Fewer people than ever before considering starting new businesses in SA - study

Bruce Whitfield interviews Angus Bowmaker-Falconer, GEM SA lead author and a research fellow at Stellenbosch Business School.

Fewer entrepreneurs are thinking about starting new businesses in South Africa than ever before, and when they do it's usually out of necessity.

These are some of the findings of the Global Entrepreneurship Monitor South Africa (GEM SA) report for 2023.

The report looks at early-stage entrepreneurial activity, which it says has declined BELOW pre-pandemic levels.

"...and regarding entrepreneurial intentions, fewer people than ever before are considering starting new businesses." 

"Perhaps more concerning is that the highest motive among South Africans to become entrepreneurs is out of necessity and to earn a living, as jobs are scarce, particularly among men. Other motives include making a difference in the world, building wealth and continuing a family tradition."

2023 Global Entrepreneurship Monitor SA report

The report says that these key findings raise concerns that the weak economy and an insufficient enabling environment for business are hampering the potential of entrepreneurship to contribute to economic growth, job creation, innovation and technology advancement, and social cohesion. 

Bruce Whitfield interviews Angus Bowmaker-Falconer, GEM SA lead author and a research fellow at Stellenbosch Business School.

Bowmaker-Falconer emphasises that the study focuses on the general population of South Africa.

"Right now - and both before and during the pandemic - our sense is that most people got involved in entrepreneurial activity out of necessity. During the pandemic there was this crazy spike in entrepreneurial activity in South Africa, which we also saw in many other developing countries, especially Latin America ."

"That really just tells a story that people needed to find find alternative ways of generating income. That is the fundamental story - obviously layered above that we had incredibly innovative startups here, but this story is the one of the general population.That's compared to the high-growth startups - these are deep ideation and are destined to grow, or fail..."

Angus Bowmaker-Falconer, Lead Author - GEM SA

Being an entrepreneur in South Africa is not easy he affirms, and the study does look at the entrepreneurial framework conditions that support the possibility of entrepreneurs succeeding here.

Bowmaker-Falconer says looking at our scores, which have been low for some time, there is not a single one of those where the country scores sufficiently.

We're one of only three countries in the study, along with Tonga and Tunisia, that recorded insufficient scores on all dimensions, he adds.

One of the factors that needs to be addressed locally is a generally unfriendly environment for startups, the GEM SA lead author says.

"There need to be exceptions - if you look at the big startup cities across the world, those have made exceptions for startups, and we just don't have that in SA."

"The government spends an enormous amount of money on programmes either to finance or to support entrepreneurial development, and from our study we see that people are unaware of these opportunities and what they might offer.

"Access to finance also has to have a different nuance - the conditions and the terms by which entrepreneurs can borrow are still archaic... based on whether you're creditworthy only, rather than whether your idea is good or whether you have other credentials that show that you'll be able to repay whatever finance you raise."

Angus Bowmaker-Falconer, Lead Author - GEM SA

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