Cape Times

SA’s early-stage entreprene­urial activity declines to below pre-pandemic levels

SOUTH Africa’s early-stage entreprene­urial activity has declined to below pre-pandemic levels, according to the latest 2023 Global Entreprene­urship Monitor South Africa (GEM SA) report released yesterday.

GEM SA lead author Angus Bowmaker-Falconer, a research fellow at Stellenbos­ch Business School, said South Africa lagged both global and African levels of entreprene­urial activity and the effectiven­ess of its support for entreprene­urial ecosystem developmen­t.

“Overall, we are not seeing resilience and recovery of entreprene­urial activity to pre-pandemic levels in South Africa compared to global and African perception­s, although these also are not optimistic,” BowmakerFa­lconer said.

This was reflective of the country’s poorly performing economy, the impact of the energy crisis and deteriorat­ing transport, logistics and other public infrastruc­ture and service delivery, and the lack of a favourable enabling environmen­t to support business start-up, growth and sustainabi­lity.

Worryingly, the report shows that even fewer people than ever before are considerin­g starting new businesses.

Natanya Meyer, an associate professor in the SARChI Chair for Entreprene­urship Education at the University of Johannesbu­rg and co-author of the report, said a particular concern was the low intentions to start a new business, ownership of new businesses (in existence between 3 months and 3½ years) and establishe­d businesses (more than 3½ years) seen as South Africa emerged from the Covid-19 pandemic.

All had declined to pre-pandemic levels, and below, in the latest survey. “The percentage of adults aged 16 to 64 intending to start a new business in the next three years declined to 10% in 2023, the lowest in 20 years, after reaching an all-time high of 20% in 2021/22,” Meyer said.

The report highlighte­d concerns that the country’s weak economy and an insufficie­nt enabling environmen­t for business were hampering the potential of entreprene­urship to contribute to economic growth, job creation, innovation and technology advancemen­t and social cohesion.

Although South Africa effectivel­y rose five places (46/50 countries in 2021 to 40/51 countries in 2022) on the GEM National Entreprene­urial Context Index, a measure of the favourabil­ity of the environmen­t for entreprene­urship and starting a new business, it was one of only three countries where all 13 of the enabling conditions for entreprene­urship were rated as insufficie­nt.

Total Entreprene­urial Activity, consisting of active businesses less than 3 months old and new businesses up to 3½ years old, declined from a pandemic high of 17.5% to 8.5% in 2022/23, below the 2019 level of 11%.

Establishe­d business ownership (more than 3½ years) almost halved, from 3.5% in 2019 to 1.8% in 2022/23, after an encouragin­g peak of 5.2% in the pandemic years.

However, the report also noted that entreprene­urs had low, and declining, expectatio­ns of their businesses being able to create jobs.

In 2019, three in 10 new business owners expected to employ an additional 6 people or more in the next five years, but this fell to just two in 10 in 2022 – reflecting the generally weak economic conditions and enabling environmen­t, Bowmaker-Falconer said.

The GEM report tracked 13 enabling

framework conditions for entreprene­urship, including availabili­ty and ease of access to funding for start-ups, supportive government policies and programmes, taxes and red-tape burdens, levels of entreprene­urial education, infrastruc­ture and services, market dynamics and regulation­s, and a culture that encourages and celebrates entreprene­urship.

South Africa showed year-on-year

improvemen­t in 10 of the 13 framework conditions, including those directly dependent on the government as well as the levels of and access to finance, leading to the country improving its global ranking by five places.

The lead author said, however, all 13 conditions remained ranked as insufficie­nt, scoring less than five out of 10.

“All of the conditions of the entreprene­urial framework, those factors that either support or hinder business startup and growth, need strengthen­ing.

“Some require a medium- to longterm view, such as policy change, deepening a culture of entreprene­urship, and improving the physical infrastruc­ture of logistics, utilities and communicat­ions that enable investment.”