Small business minister taken to task

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"Cape Town Minister of Small Business Development Lindiwe Zulu has been taken to task for not engaging with relevant experts in a sector that is at a critical low point in South Africa, according to the UCT’s Centre for Innovation and Entrepreneurship.

The centre’s director, Dr Michael Herrington, said the Global Entrepreneurship Monitor (GEM) shows that during the past 14 years, between 6% and 10% of the adult population in South Africa were in the process or considering starting a business.

Herrington is executive director of the GEM and the Global Entrepreneurship Research Association, which has just released a joint report with the World Economic Forum on entrepreneurship.

He said that South Africa’s entrepreneurial levels are about 25% of countries such as Nigeria, Ghana and Zambia.

"It is incredibly worrying," he said. "It is a proven fact that small business development is a major criteria for creating jobs and … that’s not happening."

"South Africa’s levels should be at 14%, well it’s not. We are way, way below other countries of a similar economic development stage."

Ministry's effectiveness 

He is worried that the Small Business Development ministry will not be effective.

Last year Herrington was a speaker at the Anglo-American sponsored Enterprise Development Conference, which is considered a key event on the entrepreneur calendar.

Zulu was supposed to be the keynote speaker, but she cancelled her engagement, he said.  "I would have thought that a conference of that nature, where you’re speaking to very influential people in entrepreneurship would have been of critical importance," he said.

"I’m having my doubts about whether that ministry is going to be that particularly successful," he said. "They have never bothered to contact us at all and yet we’ve been studying entrepreneurship in South Africa for 16 years."

The centre will be launching a GEM policy monitor to look at different initiatives that are successful around the world. “You would think the ministry for Small Business Development would be interested in that,” he said. "Not a word from them."

Herrington, who has given presentations to the National Planning Commission, said his centre works closely with the Western Cape government. "We have regular meetings with them," he said. "They are interested very seriously in economic development and … they want to know as much as possible about it."

The below graphs come from the 2013 South African GEM report:

Entrepreneurial pipeline, South Africa, youth aged 18 – 34, 2013:

Business sector for youth businesses in South Africa, 2013:

State of youth businesses in South Africa, 2013:

Barriers to entrepreneurship

Entrepreneurship in any country is governed by two or three primary factors: health, corruption/crime and education, Herrington explained.

Education in South Africa is "abysmal to say the least".

"If you consider the latest 2014/15 Global Economic Competitive index report, South Africa is rated 144 out of 144 countries for the level of maths and sciences. That in itself has got to say something," he said. "The level of primary and secondary education is rated amongst the lowest in the world. So, education is a major, major concern."

Youth unemployment is currently at about 60%, said Herrington. "We’re basically sitting on two scenarios:  one is a golden opportunity to develop the youth and the other one is a potential time bomb, because the youth are not going to just sit back and take it," he said.   

Another major inhibiting factor is the regulatory environment. "We have a hugely onerous regulatory environment," he said. "The number of forms one has to fill in and the bureaucracy one has to go through to start a company is mind-boggling and off putting."

He also said the labour laws inhibit people starting a business. "To hire and fire a person is almost impossible," he said. "It will take you six months. Now that may not be serious for a large corporation, but it’s certainly is very, very serious for small companies."

"They can’t afford to have unproductive or useless people working for them," he said."