Government is just one player that needs to step up — the private sector should also take up a role
There is a mismatch between what private companies and public organisations can do in entrepreneurial spaces, and what they are actually doing.
This is a key finding of a study released by Allan & Gill Gray Philanthropy SA in collaboration with the department of science & innovation, the UN Development Programme and the Allan Gray Centre for Africa Entrepreneurship.
The study explored the challenges local youth entrepreneurs are facing, and how technical and vocational training as well as private companies and public entities can help them to succeed in their businesses. The study aimed to improve entrepreneurial ecosystem data by mapping innovation entrepreneurship at training colleges.
In SA, 80% of small and medium-sized enterprises (SMEs) fail within the first five years, compared with the global average of 45%. According to a Global Entrepreneurship Monitor report, entrepreneurial activity has dropped to below prepandemic levels. It would therefore make sense to put our resources into growing SMEs to combat rising unemployment, which is at 33%.
This is not what is happening. The problem is not only a lack of funding infrastructure. While the authorities provide support to the entrepreneurial ecosystem, the distribution is not what it should be, with only 33% of government stakeholder capacity toward funding the entrepreneurial ecosystem.
About 11% of that capacity goes to policy support. This is an area that needs urgent attention considering that policy and red tape are already working against SMEs and the power to change this rests primarily in government’s hands. It is the area in which government can make the most difference.
Non-essential regulatory processes must be eliminated so that small businesses can thrive. The red tape within government itself that prevents the dissolution of these policies must be reconsidered too.
But the government is just one player that needs to step up — the private sector also needs to take responsibility for its role. In the same training institution ecosystem mapping report, it was found that private sector stakeholders’ resources are not being used optimally.
Just 17% of private stakeholder capacity went to funding SMEs. Private sector players — especially financial institutions — have an important role to play. But of all private sector stakeholders in the entrepreneurship training ecosystem only 15% are from the financial sector.
