South Africa has on average over the last 15 years become a more entrepreneurial country, but not nearly at the pace of improvements made in similar countries, suggests data.
The 2016/17 Global Entrepreneurship Monitor (Gem) global report - launched earlier this week - shows that the percentage of South African adults involved in starting a business of less than three-and-a-half years old (total entrepreneurial activity or TEA rate) slipped from 9.2% of all adults in 2015, to 6.9% - the lowest it's been since 2009.
Similarly the number of South Africans running established firms (those of three-and-a-half years and older) increased from an average of 1.1% of adults a year for 2001-2005 to 2.8% for 2012-2016.
Gem executive director Mike Herrington says Gem has not yet done a longitudinal study on the entrepreneurial environment as accessed by national experts of each respective country.
“The problem is if the TEA rate goes up or down in a country, we have never really said ‘what makes those figures go up and down’. We don’t know. We track it, that’s all we do,” he says.
In the last two years local experts that Gem consults have reported a deterioration in a number of conditions in the entrepreneurship environment (see the below graphic).
Those conditions that experts believe have worsened are concentrated in the area of business support (government entrepreneurship programmes and entrepreneurship education at both schools as well as at universities). Internal market burden or entry regulation has also worsened. The remaining conditions remained largely unchanged.
The results hint that the government (particularly the struggling Department of Small Business Development - see this post) has been largely unsuccessful at making it easier to start and run a business for South Africans.
Herrington believes South Africa is approaching a precipice: “We’re not starting enough small businesses and we are not helping those small businesses that have started, to be sustainable.”
Whatever improvements have been made (perceived or otherwise) these are not nearly enough to help power the economy and create the jobs the country badly needs. Greater impact is still needed to get more to start and stay in business.
*This post was updated on March 7, 2017 after errors were detected in the data calibration. The 2016 and 2017 scores from Gem's national experts survey made use of a Likert scale of 1 to 9, while earlier years used a scale of 1 to 5. The scores for the two recent years have therefore been adjusted to reflect their ranking under the 1 to 5 scale. We regret the error.
Timm is a South African who writes on small business. Follow Small Business Insight on Twitter at @Smallbinsight.
Stephen Timm is a