Entrepreneurship, the key to job creation

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This is according to ABSA head of Enterprise Development, Sisa Ntshona. "Historically and traditionally, our education system has encouraged people to complete high school, go to university, find a corporate job and work their way up. It's only in recent years that entrepreneurship has begun to make its way into the school curriculum."

Ntshona says business people, entrepreneurs and SMEs will often cite funding as the greatest obstacle to starting a business. "While funding is important, we believe the greater obstacle is access to markets. After all, a business without a client or customer is not a business, no matter how much funding it has."

Funding is limited

Banks are limited in terms of the type of funding they provide. "Banks generally offer debt funding and don't take equity positions in SMEs especially start-ups. The money they lend is payable back every month, which can be a problem for start-ups in two ways. Firstly, if your business is starting out, you don't want to place unnecessary pressure on your cash-flow by servicing debt from day one.

"Secondly, the primary reason for a bank's existence is to look after depositors funds, to safeguard salaries and pensions. This mean any type of lending has got to balance the risk. A start-up is taking entrepreneurial risk. Banks are more prone to lend to entities that are up and running - either to finance working capital or basic expansion," says Ntshona.

Government's role is to create a conducive environment that allows businesses to prosper. "Government needs to make it easier for people to set up businesses and recover from failure. At the moment, if you fail, you're listed on credit bureaus. By contrast, the United States protects people whose businesses fail and incubates them until they recover. I have yet to see an entrepreneur who has never failed."

Difficult to start

Setting up a business in South Africa is not an easy process. Start-ups have to register at the Companies and Intellectual Properties Commission, at SARS, at the Department of Labour for compensation commission, etc. All these bodies work independently of each other and vary in pace and speed. "If you complied 100% with all the rules in South Africa, you'd probably never get up and running, which is why most people never fully comply with the rules," says Ntshona.

"If we recognise we have a high unemployment problem and we keep echoing that SMEs are the solution towards job creation, then surely we should be obsessed about making sure we promote this sector. Surely we should be obsessed about making it easy to do business, to set up a business. The reality is there is no-one at the highest level of government to worry about SMEs. Firstly, we need a champion at the highest level, who will reduce the red tape make sure that the path to setting up a business in South Africa is as easy as possible," says Ntshona.

Secondly, legislation needs to be in place to help businesses that fail and thirdly, as the biggest promoters of small business, government institutions need to pay on time. As much as government promotes small business, it is also biggest killer of small business because by the time it pays many businesses have gone under.

BEE is about behaviour

With the amended Broad Based Black Economic Empowerment (BBBEE) codes highly topical at the moment, Ntshona says every business operating in South Africa needs to understand the framework of the environment it is operating in. "BEE impacts our businesses in one way or another. It impacts our competitiveness and our ability to trade with others. Our BEE scores are also a measure of our good corporate citizenship.

"BEE is not just a measure of blackness. It is about our behaviour. None of the BEE elements are anti-business. It depends on how we view BEE. We can see it as a burden (how much will it cost us) or alternatively as an investment that will have positive spin-offs for our businesses in the long term."