SA women entrepreneurs exiting businesses faster than men, new research unveils

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This is a key finding of the Global Entrepreneurship Monitor (GEM) South Africa Report 2023/2024 by Stellenbosch Business School on Women Entrepreneurship in South Africa.

The gap between men and women entrepreneurs widens as businesses mature, with almost double the number of men owning established businesses (7.9% vs 4.1% of women), indicating that women find it more challenging to sustain a business than to start one.

Natanya Meyer, lead author of the report and associate professor in the Department of Business Management and SARChI for Entrepreneurship Education at the University of Johannesburg, says there are “starkly different” reasons for women and men exiting their businesses highlighted the specific barriers that women face in sustaining a business.

The top reason for exiting businesses was lack of profitability for both women (34.4%) and men (21.5%) whilst their other leading reasons differed thereafter.

Women’s next two main reasons were personal and family matters (21.5%, almost double that of men at 12.1%) and problems obtaining finance (21.5% vs men 17.8%). After a lack of profitability, men mostly exited their businesses due to an opportunity to sell (18.7%, vs 10.8% of women).

Women face not only unequal access to business finance and support resources but also gender stereotypes and prejudice. As women bear the majority share of caregiving and family responsibilities, they face a greater burden of managing conflicting demands on their time as they juggle business and family needs.

“It is widely acknowledged that women in business have greater challenges in balancing business and home life, due to societal expectations of women as primary homemakers and caregivers.”

“This influences how women in business are perceived, by funders, for example, resulting in adverse outcomes,” Prof Meyer said.

The research had previously found that women entrepreneurs were far less likely than men to obtain credit in their founding year, even though those women who did receive start-up loans had a lower default rate than their male counterparts.

Lack of access to funding and support resources, along with women’s more considered approach to risk, were possible reasons for women-led businesses remaining “modest in scale and lacking substantial prospects for expansion,” she said.

The GEM SA research found a notable gender gap in business growth, with 11.8% of men’s business ventures reaching the threshold of employing 20 or more people, while only 4.9% of women-owned businesses had done so. Meanwhile, women were more likely to be “solopreneurs”, at 4.9% compared to 1% of men.

“The data highlight gender disparities in business scaling, with men owning larger businesses at a disproportionately higher rate than women. This could reflect various obstacles women might encounter in business expansion, including limited access to funding, networks, mentorship support and resources,” Prof Meyer said.

Although women’s involvement in entrepreneurship showed a healthy increase from 9.5% in the 2022 GEM SA survey to 13.5% in 2023, men’s involvement showed a greater increase, from 11.1% to 19.9%.

“Given women’s higher unemployment rate – although it is positive to see an increase in their entrepreneurial activity, it is concerning that it remains low and lags behind that of men.”

“The results of this survey highlight the importance of improving the supporting environment for entrepreneurship for both women and men in order to reduce high unemployment,” professor Meyer said.

Co-author and research fellow at Stellenbosch Business School, Angus Bowmaker Falkoner, says the involvement of young women in entrepreneurship was low, at 11.3%, and that with half of South Africa’s youth unemployed (50% of economically active aged 15-34 in Q1, 2023), it was essential to improve exposure to entrepreneurship education at school level.

Lack of exposure to entrepreneurship as a career choice for young women links to the study finding that women are less likely to view themselves as being capable of starting a new business, at 66.2% compared to men at 72.4%, even though about two-thirds of both men and women say that they see good opportunities to start a new business in the area where they live.

“However, when we narrow this sample down to only people already entrepreneurially involved, women entrepreneurs’ perceptions of available opportunities and their own capabilities to run a business are higher than those of male entrepreneurs. Women already running their businesses also have a much lower fear of failure than women in the general population, says Bowmaker-Falkoner.