Five out of seven small, medium and micro enterprises in South Africa fail in the first year. Photo: Getty
Entrepreneurship has been hailed as the key to South Africa’s economic recovery – and the good news is that all signs point to it being on the rise.
According to the Global Entrepreneurship Monitor (GEM) 2021/22 report released by the Stellenbosch Business School, there has been a dramatic increase in early-stage entrepreneurial activity among South Africans aged 18 to -64 years, with “early stage” defined as establishment. set up a business or operate a business for less than three years.
Claire Klassen, consumer financial education specialist at Momentum Metropolitan, says that the emergence of this new wave of entrepreneurial, micro-entrepreneurial and sideline activity is borne out of necessity.
“In the wake of Covid-19, South Africa’s unemployment rate has risen significantly, as many businesses have been forced to close or downsize. Young people have been hit hardest, as they have tended to be overrepresented in sectors hit hard by the pandemic, such as service, hospitality and retail industries. With less work experience under their belts, they were often the first out when companies made job cuts.”
Klassen says South Africans are inherently resourceful and, earning critical income for survival, many have begun to look at new ways to make ends meet.
Interestingly, the GEM report also assessed social attitudes towards entrepreneurship, and found that 81.8% of respondents felt that entrepreneurship was a good career choice, while 20% of those who did not -the business had entrepreneurial intentions.
While this is encouraging, five out of seven small, medium and micro enterprises in South Africa fail in the first year. We need enough runway to see that this current increase in early-stage entrepreneurial activity results in tangible economic benefit. We are in a window of opportunity period, and it is make-or-break time.
So what resources are available to budding entrepreneurs to help position them for success?
Klassen offers several tips for those considering starting their own business or side hustle.
Get financially savvy
It is important to have good financial knowledge and an understanding of what is involved in running a business.
“A bank of savings is critical to cover essential business start-up costs, such as an emergency fund or ‘buffer’ to help ensure the lights stay on when your business goes through a downturn. “
There are free online tools to help boost your financial knowledge. We do it with the Majolas is a free, undated online financial literacy course, with its latest edition focused on entrepreneurship.
“Learn key financial concepts that are essential for entrepreneurs to understand, such as how to draw up a business budget, tips for negotiating with suppliers and the importance of compiling a solid business plan – all packed in an engaging way and easy to follow. storytelling format,” explains Klassen.
“Metropolitan also hosts a Facebook group, MetroKickStarz, which is dedicated to helping young and budding entrepreneurs through its financial education program. I recommend that aspiring entrepreneurs join this community, which provides them the space to interact, share ideas and access valuable knowledge and other resources for free.”
She adds that it is vital that entrepreneurs determine their personal budget as well as their business budget, and not mix the two.
“Seeking the advice of a financial advisor will help you make better decisions and protect your business.”
Learn from those who have done it
Klassen suggests that those who want to start their own business research companies or similar ventures that have been successful.
It is important to understand why they work, what sets them apart from their competitors and what they do well – or not so well.
“Find out more about the founder and study their habits. Do they believe in continuous learning? Maybe there are certain principles or philosophy they live by that guides them. Understanding what is involved in starting and running a successful company – and the small daily habits that set you up for success – will make a significant difference in your own business trajectory, ” she says.
There are free conferences and networking events relevant to specific industries; a quick online search will help you identify what is being hosted in your community.
“Attending these events gives you an invaluable opportunity to network and learn from experienced business leaders.”
Take advantage of the financing opportunities available
The public sector has made available several initiatives for the benefit of business owners.
“Visit the Industrial Development Corporation website or the Small Business Development Agency website to apply for business funding.”