The formation of an entrepreneurial ministry would be a significant step forward in tackling SA’s unemployment crisis. This Ministry is to act as the lead agency for the development of entrepreneurs as well as to co-ordinate entrepreneurship activities in general.
Minister Of Finance Pravin Gordhan said in his Budget speech of 2011 that “businesses which employ fewer than 50 workers account for 68% of private sector employment.”
He said South Africa recorded a 7% total early-stage entrepreneurial activity (TEA) level in 2012, which is a 2 percentage point decrease from the 9% recorded in 2011.
“While South Africa is better off than it was in 2004 when the TEA level was at 5.4%, the country still has much to work towards.”
But the government has shown very little commitment towards solving problems that directly impact on experienced entrepreneurs and small businesses.
Unemployment is officially at 25% (unofficially estimated to be around 40%, this includes those who have given up looking for a job), poverty levels are high (the GINI co-efficient of South Africa one of the highest in the world), the economy is stagnant and sluggish. The National Development Plan prognosis highlights that should the status quo continue, the youth in the country faces the prospect of not being employed in their lifetime. They will continue to live below the poverty line. The only time they will live above the poverty line is when they are reach pension.
There are many government funding agencies, including financial and business advisory assistance, among others. Nevertheless, over the years, entrepreneurship development in South Africa has been a little slow to take off due to attitudinal and implementation problems.
Ironically, the role of the government is very important in fostering private sector entrepreneurship in South Africa. Nevertheless, although there are many programs and financial support systems for entrepreneurs, they have not been as effective as they should be.
A common critique is the extent of the bureaucracy or “red tape” with which entrepreneurs must contend, causing delays of several months just to get approval for applications.
This difficulty, only one example among many, is due to the fact that most of the programs for entrepreneurs are organised and offered by government agencies.
Government funding agencies are all concerned about the meeting their target numbers. How many potential entrepreneurs did they train this year, how many did they fund, how many events did they host, which is good when you have high unemployment. However there is no research done by these institutions (if is there, its findings and recommendation don’t seem to be implemented) to establish what are the bottlenecks inhibit entrepreneurs from growing, why are entrepreneurs not sustaining their businesses. There is no measure of output which highlights the impact of the trainings, workshops and events hosted by these government funding agencies, basically no measure of return on investment is calculated.
So these agencies are unable to tell us whether their programs are having the desired impact on society or not. Every year is more of the same. But what we can safely assume is that these institutions are not having an impact as they should, if they did, youth unemployment in the country would show signs of reducing which is not what is happening, instead unemployment remains stubbornly high.
An entrepreneurship ministry will be able to focus on reducing the cost of doing business, simplify the current business registration process and SME tax system, create access to finance and create appropriate incentives for South African entrepreneurs. All the CIPROS, Khula’s, NEF’s, GEP’s, NYDAs should be put under one roof for this to be more effective. We need to get rid of too much red tape.
Among the specific services offered by the Ministry will be a one-stop entrepreneurship information centre, the spearheading of the franchise and vendor development program and the provision of entrepreneurship training, subsidised business premises (for qualified entrepreneurs), financial assistance in the form of grants or loans, and an on-line resource and information centre for entrepreneurs.
When current existing government funding institutions are emerged under the ministry of entrepreneurship, synergies will be maximised and red tape reduced. For example, entrepreneurs can complete only one form (in triplicate) and that form will be for:
1) Registering a company;
2) Registering for tax; and
3) Opening a bank account.
All this process is done in one form, in one office and submitted once. This will eliminate red tape and also save time between moving from one institution to another and waiting in long queues.
The move to encourage entrepreneurship development is mainly aimed at creating a large pool of genuine medium-scale entrepreneurs who are not only job creators but are also able to compete in the global market place.
Another step in the right direction could also be government entering into a public/private partnership in order to set up an entrepreneurial academy.
The academy could develop schools that focus on entrepreneurship, as well as provide education in business skills and promote mentorship and training.
Off-course the Ministry of Entrepreneurship’s objectives should also support the country’s development plan and vision.
In 1995 Malaysia formed the Ministry of Entrepreneur Development, which clearly demonstrates the importance that the Malaysian government places upon the issue of entrepreneurship and entrepreneurial development. The Ministry acts as the lead agency for the development of entrepreneurs as well as to co-ordinate entrepreneurship activities in general.
A counter-argument would be that we already have the DTI; Khula Enterprise Fund and dozens more. We already have the Department of Economic Development. We don’t need more civil servants, there are too many already. Use what avenues exist and ensure that the government runs an awareness campaign so people can access. Make what we have to work. The challenge with this argument is that even if you make all these institutions to work efficiently, in most instances you will still find duplication of functions and this doesn’t reduce red tape, it actually maintains it.
Another key critical success factor for the ministry of entrepreneurship is that this ministry should not operate like any other department. Which means people who manage and lead in this department should strictly be people who have entrepreneurship background and experience.
This department should be structured to operate like a Chapter 9 institutions (e.g The Auditor General, Public Protector or The Reserve Bank in terms of its independence) where professionalism, independence and integrity are respected by the government. If these qualities are not guaranteed and respected by the government then we might as well continue with the current agencies which are highly politicised, with programs significantly benefitting only a few entrepreneurs.
The ministry of entrepreneurship should have key partnerships with industry sectors in the private sector and academic institutions. This will ensure that up to date industry knowledge with key stakeholders sets high standards for entrepreneurship development.
Bureaucratic delays and red tape are major stumbling blocks to entrepreneurs, especially the newer breed of technopreneurs, who have to operate and make decisions in real-time.
Essentially, pockets still exist within the public sector where the “sense of urgency” is lacking. This is a worrisome situation because the speed at which economic conditions change and at which economic decisions have to be made will only continue to get faster as the world becomes increasingly connected via ICT.
On a more positive note, the government does seem to be aware of the need to address certain pressing issues that affect entrepreneurs. Among the more salient are ensuring a healthy, conducive and stable political and economic climate, matching the most appropriate funding models to suit the needs of businesses, making funds available to stop the liquidity crunch, promulgating guidelines and regulations to ensure intellectual property right protections, and encouraging corporate governance.
The need for entrepreneurs to receive more guidance and training from business incubators needs to be highlighted and recognised. This will bode well for the strengthening of entrepreneurship in South Africa.
Considering the effect of globalisation, perhaps the time is ripe to begin to expand the common view of entrepreneurship from one that is centred on domestic needs and the domestic environment, to one that is more global in outlook. In that sense, policies should focus on how best to build resilient, competitive global entrepreneurs, and not be too mired in matters of equity. Hence, there is a need for more information sharing on entrepreneurship among countries in the continent (regional integration), beyond what works, in the local context, to a broader, more global discussion and examination.
Ps: I’m very mindful of the history of South Africa, the legacy of apartheid and how it continues to impact the current business environment, and the ever present debate of the rigid structure of the economy with makes entrepreneurship development in the country impossible. The government, business and labour need to show leadership in order to make entrepreneurship in the sustainable. In the absence of that, no matter what we do to develop entrepreneurship in the country by having a ministry of entrepreneurship, those efforts will amount to naught.