According to the recently released Global Entrepreneurship Monitor (GEM) report by the University of Cape Town’s Graduate School of Business, the person who creates jobs for others in South Africa is likely to someone with better education and opportunities.
The GEM report, sponsored by Liberty Life, the Shuttleworth Foundation, South African Breweries, Standard Bank, Khula Enterprise Finance and the National Research Foundation, provides empirical data on the level of entrepreneurship in developing nations which is intended to stimulate debate and inform policy.
Nikki Kearns, director of business banking at Standard Bank, says these findings indicate that there is much to be done in terms of redressing educational - and economic - imbalances. "This situation is likely a reflection of the fact of the poor availability of education to portions of the population," she notes - those groups that were denied access to tertiary education are less likely to exhibit entrepreneurial activity.
According to the report, less than 3% of necessity businesses (those that are created for the purposes of subsistence) create six or more jobs; similarly, start-up firms are unlikely to employ any staff, with just 4% of such entities creating jobs at inception - thus, the notion of the informal sector as a solution to unemployment is challenged.
Kearns notes that the GEM findings correlate with the bank's internal research, which indicates that businesses with a turnover of between R2.5 and R5 million typically have between 0-10 employees, while employment in companies with a R5-10 million turnover jumps substantially to between 11 and 50 jobs.
Interestingly, the report found that while women are just as likely to start a business as men are, they are less likely to create as many jobs; of every 100 adult South African men, owner-managers among them will employ ten people while for women, the number of jobs created will number 4.5.
Job creation potential is greatest in those with further education; individuals with tertiary education are 2.5 times more likely to start a business that their counterparts with secondary studies under their belt, and 11 times more likely than those without secondary schooling.
The GEM findings indicate that Indians and whites, who have historically been afforded better education opportunities, are most likely to be the owners and managers of new and established firms. This population group is also more likely to employ others, the potential for entrepreneurial activity dramatically increasing with education.
"Furthermore, business development depends on capital availability; it is exponentially more difficult to obtain funding without assets which can be used as collateral, and economic imbalances therefore limit the ability of potential entrepreneurs to raise the capital which could elevate their initiatives into the higher turnover bracket," says Kearns.
She adds that BEE initiatives in the financial sector are geared towards addressing not only the economic imbalances, but also the educational and experience gap. "Financial institutions are aware that there is a shortage of business acumen, and some have introduced structures to improve knowledge sharing - such as mentoring programmes for small businesses. The GEM report has shown conclusively that education is a critical factor in entrepreneurship and job creation, and it is the responsibility of socially conscious organisations to further the availability of the necessary knowledge for business growth."