Entrepreneurial Activity in South Africa

[Gregory Bunyard]

You may be interested in reading this article by Marlese von Broembsen about the entrepreneurial activity in South Africa compared with other developing countries.
 
Regards,
Greg Bunyard
 
Losing the entrepreneurship battle

 

ENTERPRISE EDUCATION by Marlese von Broembsen

 

SA’s entrepreneurial activity will continue to trail that of other developing countries unless enterprise education is drastically improved in our primary and secondary schools.

 

The findings of the 2005 Global Entrepreneurship Monitor (GEM) study, released this week, paint a grim picture of entrepreneurship in SA. First up, SA’s overall entrepreneurship ranking has dropped from 20th position in 2004 to 25th out of 35 last year. And the country’s total early stage activity was measured at only 5,1%, down from 5,4% in 2004.

 

We also have one of the lowest new business success rates: except for Mexico, South African startup businesses are the least likely among those of all the developing countries to mature to the new- firm stage.

 

The GEM research concludes that the South African school system is largely to blame by failing to provide the vast majority of learners with the basic knowledge and skills required to start a business. While earlier studies suggested that our low rate of entrepreneurship could be attributed to the low proportion of South Africans who complete secondary school, this year’s research goes further and has found huge variances in the quality of entrepreneurship education in South African schools.

 

With a special focus on youth and young adults, the GEM 2005 findings make for sobering reading. Previous studies provided compelling evidence of a link between levels of formal education and entrepreneurial activity.

 

Critical in the South African context was the GEM 2003 finding that the more education people had, the more likely they were to start businesses and the more people they would go on to employ. In fact, the potential of tertiary-educated adults to create employment is two-and-a- half times greater than for adults who have finished only secondary school.

 

It seems that education is the key determinant of a country’s future entrepreneurial capacity. In other words, boosting entrepreneurial capacity depends on how well our education system equips young people to start their own businesses.

 

But it’s not just about degrees and diplomas. SA’s tertiary education system appears to measure up relatively well, producing young people who start their own businesses at a comparable rate to other developing countries. Further, although the proportion of people who haven’t finished high school is higher in countries such as Uganda and Brazil, these countries still outstrip SA in terms of entrepreneurial activity.

 

The question is, why?

 

The GEM study lays the blame squarely at the door of our historically inequitable education system. SA’s young adults simply do not leave school with the skills they need to start a business: only 35% of young South African men believe they have the right skills, compared with 60% of young men in India and almost 70% in Brazil and Argentina.

 

In a country where less than 10% of young adults have access to tertiary education, the quality of learning in primary and secondary school becomes paramount. The reality is that the vast majority, about 90%, of our young adults are dependent on what they learn in school for their future success.

 

The GEM 2005 study presents evidence of huge inconsistencies in the quality of entrepreneurship education in South African schools. The education department admits it does not know how the economic and management science curriculum is being implemented and is itself concerned about the large proportion of schools where teachers lack adequate training to teach enterprise skills. In SA’s schools, the development of entrepreneurial skills is the last of four outcomes required by the national curriculum for economic and management science.

 

Most worrying for a country with SA’s development needs, it is the previously disadvantaged who are most affected. In a survey of more than 4500 learners in 41 schools, it was found that pupils in mainly black schools were 50% less likely to acquire entrepreneurial skills and attitudes than those in mainly white schools.

 

Our schools are failing precisely the people we are relying on to start businesses, create jobs and alleviate poverty and the gap is growing. Learners in predominantly black, coloured and Indian schools are falling further behind. The rate at which learners in white schools are developing skills in financial arithmetic, in particular, far outstrips the rate in black, coloured and Indian schools, giving these learners little hope of catching up.

 

The impact of this on small business development and job creation is already being felt as we continue to slip down the entrepreneurial rankings. Unless urgent remedial action is taken, the majority of young South Africans will leave school without the basic skills required for enterprise or, indeed, for a productive life.

 

But it’s not all gloom and doom. The majority of the educators surveyed clearly saw the value of entrepreneurship education and said they would welcome further training in the teaching of these skills. The study makes it clear that entrepreneurship is a valuable component of the primary school curriculum and, if taught with the appropriate materials, can also enhance the development of fundamental skills such as arithmetic.

 

By making dedicated entrepreneurship teaching materials available to all schools, we can increase the number of young adults with the right skills and attitudes to start their own businesses.

 

GEM is the largest and most rigorous longitudinal study of entrepreneurship in the world. This is the fifth year that SA has taken part in the study and this provides an unprecedented long-term view of the state of entrepreneurship in SA.

 

In these five years, GEM has shown that SA has consistently underperformed, with the 2003 GEM showing the rate of entrepreneurial activity in SA to be significantly lower than in other developing countries such as India, Brazil, Mexico and Argentina; the 2004 study pinpointing education levels as having a detrimental impact on the rate of new business startups; and the 2005 team finding evidence of huge variances in the quality of entrepreneurship education in our primary and secondary schools.

 

If we accept that the majority of South Africans will continue to rely on primary and secondary education, improving the poor quality of schooling must be the key long-term challenge to increasing sustainable, entrepreneurial activity and the job creation that goes with it.

 

Von Broembsen is the lead researcher on the GEM 2005 study. The South African GEM study was conducted by the UCT Graduate School of Business and sponsored by Liberty Life, the Shuttleworth Foundation, South African Breweries Limited, Standard Bank, Khula Enterprise Finance Limited and the National Research Foundation.

 

Source: Business Day - © Johnnic Communications.