FEATURE: New report reveals how start-ups can drive growth in a disrupted world of Covid-19
CAPE TOWN, June 8 (ANA) – The severe economic and social disruptions caused by the Covid-19 pandemic underline the need for a collective and robust national strategy to unlock entrepreneurship in South Africa, according to a new report published on Monday.
Already before the pandemic, many aspects of the country’s entrepreneurial ecosystem needed a major overhaul, according to the Global Entrepreneurship Monitor South Africa (GEM SA) 2019/2020 report.
The report was published by the University of Stellenbosch Business School (USB), the Global Entrepreneurship Monitor (GEM) and the Small Enterprise Development Agency (Seda).
GEM’s research output is considered the world’s most authoritative annual report on the global state of entrepreneurship. USB is the new custodian of this research in South Africa. The study included a survey sample of 3,300 people and the national expert survey involved the input of 36 experts from diverse fields.
Angus Bowmaker-Falconer, a research fellow at USB, and Mike Herrington, the former executive director of the Global Entrepreneurship Research Association, established GEM SA in 2001.
The GEM SA report, titled “Igniting start-ups for economic growth and social change”, contains the hard facts, data and figures that highlight trends in entrepreneurship in South Africa. The results of the study reveal the fundamentals to consider when developing an informed response aimed at securing economic recovery.
“The pandemic has intensified the country’s economic challenges. We know that earnings have been affected, that further job losses are likely and that many small, medium and micro enterprises may not survive under these extraordinary high stakes,” Bowmaker-Falconer said.
“Most local companies are small or medium-sized enterprises and many will battle to stay afloat after one to three months with no or limited trade and income. Early-stage entrepreneurial start-ups (new ventures less than three and a half years old) are likely to be ravaged,” he added.
The report said the economic and social recovery could take several years. GEM’s research during the 2008/2009 global financial crash showed a significant dip in early-stage entrepreneurial activity across the globe. Entrepreneurial ecosystems took two to three years to reach pre-2008 levels after this event. The recovery curve was driven directly by country-specific economic policy and financial support responses.
Among other key findings, the report said South Africa’s entrepreneurial ecosystem was rated one of the most challenging in the sample of participating economies in 2019 and has exhibited little sign of improvement over the past few years. It said societal values regarding entrepreneurship show an upward trend from 2003 to 2019. Specifically, there has been an increase from 2017 to 2019 in the number of people who see entrepreneurship as a good career choice (from 69.4% to 78.8%) and one with high status (from 74.9% to 82.2%).
The report further said that moving from start-up to scale requires the right support from the government and the private sector alike. The report further called for interventions in terms of government policies and initiatives, market openness, entrepreneurship education and training, and the availability of and access to finance to foster entrepreneurship.
“Government is an enabler and fully supports and understands the importance of entrepreneurial development for inclusive economic growth and social cohesion,” said Bowmaker-Falconer.
“The Department of Small Business Development announced significant new measures before this crisis related to access to funding. These measures include harmonising funding applications across all developmental finance institutions and introducing a blended financing model to reduce financing costs for entrepreneurs. Overall, the focus for the government should now be on achieving policy and support initiative alignment priorities,” he said.
He said the government’s economic stimulus package to help bridge Covid-19 is significant and the impact thereof for SMMEs needs to be evaluated and made public.
“Big business needs to partner with the government and play their part in opening markets and value chain participation for smaller enterprises.”
– African News Agency (ANA); Editing by Yaron Blecher