South Africa, with the exception of financing, underperforms in the entrepreneurial landscape relative to its peers in five countries in sub-Saharan Africa, according to a survey.
It says the complexity of legislation in South Africa, coupled with the harsh penalties imposed for non-compliance, is a significant constraint for new entrepreneurial ventures.
The survey was conducted in South Africa, Ghana, Ethiopia, Kenya, Nigeria and Tanzania.
It was commissioned by Omidyar Network (ON), a philanthropic investment firm dedicated to harnessing the power of markets to create opportunities for people to improve their lives. It invests in and helps scale up innovative organisations to catalyse economic and social change.
By March, ON had committed $611 million (R6 billion) to for-profit companies and non-profit organisations.
Malik Fal, the managing director for ON Africa, said: “Despite the positive economic news and encouraging trends that have emerged from Africa over the decade, the troubling reality remains that the everyday livelihoods of Africans have not kept pace with macroeconomic growth, and per capita gross domestic product (GDP) levels on the continent persistently lag behind the rest of the world.”
The survey looks at four entrepreneurship assets: financing, skills and talent, policy accelerators, and motivations and mindset.
One South African interviewee in the study said: “People are beginning to view entrepreneurship as a legitimate choice whereas before it was viewed as a last option.”
The survey says complex legislation in South Africa and the limited availability of appropriate skills and talent for entrepreneurial ventures present significant challenges for new and growing businesses.
ON says the sophistication of financial markets is an enabler, with entrepreneurs in South Africa enjoying access to a more diverse range of financing strategies than both sub-Saharan Africa and global counterparts. An emerging culture of entrepreneurship is also evident.
It says schools are not seen as devoting enough time to teaching entrepreneurial courses. As such, school leavers are not well equipped to manage new firms.
ON says survey respondents in South Africa have negative perceptions regarding infrastructure, although these are probably influenced by unfavourable comparisons to the developed world.
Of the respondents, only 32 percent believe the physical infrastructure adequately supports new and growing firms.
The survey says: “Participants in the in-depth interviews suggested that electricity and the internet are the main drivers behind the perception that infrastructure in South Africa is problematic for small business.”
It says recent increases in electricity prices are beginning to make a dent in business profits, and this trend will continue as Eskom tariffs are increased over the next five years.
“Internet speeds and rankings significantly lag global peers, although analysts believe that new fibre-optic cables coming online in the short term may ease prices and enhance service.”