It is no secret that South Africa has an unemployment problem. In the last few years, the country’s already beleaguered labor market has continued to be hit by a range of problems. The floods, the unrest, the persistent lack of energy and the Covid-19 pandemic have all left their mark.
According to Statistics South Africa, the unemployment rate in South Africa is just under 34%, and the International Monetary Fund projects that it will soon exceed 35%, giving the country the dubious distinction of having the highest unemployment rate in the world.
Entrepreneurship has often been hailed as the solution to the problems of unemployment, poverty and inequality that continue to hamper South Africa’s development goals. But, in addressing complex issues such as job creation, traditional approaches that focus solely on the problem, without considering the power dynamics and systems at play, are unlikely to translate into entrepreneurship in much needed progress.
For example, in the last 20 years, they have created physical and virtual innovation centers, designed to promote technological advances and entrepreneurship, across Africa. But the effect of these centers on shared progress has remained elusive.
Since the centers tend to be concentrated in richer countries, and urban areas, those who are poor, uneducated, do not have the relevant networks or live far from the cities, struggle to access these resources. As a result, centers tend to perpetuate the status quo, rather than expand the advantages of entrepreneurship to those who need it most.
Similarly, when it comes to entrepreneurship in the South African context, we cannot simply “copy and paste” global models and expect to see real progress. Instead, a more nuanced approach is needed, one based on a realistic assessment of the country’s structural problems and how they result in unequal conditions that continue to exclude marginalized groups.
By looking beyond trying to fix problems in isolation, and instead considering the context and systems that underpin them, real social change is possible. This is the power of a systems approach; it seeks to change the system that creates the problems in the first place, addressing large systemic issues, often by first identifying and addressing local challenges in the affected areas.
Systems change offers the chance for innovations that actually create social change, rather than simply replicating and preserving existing conditions. To hack the system, interdisciplinary thinking is necessary; we need to tap into the expertise of people across a wide range of sectors and disciplines, expose ourselves to different points of view, and engage and connect the people who are most affected by change in the process of solving the -problems, instead of seeing them simply as a testing ground.
For example, at a recent Business Grow Africa workshop — an initiative led by the Western Cape Economic Development Partnership to grow small businesses and support entrepreneurship and job creation in the province — a group of experts from different focal areas in the small business ecosystem met to gather perspectives and explore innovative and practical solutions to address the gaps in support received by small businesses.
The entrepreneurs held discussions with representatives from local government, technology centers, academia, the funding community and civil society in an effort to truly understand the problem and then agree on innovative ideas to help unlock job creation. in high-potential enterprises and support businesses and communities that are often underfunded.
Several promising pilot ideas emerged from the workshop. For example, the development of an early-stage start-up fund specifically aimed at female and young entrepreneurs. According to the 2020 Venture Capital and the Gender Funding Gap report, women have been systematically excluded from entrepreneurship, with female-led start-ups in emerging markets garnering only $1 in seed funding for every $9 raised by all-male teams.
Unemployment figures also show that almost half of working-age women in South Africa are out of the labor force, compared to 35% of working-age men . A fund of this nature can, therefore, open up the field for those who are chronically underrepresented in the entrepreneurial space.
Another pilot idea focused on increasing the support offered to the “missing middle” — the term used to describe companies that are “too big” (medium size) for early-stage financial initiatives but do not grow consistently to be attractive to large investors.
In South Africa, most funding is focused on start-ups or larger, well-established businesses, meaning that small businesses cannot access the funding they need to grow. Considering that the National Development Plan foresees that by 2030, nine out of every 10 new jobs will be generated by struggling small, micro and medium enterprises, supporting the growth of missing medium businesses is critical for the creation of jobs in the country.
A systems lens helps us see that progress requires a fundamental rethinking of a wide range of assumptions about what we value, how we invest, the rules set by governments and markets, as well as people and interests we prioritize.
None of this is simple. It is a messy, informal, non-linear process that depends on understanding the context, developing business prototyping proposals, learning from carefully designed social experiments, and attracting support and the necessary resources that can help turn a prototype into a project to drive social change.
But it is only by being brave enough to step into the “mess” of complex landscapes like the Western Cape’s innovation ecosystem that we have a chance to re-imagine the systems that have created problems like rampant poverty and unemployment . We have to start thinking and acting differently if we want to empower our entrepreneurs to create the quantity and quality of jobs and social progress we so desperately need to fulfill our vision of shared prosperity in this country.
Dr Phumlani Nkontwana is a development economist and entrepreneurship development specialist. He is co-convener of the University of Cape Town’s GSB Bertha Center for Social Innovation and Change in Entrepreneurship Systems and Social Impact short course.