for their shop or putting in solar panels and batteries to continue trading by offloading, South African retailers face risks and opportunities today.”
Despite the positive sentiment, the report found that many barriers remain. This is indicated by South Africa’s below-average rating on several key factors that play an important role in ensuring the success of entrepreneurship.
In particular, in terms of assessing internal market burdens or entry regulations for entrepreneurs trying to enter new markets, the country ranked 41st out of the 50 economies assessed. It scored 3.6, well below the overall average of five and the GEM average of 4.4.
“This indicates that there has been a decline in how new markets are entered, particularly cost and red tape, that industry experts are looking at,” the report states.
“For a business to start and grow, market access needs to be simplified. A decrease in this rate can also be linked to a higher discontinuation rate.”
When it comes to government policies related to support for entrepreneurs and their suitability for entrepreneurs, the country ranked 38 out of 50, with a score of 3.4, below the average gender index of 4.4 for 2021.
For government policies related to taxation and bureaucracy, South Africa is ranked 45th out of 50 economies, with a score of 3.5, below the GEM average of 4.7.