63% of small businesses fail
Johannesburg - Small business failure rates are as high as 63% in the first two years of trading, Absa said on Thursday at its Small Business Roundtable in Johannesburg.
"The biggest challenge that the country faces is creating employment through building a culture of entrepreneurship, but this has been difficult.
"Entrepreneurs have a certain set of skills and don't have the funds to employ the other sets to run a successful business," Nico Jacobs, head of Absa Small Business said.
Jacobs highlighted the importance of small business to the economy.
"Small businesses have moved from employing 18% of the South African employable population in 1998 to more than 60% today."
Reasons why businesses fail included poor management as well as lack of structure and infrastructure.
However, the lack of financial know-how was the biggest reason.
"But this has not stopped new entrepreneurs from entering the market," Jacobs said.
"Currently the new entrants mainly range from people who are unemployed, retrenched or retirees who realise they can't survive on their pension.
"They are then forced to start their own business, but are not equipped to handle the rigours, do not have the financial support or knowledge."
Jacobs added that in order to tackle this issue, Absa Small Business had developed a classroom-based mentoring programme – the Enterprise Growth Programme (EGP).
"One of the key highlights of this programme is that it will help develop entrepreneurial skills, teach participants how to effectively implement their business plans, understand the various aspects of a business and how they all tie in together."
The EGP currently operates in KwaZulu Natal, the Western Cape, Limpopo and Gauteng.
"The national roll-out is scheduled for February 2011."