“If we are going to compete with other countries in the world as a destination for foreign investment but also for our local entrepreneurs to come into their own and do what we want them to do, which is to start-up businesses and employ a lot of people because that will address the joblessness that we have in our country right now,” Nazeem Martin, managing director of finance company, Business Partners told CNBC Africa.
According to the University of Cape Town’s Graduate School of Business’ annual international survey called the Global Entrepreneurship Monitor, early stage entrepreneurial activity in South Africa in 2012 dropped to 7.3 per cent for a high of 9.1 per cent in 2011.
“If you look at the rate of entrepreneurship amongst adult South Africans aged 18 to 65, you’ll find that we are sitting at about 7 per cent. Compare that to countries of the same levels of economic development, there you are looking at 14 per cent,” said Martin.
He further explained that one of the main factors inhibiting entrepreneurship in the country is the legislation that exists, such as the Black Economic Employment Act as it encourages black South Africans to seek employment in the corporate world instead of pursuing their own start-up businesses.
In addition, red tape has also proven to inhibit the entrepreneurial spirit. Martin stated that financiers and banks don’t make it easy for people to get start-up capital loans and are also obligated to comply with a number of legislations, policies and ordinances.
“Depending on what business you’re starting, you have between 44 and 48 different pieces of legislation that you have to comply with from national legislation to provincial laws and local municipality ordinances,” he explained.
Martin believes that the country needs to find a means to streamline all processes and regulations in order to encourage small business owners and entrepreneurs to flourish.
“I think we need to find a way we can streamline things, make it a lot easier for people to set themselves up to start businesses and to grow those businesses,” he added.
In the United States of America, for example, entrepreneurship is booming as those that fail to start up their own businesses are not punished but are rather respected for their determination and usually learn valuable lessons from their experience.
In South Africa, on the other hand, people are punished when they fail and are disregarded by financiers when they seek financial assistance.
Martin therefore added that a mind-set change is needed by both large corporates and financiers so that they no longer hinder the small business environment from flourishing.
“I think we require mind-set change on the parts of both big businesses and financiers in order to not hold failure at entrepreneurship or starting a business against an entrepreneur,” he added.
Simone Cooper, head of franchising and enterprise development at Standard Bank, however, added that banks and large corporates are slowly making a positive change to the small business environment in the country.
“There’re a number of companies that are trying to make it easier to get into the business market. A lot of government agencies as well are trying to support small business owners and people starting up businesses,” she said.
She added that banks have become more lenient when approving loans to people for start-up capital as those banks are beginning to understand the franchising and small business environments better.