For SMMEs to survive and thrive, they need robust entrepreneurship ecosystem

South Africa faces a significant digital skills shortage in the private sector. Photo: Pixabay

South Africa faces a significant digital skills shortage in the private sector. Photo: Pixabay

Published Apr 25, 2024


It’s no secret that entrepreneurs are the driving force behind economic growth and job creation.

Most economies in the world are powered by entrepreneurs who, in turn, create between 60 and 90% of jobs in their various countries. For entrepreneurs to have the freedom to prosper, they need a robust ecosystem that supports their efforts. A vibrant and inter-connected system, great support networks and an open economy system help entrepreneurs succeed.

This year marks a significant year for South Africa, as it celebrates 30 years since the country had its first democratic elections, thereby eliminating the apartheid era that marginalised most of the population.

Since then, the government has put in place various measures to enable the development of micro, small and medium enterprises. Several interventions have been implemented to enable innovative start-ups to start and scale. However, with all the measures in place, South Africa has one of the worst unemployment rates in the world – 32.1% of the working population – which also means that more than seven million people walk around the streets without jobs.

Only entrepreneurs have the power to solve the unemployment crisis in the country, but before they can solve this, we need a strong, vigorous and resilient entrepreneurship ecosystem that supports their constant growth. For this to happen, we need the following interventions:

Access to innovative funding mechanisms: Some of the lending instruments and traditional financing methods used by various financial institutions are more suited to large businesses than for small and medium-sized enterprises (SMEs). We need to develop innovative financing mechanisms that looks at each SME through a developmental lens.

Creating an open economy: According to the Heritage Foundation, South Africa’s economic freedom score is 55.3, making its economy the 111th freest in the 2024 Index of Economic Freedom. Its rating has decreased by 0.4 point from last year, and South Africa is ranked 18th out of 47 countries in the sub-Saharan Africa region.

The country’s economic freedom score is lower than the world average and higher than the regional average. South Africa’s economy is considered “mostly unfree”, according to the 2024 Index. Various industries have many barriers to entry for SMMEs, from rigorous and bureaucratic regulatory frameworks to the inflexible labour market, are all but hindrances for SMMEs to effectively compete with bigger players.

Access to skills: South Africa has been experiencing a brain drain in recent years, with many professionals moving abroad for better opportunities. Additionally, the country faces a significant digital skills shortage in the private sector. Larger companies often have the resources to attract and hire skilled individuals, leaving smaller businesses and SMMEs struggling to afford the essential skills, which stifles their growth. There is a pressing need for large-scale initiatives to train young people in these crucial areas, making them more accessible to smaller enterprises that are vital for economic diversification and job creation.

Access to infrastructure: SMMEs depend on various infrastructure and support services. Incubators, co-working spaces, access to reliable public transportation, connectivity and access to information are the crucial things entrepreneurs need to succeed. We must create more spaces that are conducive to fully enable entrepreneurship.

Access to markets and networks: Access to markets help entrepreneurs validate their products and generate revenue. Creating platforms that expose entrepreneurs to various channels enables them to connect with potential customers. Exposure to various networking and industry events help entrepreneurs expand their reach, meet their peers and boost their chances of success.

As the popular saying goes, it takes a village to raise a child. To build entrepreneurs, we need a collaborative and rock-solid environment that will always prioritise the entrepreneur.

Enabling policies are crucial to pro-entrepreneurship development. Our country can be free only when every person has a job – and most of these jobs can be created only by entrepreneurs.

Kizito Okechukwu is the executive head of 22 On Sloane and co-chair of the Global Entrepreneurship Network Africa