Real State of Entrepreneur Survey reveals development challenges

Donna Rachelson

More impactful business development support that provides entrepreneurs with robust business basics is needed to increase small business success rates, while a decline in youth owned businesses has emerged as cause for concern, given South Africa’s dire unemployment figures.

This year’s survey, which canvassed over 1,200 entrepreneurs, expanded its scope from start-ups to all entrepreneurs at any stage of business development to gain valuable insight on the true state of entrepreneurship in South Africa.

These are just some of the findings of, the announced by Conducted by Seed Academy and now in its third consecutive year, the survey is the biggest and most widely referenced of its kind.

“Encouragingly, we are seeing the gap between the number of male and female entrepreneurs start to narrow as women represented 47% of entrepreneurs surveyed. This gives some indication that efforts focused on the development of women owned businesses are beginning to pay off. Similar initiatives are now urgently needed to develop youth entrepreneurs so that entrepreneurship is viewed as a ‘real’ career option,” notes Donna Rachelson, Seed Engine CEO, incorporating Seed Academy and the WDB Seed Fund.

Short on specific education, strong on relationship

Although some 65% of survey respondents were in possession of a post-matric qualification and a sizeable majority at 85% had at least one year’s work experience before starting a business, many entrepreneurs indicated that they require education specific to the practicalities of running a business such as marketing support and business planning. Rachelson says that while Centres for Entrepreneurship at TVET colleges are making strides in entrepreneurial education, both the public and private sectors need to look at what more can be done and how this kind of education could be incorporated into both basic and tertiary curricula.

Interestingly, 33% of entrepreneurs that have been in business for more than two and half years attribute the primary reason for their success to cultivating strong personal networks. This finding bears some correlation to the fact that 95% of businesses are funded by a combination of owner’s funds and funds from owner’s friends and family.

“What we can interpret from this is that entrepreneurs place a high value on cultivating strong trust-based relationships that can help the business owner with access to markets and other opportunities, including access to financing, both of which were stated as the most pressing challenges by 67% and 43% of entrepreneurs respectively.

Finding funders

“Only 18% of entrepreneurs surveyed have attempted to secure funding from banks or development funding institutions like the IDC or DTI. Some entrepreneurs indicated that they simply do not know where to go for funding especially in light of the fact that most early-stage business funding requirements are below the R100k threshold. There is certainly a case to be made for funding providers to revise certain requirements to better accommodate the unique needs of small and early-stage businesses. Of course, one unfortunate implication of self-funding is that growth potential is limited to the owner’s own pocket and diminishes the ability for a small business to increase capacity, hire more staff and make a more meaningful impact on the South African economy.”

Top sectors

This year’s survey has also revealed that the top sectors represented by respondents are information technology, business services, construction, and advertising, marketing & pr. These are however weakly aligned to the South African government’s priority sectors of manufacturing, construction, utilities and telecoms, indicating that more aggressive efforts are needed to incentivise businesses development in these key priority sectors.

“One important aim of the survey is to influence the entrepreneurial ecosystem in South Africa positively by providing the basis for robust engagement for policy makers and providers of financial and non-financial support to business in South Africa. In addition, the research functions as a useful touchpoint to help educate individuals thinking about starting a business, and those already running businesses, about the current challenges and opportunities facing entrepreneurs in South Africa.

“With each survey, we learn something new that challenges us and the broader entrepreneurial ecosystem in South Africa. Armed with concrete new insights we are better equipped to make significant changes to the way we support entrepreneurs,” concludes Rachelson.

To download the full report go to www.seedengine.co.za.