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Why are SA's entrepreneurs reluctant?

Jul 27 2010 17:36 Marc Ashton

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Johannesburg - "I could choose to be either an entrepreneur, or work in a corporate environment, but knowing that I have the opportunity to leave a legacy of companies that people love to work for is probably the most exciting thing about being an entrepreneur."

That's the view of up-and-coming technology entrepreneur, Tyler Reed, who spoke to Fin24.com recently.

However, Reed is a rare animal.

According to international research from the Global Entrepreneurship Monitor (GEM), he is part of just 6% of the South African population that views entrepreneurship as a potential career path.

This is the paradox that faces the country as a whole: South Africans have ingrained the principal that work in the corporate sector is safer than attempting an entrepreneurial venture, and yet the corporate sector is failing the population.

That's because unemployment continues to rise sharply toward 30%.

Simply put, corporates are not creating jobs.

 Business owners admit there are some new opportunities for entrepreneurs as the historic dominance in certain industries weakens, partly owing to the Competition Commission which has worked to break down cartel-type behaviour and allowed new entrants in to the market.

Some sectors, however, such as banking and financial services, have retained their high barriers to entry.

For most, this sector of the economy is firmed signposted "restricted entry" for all except those with the deepest pockets.

And there are other barriers to entry. Education remains a major hurdle for South Africa in both the formal and entrepreneur sectors.

It's no accident that the country's best entrepreneurs success stories such as Mark Shuttleworth, Adrian Gore of Discovery, or international rocket science guru Elon Musk, are highly skilled and educated individuals.

Orrin Klopper, spokesperson for the Entrepreneur Organisation (EO) believes that much focus still needs to be made on entrepreneur education within South Africa.

Said Klopper: "Entrepreneurial ability without managerial ability would not be sustainable. Management and entrepreneurial skill and experience are the most frequently used selection criteria of venture capitalists. Entrepreneurs who have invested in education are more likely to have a growth strategy and run profitable businesses."

IT sector getting some traction

One sector which is getting quite a lot of attention in recent months is that of information technology (IT).

In late 2009, IT entrepreneurs and venture capitalists, Vinny Lingham and Justin Stanford, announced the launch of their "Silicon Cape" initiative which was positioning itself to raise the profile of technology entrepreneurs in the Western Cape.

This included co-ordinating the efforts of government, innovators and technology investors to develop the sector.

The entrepreneur Reed believes that the environment in South Africa is now far more friendly for entrepreneurs.

"I think broadband is becoming less of an issue, more and more people are becoming connected and more entrepreneurs are realising the opportunity in web and mobile too."

"I think funding is still a grey area, the money is there but it's not easy to get and I don't think we are quite there yet, in terms of getting the same kind of deals our overseas competitors land," he said.

Technology analyst, Will Mworia, from AfriInnovator believes that it is not just in South Africa's tech sector that entrepreneurship is thriving.

He points to successes in places like Nigeria and Kenya where IT is thriving and this will stimulate further entrepreneurship between African entrepreneurs. Yet it will take time.

"Being a startup founder in Silicon Valley is ordinary, but creating a culture [in Africa] takes time," he said.

He attributes this "subtle" change in levels of interest in entrepreneurial activities to increased awareness in the media as well as government policies in places like Kenya where government is taking an active role in stimulating the sector through specialist entrepreneur funds.

 - Fin24.com

discovery  |  entrepreneurship
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