South Africa has more than 2 million micro, small and medium-sized enterprises, representing over 98% of formal businesses, according to UNCTAD’s entrepreneurship strategy review for the country.
Despite their sheer prevalence, these small businesses create less than a third of all formal jobs, leaving job creation highly concentrated in a few large corporations and government entities.
The survival rate of the businesses is also low, with two thirds failing within the first five years and about 20% in the first two years.
Combined with a high level of youth unemployment and around 70% of entrepreneurs operating in the informal sector, South Africa’s entrepreneurial potential remains well below international trends.
A boon for entrepreneurship
To boost entrepreneurship, the country’s Department of Small Business Development (DSBD) is developing a national entrepreneurship strategy to create an enabling environment for entrepreneurs, small businesses and start-ups to flourish.
To set its foundation, UNCTAD has supported DSBD to prepare the entrepreneurship strategy review, based on research and multistakeholder consultations, the country’s National Development Plan 2030 and the National Integrated Small Enterprise Development Masterplan of 2022.
“We aim at contributing towards building a sustainable, resilient and inclusive economy where entrepreneurs can be catalysts of change,” said Mojalefa Mohoto, DSBD’s chief director of enterprise development. “UNCTAD’s support in presenting policy options and a proposed action plan has been beneficial in the process.”
The review spells out priority actions such as creating a supportive regulatory system with reduced bureaucracy, streamlined rules that are easily accessible online, simplified economic and fiscal regimes and support programmes.
It also calls for incentives to facilitate access to finance from traditional and non-traditional sources, advisory services, mentorship and partnership programmes.
It recommends building an entrepreneurial mindset through education and skills development initiatives such as training workshops by Empretec, UNCTAD’s flagship capacity-building programme.
Long-term vision
“A national entrepreneurship strategy needs to present a long-term vision that enables entrepreneurs to plan and stakeholders to invest in a conducive entrepreneurial ecosystem,” said Arlette Verploegh, who leads UNCTAD’s work on entrepreneurship development.
“Putting in place a steering committee for monitoring and evaluation purposes and having data that can drive informed decisions on the implementation of the strategy are equally valuable,” Ms. Verploegh said.
She spoke at a session on South Africa’s national entrepreneurship strategy during the Global Entrepreneurship Congress + Africa gathering on 14 March 2024. Drawing on international best practices, she stressed the role of innovation-driven education and increased investment in research and development
Promising initiatives
Despite challenges, South Africa’s entrepreneurship development initiatives are promising, particularly in the tech start-up ecosystem, as it clinched the top spot in the Africa Tech Ecosystems of the Future 2021/2022 rankings.
A national entrepreneurship strategy will strengthen the country’s efforts towards a renewed, competitive and sustainable entrepreneurial landscape.UNCTAD supported South Africa as part of the United Nations Development Account project dubbed “Global initiative towards post-COVID-19 resurgence of the MSME sector”.
