'Incubation cost a drawback'

Johannesburg - Business incubation as a method to boost business ownership is beginning to gain traction in South Africa.

Incubation involves not only financial assistance, but also the provision of infrastructure and mentorship to new entrepreneurs.

However, First National Bank's recently-released State of Entrepreneurship in South Africa report stated the cost of incubation is a large drawback. According to the report, incubation is not easy and short-term benefits are felt by a mere handful.

"It is expensive because good incubation deploys large amounts of resources to support few truly promising entrepreneurs," the report said.

"In addition, an intensive selection process needs to take place to determine which entrepreneurs or businesses should be allowed to receive incubator services."

"For profit" incubators have come into play in South Africa since the early 2000s.

According to statistics from the Small Enterprise Development Agency (Seda), the survival rate within its incubators is about 84% to 97% in the first two years of operation. Seda also claims the 200 companies it has incubated have generated total turnover in excess of R129m, with about 10 000 jobs created.

However, not everybody buys the statistics rolled out by Seda.

"If those numbers are true, the rest of us should close up shop," said Pavlo Phitidis of incubation group Aurik.

Phitidis said it would be informative if Seda provided further details around these numbers and the cost to taxpayers.

Asked about the expense associated with incubation and acceleration, Phitidis said skilled people were pricey because of their education and experience.

- Fin24.com