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JElemy Muggs: Early-stage entrepreneurial activity in the country has declined below pre-pandemic levels, according to the latest 2023 Global Entrepreneurship Monitor South Africa (Gem SA) report released today. Regarding entrepreneurial intentions, fewer people are considering starting a new business than before. This sounds serious.
We'll hear more from Professor Natanya Mayer, co-author of the Stellenbosch Business School Monitor Report. First of all, Professor, welcome. So, could you elaborate on the main factors contributing to this decline?
Natanya Meyer: yes. To give you a little background, it's currently around 8.5% and reached 17.5% in 2021. This is obviously strange considering this was the Corona era, but the rationale behind this is that many people lost their jobs during the Corona pandemic. With lockdowns and other restrictions on movement, obviously a lot of things have moved online. This has forced many companies to go online and make their products available in more technologically advanced ways than before. This online approach also eliminates the need to have a traditional brick-and-mortar store, making it a little easier to access and enter the market.
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Therefore, many people started their own businesses during this period. Unfortunately, some of these businesses were started out of necessity rather than seeing potential or opportunity, which means many businesses are not successful or don't last long. This is bad because it means In a nutshell, this is what we analyzed or distilled from the surge of early-stage entrepreneurial activity at that time.
Jeremy Maggs: Therefore, if I understand correctly, fewer people will be thinking of starting a new business. what are they afraid of?
Natanya Meyer: Well, if you think about it when you measure your entrepreneurial intent, or as you said, when you start a new business, you have to make this choice or thought in order to take a certain action and actually start something. There are certain things that really influence behavior. This obviously seems like a good career choice.
Fortunately, it turns out that people still think being a business owner or entrepreneur is a good career choice. It is still seen as having a high status in the world.
If you are your own boss or an entrepreneur, you are seen as a status symbol. We know that the media is giving a lot of attention to this being the so-called cure for all economic problems, but unfortunately at this stage it is not working as expected.
But what you just mentioned, and what actually prevents people from taking that first step and getting started, is the fear of failure, which is one of the variables that we measured. We found that it was actually increasing. Look around you, our ecosystem, everything that's going on in this country, all the crime, the problems with access to electricity, so many other things, and how this actually affects people. It's scaring you and making you think twice before actually starting your business. This may be because the environment for businesses to grow and survive is currently deteriorating and people are afraid to take chances.
Jeremy Maggs: And of course, all of this is completely understandable as South Africa's economic risks are increasing exponentially.
Natanya Meyer: Yes, definitely. When a person makes a cognitive decision to start a business, you have to remember that some people just jump in and just start, and that's your kamikaze, or your risk taker. Maybe it will work, maybe it won't. But most people are more realistic and obviously setting up a product or service requires a lot of planning, money and preparation, and there's a lot of risk if it doesn't succeed, so people don't take the chance. I'm really afraid of getting caught.
But on the positive side, we also received the latest updated data, which we are currently starting to write, and it has improved slightly. So perhaps the initial fear after COVID-19 and the failure of many businesses is starting to make people realize that there is possibility and hope. This is at least a positive thing, and I don't want this conversation to end on a negative note.
Jeremy Maggs: I will definitely take that and get back to you at that time and what specific measures should you recommend or suggest to foster a stronger entrepreneurial culture that can take advantage of this increased positivity? I ask.
Natanya Meyer: Now, we also measure what we call the framework conditions of entrepreneurship. These are the 13 conditions that we've developed over the years with a lot of research, and mean the global team behind Gem, that you need to have in place to actually start or start your business. We are considering certain matters. A person who starts a business, launches it, and clearly has the intention of surviving, thriving, and ultimately growing. Because that's what we want.
We could discuss them all morning, so I'll just gloss over some of them, but obviously you need enough start-up capital. So you need money to start a business, but again, this is a problem in itself.
Entrepreneurs need access to funding specifically for entrepreneurs, as there are many different types of funding available.
We are looking at two aspects of government support. First is support and relevance, then taxes and bureaucracy. Unfortunately, the results for these two metrics are not very good.
Second, access or availability of government entrepreneurship programs. You can see that there are many available. But again, these controls and (implementation) and success rates may not be what we expect. Something very close to my heart is education. I don't think this kind of entrepreneurial spirit is fostered among children, especially in school education. After school, I felt a little better.
Next, of course, you need to consider research and development, infrastructure, market dynamics, physical infrastructure, and finally culture, that is, social and cultural norms. Unfortunately, all of these indicators were below 5 in the last survey, and although they have again increased from the previous year, they are all still below average. So these, in no particular order, are things that businesses really need to address to create a better environment for businesses to start, survive and thrive. These are the three things we're looking at.
Jeremy Maggs: Thank you very much, Professor Natanya Meyer.
