The still new rather new political system and obvious significant changes are still impacting South Africa with BEE (Black Economic Empowerment) and 8-BEE (Broad Based Black Economic Empowerment) laws and regulations, which support people of different ethnic groups who were previously disadvantaged. The B-BEE law was passed in 2007 and is hence still rather new, it supports DE (entrepreneurial development) of black people by taking funding from cooperation’s. The Entrepreneurial Dialogues) However a valid business idea and plan and a certain skill set, experience are required which often are not met by the individuals applying for the DE, due to poor educational systems and lacking business experience. Furthermore the South African culture neither celebrates entrepreneurial Innovation nor supports the aim of single handedly acquiring wealth.
Nepotism Is fairly prevalent in the current South African social climate it could however be argued it aids community development it does however discourage individuals from seeking personal gain, which often is a key motivator for entrepreneurs. This is implemented in the thought process of many South Africans and hence will be passed down to children In their upbringing and education, as stated in Entrepreneurship & New Venture Management ‘South Africans are not socialized or educated to become entrepreneurs, but rather to enter the labor market as employees.
In this role they become consumers of existing jobs instead of creators of new Jobs. ‘ (Van Award, q, Van deer Bank, J and Falser,T. 2011)The obviously existing lack of motivation to be innovative is present. In comparison to other Sub-Sahara countries much fewer (nearly 20% less) young South Africans believe they have the ability to start a business. (Mall,2013) depreciation of the rand is likely to exclude many import possibilities because of the increased expense.
Also the constantly fluctuating interest rates make it difficult for an entrepreneur to plan the future as banks are the most common funding provider in South Africa other ways of funding such as crowd-financing platforms, foreign direct investment (FED), government grants and advance orders are not yet very established in South Africa, hence leaving banks and their set interest rates as the only option. This is one of the fundamental factors why entrepreneurship in South Africa is at its current stage. Funding for new entrepreneurs is one of the main robbers.
The low per capita income doesn’t allow savings and back up, hence loans need to be taken and approved. The lower the initial self- input the higher the interest rate and the longer the period of payback time. It is a big risk for an individual to take out a loan on an entrepreneurial business as the person and the business are one legal entity and hence the person is fully liable with all personal belongings in case the business is not successful, (Hang, 2009) making it seem even less desirable in addition to the cultural opposition to it.
Another possibility of ending could be venture capital, which would however more apply to opportunity driven entrepreneurs rather than necessity driven entrepreneurs as the return on investment is likely to be higher. In order to find investors for such private equity a sufficient idea, experience and business plan need to be present. This however is often not the case as stated above for the DE, the problem being lack of education and business experience.
Those result from the poor educational system and the still insufficiently educated majority of the population in South Africa. Particularly the standard in subjects such s Mathematics and Sciences is too low. (Mail&Guardian,2013. ) Problem solving and the ability to think rationally are key characteristics of a successful entrepreneur. Running a business requires on the spot thinking and calculated risk taking, hence the rational and logical approach to pros and cons in situations is needed.
As a large part of the population still resides in poverty tertiary education often cannot be considered due to its expense, further increasing the lack of business understanding. Ongoing strict labor laws and government corruption make the process of setting up business more complicated, lengthy and expensive. The current safety and crime rates in South Africa also cause a lot of shrinkage for businesses hence resulting in increased expenses or losses for the entrepreneur, making success and profitability harder to achieve.
What must not be forgotten is the importance of entrepreneurs, for both the community as well as the individuals directly benefiting from it. The economic crisis in 2009 had a significant effect on South Africa as more than one million Jobs were lost and the number of unemployment is still increasing. .2% as ell as below average for all middle to low income countries with 14. 8%. (A Gem Perspective, 2009. M. Herrington, J. Skew, P.
Skew) The still underdeveloped Entrepreneurs provide the possibility for Job creation and a constant source of income, which would enable many families to better their lifestyle. The individual benefits gained from entrepreneurship will over time help to improve the socio economic status in South Africa, resulting in a decrease in unemployment and An increase in entrepreneurial ventures would have a positive impact on the GAP in South Africa and promote economic growth in the country. Both of which are important to foreign investors.
With a decrease in crime and a increase in GAP and economic growth South Africa would be more appealing for Foreign Direct Investment, which would then further promote growth and creativity, diversifying the market and its opportunities. In conclusion it can be said that South African level of entrepreneurship is being regarded as to low due to the factors of comparison with other similar regarded countries. The lack of motivation and education particularly in South African youth is one of the striking points of why the entrepreneurial level is at its current state.