The development of entrepreneurship and small and medium-sized enterprises (SMEs) is integral to promoting job creation in South Africa. While the country has an encouraging demographic profile and strong institutional infrastructure, the enabling environment must be improved for small business owners to thrive.
I believe entrepreneurship activity is currently low in South Africa because we are a hybrid economy. Some of our industries are first world whereas some are third world. The rest of Africa is still in a developmental phase where there is space for entrepreneurs to open up businesses virtually everywhere.
Conversely, in South Africa some industries have consolidated over the years, meaning that the space for entrepreneurs to create brand new businesses is more limited than in the rest of the continent. Whereas we established political freedom in 1994, it is now imperative to create the conditions for economic freedom for the vast majority of our people.
The prime objective must be to create entrepreneurs out of those currently receiving social assistance. If the government wants to reach its target of creating 5m new jobs by 2020, as outlined under the National Development Plan, I believe it would be necessary to create 1m new enterprises. Therefore, the debate must shift from how to create 5m new jobs to how to create 1m new businesses, a process that begins with creating a supportive environment for entrepreneurs.
One step is to address the challenges faced by SMEs in their start-up phases. Regulation through labour laws is one barrier stifling SME development. Our labour laws, which are perfectly reasonable, are applied equally to both small businesses and larger corporations. Small businesses may, however, lack the resources to comply with some regulations, so these must be relaxed at the start-up level. Secondly, barriers to financing must be removed for SMEs. The banking system is critical for entrepreneurs to fund and expand their businesses. SME-specific financing programmes by large banks may act as the most sustainable form of providing access to credit. Lastly, SMEs require advisory services to get off the ground. The use of mentorships or consultants, who can utilise their experience to advise entrepreneurs, is ultimately just as important as addressing financing and regulations.
In addition to this, more research should be done on township economies. Once we have identified entrepreneurs within the townships, we can create a bridge to the local economy. We must try to link the township economies in to the mainstream economy because, as of now, there is no visibility or integration.
The education system must also be improved. Schools are still educating children using methods more appropriate for the job market of the 1960s. We need to create a new innovative generation of South Africans by providing them with hard entrepreneurial skills at school. This should start early, covering maths and sciences, and also include basic business education. There should also be support for entrepreneurs through the Black Economic Empowerment initiative, which should not just be about creating jobs but also about giving people skills through programmes such as public works, in order to equip people to start their own businesses.
Lastly, achieving an entrepreneurial economy will not be possible without engaging both the government and the private sector. I have been speaking about this for some time now and I believe the establishment of an economic forum, similar to the political Conventions for a Democratic South Africa that we held in the 1990s, can stimulate discussion on designing a more open economy. The input of unions can be key to cementing the social compact, but business and government must take the lead.
South Africa has the right fundamentals in terms of demographics and infrastructure to see an era of entrepreneurship and innovation lift off. It just requires the establishment of an enabling environment supported by government and business. The recent establishment of the Ministry of Small Business Development is an indication that we are heading in the right direction.
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