According to Census 2011, 15% of South African households have female breadwinners, where a married woman is the head of the household. But as South Africa’s unemployment rate rises and it becomes increasingly harder to find permanent employment, more and more women are looking to entrepreneurial endeavours to help them support their families.

 

While the reasons for this are the same as for men, “Women,” says the 2012 Global Entrepreneurship Monitor (GEM), “show marked differences from men in characteristics such as their attitudes about entrepreneurship, the industries they operate in, and their ambitions for growth.”

 

It also suggests that women may face a tougher battle than men though as “women entrepreneurs may not be sufficiently empowered or supported to allow them to contribute to new business start-ups.

 

“The reasons for this may include cultural and societal attitudes and access to resources and opportunities. Policies that can promote societal attitude changes, and train, support and encourage women entrepreneurs will promote inclusiveness and fuel economic growth.”

 

Annie McWalter, CEO of The Hope Factory believes that its approach of holistic and hands-on mentoring helps to provide some much needed support to the entrepreneurs on its programmes. She says, “All of our programmes include a large mentoring component where we walk the business journey with our entrepreneurs. Through this programme we assist each business owner with the issues that their particular business faces.

 

“To make it as an entrepreneur, you have to have passion, determination, and the necessary drive - the willingness to push through no matter what. This is what ultimately determines your success.”

 

Over the last 12 years The Hope Factory has had more than 1000 people attend various business and skills development programmes, with a major emphasis on starting and growing your own business – approximately 60% of these businesses are female-owned or run.

 

And, crucially The Hope Factory is helping to sustain these businesses past the three and a half year mark. Worryingly, according to GEM, only 2% of South African businesses manage this.

 

The Hope Factory’s successes include:

• 48 new businesses were created and registered in 2012
• 148 entrepreneurs participated in its Entrepreneur Support Programme in 2012
• 86% of all these businesses now have a clear business strategy
• 92% of the businesses in its incubator programme, The Hope Hub, experienced a significant growth in turnover and 64% experienced a growth in profit
• 54% of general businesses on The Hope Factory Entrepreneur Support Programme increased their turnover
• 95% of all the businesses on its programmes now implement accurate financial record keeping systems
• 95% of all the businesses now adhere to a budget.

“Our experience has shown that mentorship is vital to grow small businesses and to help the entrepreneurs overcome challenges. We approach this from a personal, as well as a business and financial management development angle, as we believe that if you grow the person, you grow the business. This year our target is to equip and grow 190 businesses,” says McWalter.

Entrepreneurial leader, Mark Lamberti, recently called for the creation of a Ministry of Entrepreneurship in South Africa at the recent competition launch. This was echoed by Professor Dilip Garach, of Garach & Garach Financial Advisory Services who called for a Small Business Ministry to be established locally.

 

According to Nazeem Martin, MD of Business Partners Limited and spokesperson for the , following President Jacob Zuma’s State of the Nation speech last week, which referenced government programmes that support small business, the formation of an entrepreneurial Ministry would be a significant step forward in tackling SA’s unemployment crisis.

 

Martin says that he endorses these proposals and says that the efforts that are currently being made to support and grow do not seem to be effective enough, as South Africa’s ranking in various entrepreneurial reports still seems to be slipping. 

 

According to Professor Garach, it is evident that government understands that small and medium enterprises (SMEs) are an important source of jobs. “Minister Gordhan said in his Budget speech of 2011 that businesses which employ fewer than 50 workers account for 68% of private sector employment. But the government has shown very little commitment towards solving problems that directly impact on experienced entrepreneurs and small businesses.”

 

He says that South Africa recorded a 7% total early-stage (TEA) level in 2012, which is a 2 percentage point decrease from the 9% recorded in 2011. “While South Africa is better off than it was in 2004 when the TEA level was at 5,4%, the country still has much to work towards.”

 

Professor Garach says that an entrepreneurial Ministry will be able to focus on reducing the cost of doing business, simplify the current business registration process and SME tax system, create access to finance and create appropriate incentives for South African entrepreneurs.

 

He says that a step in the right direction may also be government entering into a public / private partnership in order to set up an entrepreneurial academy. “The academy could  develop schools that focus on entrepreneurship, as well as provide education in business skills and promote mentorship and training.” 

 

He says that in 1995 Malaysia formed the Ministry of Entrepreneur Development, which clearly demonstrates the importance that the Malaysian government places upon the issue of entrepreneurship and entrepreneurial development. “The Ministry acts as the lead agency for the development of entrepreneurs as well as to co-ordinate entrepreneurship activities in general.”

 

Among the specific services currently offered by the Ministry are a one-stop entrepreneurship information centre, franchise and vendor development programs, entrepreneurial training, and subsidised business premises for qualified entrepreneurs.

 

He says that other examples of economies that have implemented this type of body include the US, which has a Small Business Administration Cabinet position which arranges loans, loan guarantees and other assistance to small businesses, as well as  Croatia, which has implemented a Ministry of Economy, Labour and Entrepreneurship, which carries out proactive employment policies.

 

“The SA government target was to create five million jobs by 2020. Although it may not be possible to create this amount of sustainable jobs in the long-term, government however can create an enabling environment to set up one million entrepreneurs who then in turn create five million jobs,” concludes Professor Garach.

If you’re in the process of starting a new business and want to do things right, you probably already know that it’s important to have the necessary “founding documents” – your memorandum of incorporation and shareholders’ agreement – in place.  But do you know what they should cover? This is our guide to the five most important issues we believe every startup team should consider.

1. What is the relationship between shareholders and funders?

In a well-established company this isn’t an issue: Shareholders have no obligations to provide any kind of funding or other support at all. But nobody gives away shares in a startup without expecting something in return. So, what contribution is each shareholder going to make, and how is that going to be compensated in the long run?

This gets especially complicated in startups because it’s quite typical for the founding shareholders to put a lot of their own money into the business, either in cash or in salaries not taken. A common way to handle this is to specify that loans should always be repaid before dividends are declared. A more hard-nosed option is to decide that whoever can contribute more funding gets more of the shares – this would involve a “call option” or a right to convert your loan into shares. There are other options too, each with different implications in the long term. Choose a lawyer who can explain it all clearly and help you choose the option that works for you.

2. What is the link between shareholding and decision making?

Being a shareholder doesn’t give you any automatic rights to decide how the company should be run on a day-to-day basis. One common mis-perception is that a right to appoint directors effectively affords the appointing shareholder this control– this, however, is is incorrect as any director must act in the best interests of the company (being the body of shareholders, and not the shareholders who appointed them), or face sanction in accordance with the Companies Act, No 71 of 2008, as amended.

So, if you’re a shareholder who wants to maintain a degree of control over the company, you will want to specify certain “reserved matters” which place restrictions on the decision making ability of the directors. If you ever want to bring in a venture capital or angel investor at any stage (and we haven’t yet met a tech startup that doesn’t) they will definitely demand some of these rights.  Thinking about these issues right at the start, and drawing up founding documents that reflect what you’ve agreed on, will put you in a stronger negotiating position later as well as saving you grief in the short term.

3. How do you want to tailor the provisions of the Companies Act to suit your needs?

The new Companies Act has been designed to accommodate the needs of a diverse range of companies, from the largest blue chip corporates to the smallest young startup. Primarily, it achieves this by way of a range of default, but “alterable provisions”, which can be adapted in a company’s Memorandum of Incorporation – but if you want to take advantage of these provisions, you have to do some work. An off-shelf memorandum of incorporation won’t cut it.

For example, the default in the Act is that a private company must have a minimum of one director. You can agree to set the minimum higher – but that must be specified in the Memorandum of Incorporation. 

4. What consensus is needed to make any changes to your agreements?

This is the stuff boardroom battles are made of and relates to amendments to the agreement.  They are always subject to certain requirements (voting thresholds, in the context of an MOI, and (usually) unanimous agreement in the case of shareholders’ agreements.

We’ve seen agreements, for example, which specify that ordinary shareholders don’t even have to attend shareholders’ meetings in order for it to be valid. So if your friendly venture capitalist, to whom you issued shares with certain extra rights attached, decides to hold an important meeting when you’re out of town, there’s nothing you can do about it.  It’s important to know all the options right at the start, so you can decide what your position is.

5. What will you do when someone wants to exit?

Three friends decide to start a company together. Two years later one of them makes a deal to sell his shares to someone else. Would you allow that? Would you want to insist that if one person exits, the others have a right to sell their shares to the same buyer as well? What if two people want to sell and one doesn’t? Can the majority force a sale, or not? The consequences of what you agree at the start can be very big indeed; the advice of someone who’s see it all a few times is indispensable.

On the face of it, company law is very dry stuff – a few minutes with the Companies Act will make the average entrepreneur’s eyes glaze over pretty quickly. But the specific dry legal clause you choose could have very dramatic consequences later on. Taking some time and spending a bit of money to get an expert to explain it all to you is an investment worth making.

 

Softline, part of the Sage Group PLC, has released the results of The Sage Business Index – Local and International Business Insights.

 

The Index is a global measure of confidence across small and medium sized businesses. Nearly 11,000 small and medium sized companies in 15 countries across Europe, North America, Brazil, South Africa and Asia responded to the survey. The Index shows that whilst there is a general decline in confidence in global and local economies, businesses remain cautiously optimistic in their own growth prospects.

 

In South Africa, confidence in both individual business prospects and the outlook for the global economy remain largely unchanged, down slightly from March 2012 (Index scores: 64.44 to 64.19 and 44.71 to 44.54 respectively). Confidence in South Africa’s own economic prospects has fallen slightly further from 46.11 in March 2012 to 43.03 in September 2012.

 

South African Index Scores*	September 2012	March 2012	September 2011
Global economic confidence	44.54	44.71	45.92
SA’s Country economic confidence	43.03	46.11	44.10
Own business confidence SA	64.19	64.44	62.58

 

 

 

 

 

 

(Below 50 is decline/less confident above 50 is improvement/more confident, 50 is no different)*

The research, which included 1 879 South African small to medium size businesses, was carried out by Populus, a UK based opinion and research consultancy firm.

 

Economic confidence – local concerns in line with macro-economic trends

All countries, with the exception of Brazil registered an index score below 50 showing that respondents generally feel that the global economy is continuing to decline. Unsurprisingly, the Eurozone countries feel the most negative, with fears of a “double dip” recession having risen sharply.

 

In South Africa, businesses surveyed are feeling less confident about the prospects for the local economy, with the index declining from 46.11 to 43.03 over the past 6 months. This, however, is in sharp contrast with how they feel about their own business prospects which scored positively at 64.19.

 

Commenting at the official results presentation in Johannesburg today, Ivan Epstein, CEO (and co-founder ) of Softline and Sage AAMEA (Asia, Australia, Middle East and Africa) said, “Looking at the results against an international backdrop, South Africa scored the second highest index rating of all the countries polled in terms of individual business confidence. Entrepreneurial spirit and business culture is identified by businesses as one of the most important aspects for doing business successfully in South Africa. This endorses my strong belief that South Africa is a fertile environment for successful entrepreneurs and small businesses.”

 

Business performance and challenges - revenues maintained, cost challenges

There are some positive signs in the global survey with 63 percent of respondents saying that over the past 6 months revenue has either increased or held steady whilst 82 percent have either increased or maintained employee numbers.

 

South Africa achieved a similar score with 65 percent of businesses polled showing either steady or increasing revenue and 84 percent of businesses either increasing or maintaining employee numbers.

 

Rob Wilkie, CFO of Softline and Sage AAMEA commented that “72 percent of South African businesses said that they have adapted to the challenges of the current economic climate. The agility and resilience of businesses in South Africa is testament to a strong entrepreneurial business culture and strength of South Africa as a place to do business”.

 

Increasing costs are the number one concern of businesses surveyed in South Africa. Wilkie commented that “this was expected given that CPI is on an upward trend with the main drivers being food prices, fuel and electricity. In addition, an inevitable consequence of the recent high wage increases seen in the mining and transport sectors is going to be higher inflation, particularly when decoupled from increased productivity”.

 

Government – businesses call on government to do more

All countries participating in the global survey feel that their governments don’t provide sufficient support for business, with the exception of Singapore where 54% of respondents indicated that their Government provides adequate support.

 

In South Africa businesses are calling for skills development and education (46%), the reduction of bureaucracy and legislation (40%), a reduction in business tax (34%) and currency stability (28%).  Wilkie commented, “in order to enhance its competitiveness, government must address the quality of primary education, particularly in view of a very high unemployment rate. Overregulation and red tape is a further obstacle, specifically firing and hiring practices, wage determination, public sector tender procedures and enforcement of contracts”.

 

Investment for growth – future prospects

In considering the year ahead, 29 percent of South African businesses surveyed said they were looking to diversify into new markets, 28 percent would invest further in marketing and sales within their existing markets and 27 percent would invest in skills development and training. 

 

According to Epstein, “economic and political reforms in Africa have resulted in an improved business environment and offer an attractive opportunity for South African businesses to diversify and expand across their border.”

 

In conclusion Epstein said, “We’ve seen evidence in this research report and others, that small and medium sized business in South Africa require more focussed attention from our leaders. The future of the South African economy, and most importantly, the ability to create employment in this country will be dependent the stimulation of more businesses that are sustainable over the long term. Private business and Government have a pivotal role to play in the economic growth and development of small business in South Africa.”

10 out of 11 private airlines launched in South Africa have failed since 1991, a list which now includes 1time airlines. Many of these new ventures struggled when it came to support, financing and in particular, cash flow. The recent news of 1time airline’s decision to file for liquidation, after applying for business rescue in August 2012, also highlights the need for adequate research, planning and support when starting and running a new venture.

 

According to Gerrie van Biljon, Executive Director of Business Partners Limited, a specialist risk finance company for SMEs in South Africa, a common downfall for companies, from small enterprises to large entities, is poor cash flow management. “Cash flow management is a key challenge and companies need to manage their cash flow according to the sector they operate in by taking into account the challenges they could, and are likely to, experience.”

 

He adds that support and mentorship is another key area to business success, as it is vital companies are given guidance when deciding on certain business decisions, such as business rescue.

 

Van Biljon says that 1time’s situation is a common occurrence in the small and medium enterprise (SME) industry. “This situation is a key lesson to many South African businesses out there. It highlights that the old saying, “cash is king”, remains vital in any business as cash is the life blood of any business and without it, it is dead.”

 

1time was trading under the protection of a business rescue with an estimated R320 million in short-term debt and had been in negotiations with creditors since March 2012.

 

He says as with 1time, when businesses compete with large players they are often not on equal footing. “Large businesses have the buying power, the muscle and the means to act, which makes it very difficult for smaller businesses to own a fair share of the market.

 

“When businesses compete on an unequal base, as 1time did in the South African aviation industry, they are very prone to encounter issues, especially if the competition receives additional funding from external sources.”

Van Biljon explains that if the cost of a product or service is dependent on external factors which are difficult to control, it poses a major threat to a business. “In the case of 1time, the cost of fuel was a threat. If the correlation between what businesses may charge the customer and what the costs actually are is out of sync, the business model becomes vulnerable.”

 

Van Biljon says that even if an SME is offering excellent service and good prices, there is no guarantee that the business will thrive. “However, the SME will have particular competitive advantages over a corporate. Entrepreneurs have the ability to move quickly and adapt to changing environment, which large business find difficult to do. They are very innovative and act in an entrepreneurial manner, which means that they are always on a lookout for an opportunity that can lead to more business or even a new venture.

 

“In these very difficult trading conditions, entrepreneurs have no choice but to make the business work as there is just too much at stake. It is also a good time to revisit the business model, change tact and explore new markets,” concludes van Biljon.

The growth and sustainability of Small and Medium Enterprises (SMEs) plays a significant role to solving South Africa’s developmental issues. While small businesses employ just over half of the country’s labour force, a number of studies have shown that start-up South African SMEs have a failure rate of 75% - one of the highest in the world.

 

According to Jon-Jon Smit, Sales Director at CIB Insurance Administrators (CIB), one of the most important areas any start-up enterprise should consider is to correctly insure the operations of the business, such as the premises, stock, vehicles and machinery to ensure that the business will not be fatally crippled in the event of loss or damage to assets.

 

Considering that around 12.8 million people are employed in South Africa, SMEs provide around 7.8 million jobs, according to a World Wide Worx 2012 survey. Smit contends that it is therefore imperative for the health of the economy that these businesses succeed. “While many start-ups have great business ideas, having strong financial and risk management practices are just as important to ensure the success of the venture”

 

According to Smit, one of the keys to running a successful enterprise is ensuring you have the necessary business insurances in place.

 

“When starting a new business, cash flow is often an issue. Unfortunately, in an effort to keep costs down, many small business owners choose to forego insurance cover, or to seek out the cheapest cover possible. He adds that a professional broker, who understands risk management, is best suited to advise the business owner of what cover is essential in the business in the early stages and as the business matures that it is adjusted to provide adequate cover.

 

According to Smit the following sections of standard commercial insurance are must-haves when it comes to cover for small businesses:

• Fire Cover. This cover is taken as the basis of all insurance policies and is designed to insure against a potentially catastrophic loss of a building, stock, machinery and equipment such as electronic items. The cover extends to include storm and lightning losses as part of the insured perils.
• Business Interruption Insurance. This section would be included to cover operating costs, such as wages in the situation where the business is not operational due to a claim such as a fire that has burnt down a factory and production and income are affected.  The amount that is required for business interruption as well as the period for which the cover will remain in effect, are both considerations that would have to be borne in mind when electing this form of insurance. Again, a professional business insurance broker will be able to assist in giving the correct advice needed.
• Theft Cover. This would cover the business owner’s stock and equipment in the event of a robbery. The cover need not be on a full replacement value, but rather for an elected amount which will be calculated through a consultative process with the business owner and the broker, who would once again assist in this process.
• Motor Cover. This is particularly imperative for a business that relies on sales representatives who use their vehicles for business purposes or for businesses that use vehicles for transportation and delivery of goods. It is important to ensure that the description of use of the vehicle is correct and that the cover taken is as comprehensive as possible. Car hire following a loss under this section can also be an important addition to ensure minimal interruption to the business following a claim. If the business requires the goods or equipment which are being transported to be insured, this can be covered by adding the Goods in Transit section, which again, has various cover options.

“Given the general failure of the formal and public sector to absorb the growing number of job seekers in South Africa, increasing attention has focused on entrepreneurship and new business creation as a means of addressing the unemployment situation. While insurance is regarded by some as a grudge purchase, as a vital element of any business, the importance of having the right cover cannot be underestimated,” he concludes.

The general sentiment in South Africa’s business landscape is that the environment is plagued by challenges that hinder commercial activity. In recent months much has been said about the significant red tape that hampers business growth in the country, however, according to Gerrie van Biljon, Executive Director of Business Partners Limited, despite all the negative reports, South Africa’s business environment is performing significantly well in key areas.

 

Van Biljon refers to the World Bank’s Doing Business 2012 Report, whichranks countries across the globe according to how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

 

Van Biljon says that overall, South Africa performed relatively well and was ranked 35^th out of 183 countries in 2012, excelling in various elements which encourages the ease of business. “South Africa is also, in fact, the best performing country worldwide when it comes to accessing credit.”

 

He believes that the South African business environment successfully caters for the local SME industry in terms of funding and investment, for both entrepreneurs and financiers. “According to the report, South Africa ranked 10^th in terms of protecting investors. Even more importantly, South Africa was the top ranked country internationally in terms of accessing credit.

 

“Another positive indicator is the fact that South Africa improved by 68% in terms of starting a business and is currently ranked 44^th.”

 

Van Biljon explains that there is a general misconception amongst small business owners that the lack of local entrepreneurs in the South African economy is the direct result of a lack of access to capital. “The issue surrounding funding is more a myth than a reality. The problem is not a lack of access to capital, but is ultimately the result of an awareness gap between financing institutions and aspiring entrepreneurs. It is essential that entrepreneurs seeking capital fully understand the process and stringent criteria required to obtain financial support.”

 

He also points to the fact that South Africa is ranked 44^th in terms of ease of opening a business, which is an improvement of 30 places since the 2011 report. “As all procedures, including the time and cost required to complete these procedures, were analysed as part of this study, South Africa’s ranking is very positive. The efforts of some government departments, especially the inroads that have been made in clearing the backlogs at the Companies and Intellectual Property Registration Office (Cipro) and the streamlining of tax compliance by the SA Revenue Services, have greatly contributed to improvements in the ease of doing business in South Africa.”

 

However, van Biljon concedes that there remain certain areas of concern which are limiting for SMEs and may hamper the future growth of entrepreneurs and small business. “Latest data released by The Global Competitiveness Report (GCR), reveals that the South African labour market is characterised by rigid hiring and firing processes, inflexible wage setting structures and tense employee employer relations. Our economy ranks 139^th, 138^th and 138^th in these categories respectively out of a total 142 countries, and is being significantly hampered by these restrictive characteristics of the labour market.”

 

Van Biljon says that in South Africa, our “First World” labour legislation sometimes restrains SMEs from hiring additional staff due to the country’s strict labour laws and regulations. He explains that this can potentially result in SMEs making use of automated solutions such as machinery as alternatives to new staff, which is harmful to the economy and skills development goals.

 

He adds, “South Africa’s extremely powerful trade unions do a great job of protecting the interests of their members, who are individuals with jobs. However, many South Africans are unemployed and therefore no one speaks out on their behalf.

 

“A more flexible labour regime is necessary for SMEs to encourage them to hire more employees, thus making an even larger contribution towards solving our country’s unemployment problem.”

 

Van Biljon says that although the South African business environment is thriving in certain aspects, other sections need to be reviewed in order to streamline SME growth in the country. “Like any business or industry, in order to succeed it is essential to identify and analyse the strengths and weaknesses of the corporate landscape,” concludes van Biljon. 

Junk Mail started life as a weekly print publication, a solidly old-school business – but in the 15 years since I joined the business in 1998 it’s also become South Africa’s largest online classified advertising site, with a huge mobile reach as well thanks to our custom-developed mobile site.

 

These are the top five things I’ve learned in the past 15 years:

1. Never think you’re ahead of the game

We went through a phase a few years ago where everything we touched made money. I thought I was so good: And then the competitors came. I watched them, of course, but not nearly seriously enough - I made exactly the same mistake the newspapers had made with Junk Mail a decade earlier.

If I’d been a bit more smart, and a bit less complacent, I would have realised a lot earlier than I did that my business as I had known it would never be the same again.  Because these things sneak up on you – your numbers keep looking good, and you keep feeling successful, for quite a long time while the ground is being cut out from under you.

We survived, of course, but it was tough going for a while. If I’d known then what I know now, I would have moved to respond a lot earlier. Which brings me to the second lesson:

2. You can’t bar the door against a tsunami

Change happens, and you can’t stop it – you can only try to ride it.  With hindsight, we tried to protect the print side of our business against the Internet onslaught for far too long. I’ve learned that it’s always better to embrace than to defend – the more tightly you cling to what you know, the more you lose the essence of what you are trying to do. Ultimately we had to recognise that our business was fundamentally about helping people buy and sell things, not publishing newspapers – the medium our customers choose should make no difference to us.

There’s always going to be a new disruption around the corner – I’ve learned now to go out and pursue partnerships and collaborations, not view every new thing as a potential threat.

3. Trust your instincts and stand up for them

This goes along with the old line about it being easier to ask for forgiveness than permission. I’ve always had the best results when I’ve trusted my own experience and instincts. At one point we lost two years of growth, I believe, because I wasn’t confident enough in my own judgement to argue my position.

4. Look after your body

Running a business takes a lot of energy, and it’s a long-term commitment. Working 18-hour days fuelled by junk food and caffeine might work for a short time, but if you don’t look after your own resources they will fail you at a critical point. Looking after your body, taking holidays, looking after your relationships – these are important investments in your business as well as your own happiness and well-being.

5. Invest in your management

This is the hardest lesson of all, for most of us: At some point, we have to let go. It will always be agonising to hand a portion of the business over to someone else and then watch them make mistakes – but if you don’t do it, they will never learn and the business will never grow.  And if you fall ill, or fall under a bus next week, the business will collapse without you unless you’ve shared the vision and the competence that will enable other people to run things.

A sharp decline in business confidence in many rapid growing economies is raising a warning flag that global business may face continued volatility for some months to come. In South Africa, confidence levels have remained largely unchanged, dropping one point in the Regus Business Confidence Index (from 117 to 116) since April 2012.

 

Business confidence in some of the world’s leading growth economies has dropped significantly over the last six months. Despite the fall, levels of business confidence in rapidly growing economies still remains well ahead of levels in mature economies – yet this setback should act as a warning flag for businesses across the world to stay nimble and expect further volatility before a general global upturn, finds the latest Regus Business Confidence Index (BCI) based on the views of more than 24,000 senior business people from 92 countries.

 

In South Africa, the Business Confidence Index rating is lower for small businesses (111) than for large firms (132)and, given the important role of small and medium-sized enterprises as an engine of growth and provider of jobs, this finding is of particular concern. Access to affordable credit and cash-flow management were among their biggest concerns, highlighting the need for flexible, pay-as-you go business services allowing businesses to remain flexible and agile.

 

Key Findings and Statistics

 

 

It’s clear that there’s been a stagnation in business confidence, accompanied by significant falls in some rapidly developing economies since our last BCI report in April. This suggests that slowing trade with Europe and Western economies, combined with a host of national factors, is taking its toll. In South Africa, unrest in the mining sector is expected to affect production and demand, but also allowing the central bank to keep interest rates low.

 

We were particularly struck by slower improvement amongst entrepreneurs and small businesses. In order to improve their cash situation, respondents identified affordable and flexible business services – especially for overheads such as workspace, administrative support and sales/marketing. 45% of respondents, for instance, reported that one of the major burdens during the downturn has been inflexible property leases. Flexible services allow businesses to be more agile and free-up cash for investment without relying on credit at a time when it is so difficult to secure.

In the current uncertain economic climate and unpredictable job market, global research has revealed that ‘emerging adults’, also known as ‘Generation Y’ (born between 1980 and 1995), are attempting to adapt to these environmental conditions by seeking alternative forms of employment through entrepreneurial activities.

 

According to Kobus Engelbrecht, of the Sanlam / Business Partners Entrepreneur of the Year® competition, entrepreneurship is not only crucial in stimulating economic growth and job creation, but plays an important role in determining the future economic outlook of a nation. However, he says that research indicates that the same trend is not materialising among Generation Y’ers in South Africa. 

 

Engelbrecht, says that today’s Generation Y is faced with a barrage of unique challenges when entering the work environment that are distinctive to their generation. “Today’s youth are joining an unpredictable job market plagued by poor global economic conditions that has resulted in an escalating mass of unemployed youths.”

 

However, Engelbrecht believes that these obstacles have produced a generation of problem solvers in countries like America, who possess a strong entrepreneurial culture. “A study conducted by Employers Insurance found that 46% of Americans from Generation Y wanted to start a business within the next five years, while only 35% of ‘Generation X’ers’ (born between 1965 and 1979) and 21% of the ‘Baby Boomers’ generation (born between 1946 and 1964) were interested in pursuing a career in entrepreneurship within the next five years.”

 

He says a strong entrepreneurial culture is important in shaping and developing the future of an economy. “It is commonly believed that a strong entrepreneurial culture laid the foundation for building one of the world largest economies. In 1970, 90% of the American population comprised of self-employed entrepreneurs. Today many of those companies are global leaders and drivers of economic growth. It is hence of utmost importance that entrepreneurialism is encouraged amongst the youth in order to encourage sustainable economic growth in the future.”

However, he believes that the South African Generation Y has fallen behind in this regard and not only lag behinds the United States but behind its fellow BRICS (Brazil, Russia, India, China and South Africa) economies.

 

According to Engelbrecht, research indicates that South Africa’s Generation Y is not interested in becoming entrepreneurs. “Data from the recently released 2011 Global Entrepreneurship Monitor (GEM) South Africa report found that only 6.8% and 10.2% of South Africans, aged between 18 and 24 and 25 and 34 respectively, were involved in entrepreneurship. In comparison to other BRICS countries, members of Generation Y in Brazil and China are approximately two to three times more likely to be entrepreneurs when compared to South Africa.”

 

He believes that this is a great cause of concern considering South Africa’s relatively high youth unemployment rate. “According to the GEM report, South Africa’s youth unemployment rate is currently as high as 48.2%, which is considerably higher than Brazil’s rate, currently at 17.8%. In poor economic conditions young people are generally the first to lose their jobs and last to be hired.

 

“Many young people in South Africa feel the need to find employment in the formal job market directly after school. However, given South Africa’s very low established business rate, which is the lowest of the BRICS nations and one of the lowest across all GEM countries, few jobs are available.

 

“With limited jobs available and a soaring youth unemployment rate, one would expect the unemployed youth of South Africa to seek alternative forms employment.” However, as Engelbrecht explains, this is not the case in South Africa. “According to GEM research, only 14.3% of South Africans are interested in starting their own business in the next three years. The study indicated that South Africa has the fifth lowest entrepreneurial intent amongst all efficiency-driven economies in the world.”

 

He says that more needs to be done to create a positive entrepreneurial culture that supports a fruitful business environment where young entrepreneurs can flourish. “Encouraging entrepreneurship amongst this generation could serve as a very viable solution to the rising youth unemployment rate, income inequality and rising poverty levels.

 

“This can be done by promoting and recognising entrepreneurs that have not only been successful in their own right, but in doing so have benefited others. These ‘economic heroes’ show true courage, vision and leadership and should be positioned as the true champions for South Africa’s aspiring youth,” concludes Engelbrecht.