The SEED Engine is currently running its annual The Real State of Entrepreneurship Survey. In 2018, more than 1 500 entrepreneurs participated in the survey. The survey findings were enlightening, but not unexpected: enterprise supplier development (ESD) programmes that are intended to assist entrepreneurs are proving to be of little value to the majority of entrepreneurs, many of whom attend several per annum with a view to access purchase orders.
While ESD programmes are sending entrepreneurs back to school, many indicated that the programmes are not addressing the specific needs of their businesses.
Procurement contracts are turning entrepreneurs away as contracts are often not split or designed to accommodate smaller role players in sectors.
Entrepreneurs further flagged corruption among procurement personnel as a serious and growing issue, one that is adding to the cost of doing business.
Louise Paulsen, a consultant, advisor, director and mentor in localisation and enterprise development, highlights the main issues from the 2018 survey.
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1. ESD programmes
– Current ESD programmes rarely add the necessary relevant input to entrepreneurs’ businesses unless they are niche, specific or tailormade.
– Corporate-sponsored programmes may not be adding as much value as anticipated, thus rarely leading to increased productivity and head count.
– The presence of a mentor aligned to an entrepreneur’s business is a key success factor, yet the number of entrepreneurs who have mentors through their ESD programmes is low.
– If ESD programmes reach the right kinds of entrepreneur, the success rate is higher.
– Accessing funding remains the biggest concern and challenge for entrepreneurs. Entrepreneurs are largely self-funded or do not apply for funding because they do not know either where to go or how to access such.
– Factors such as credit ratings and a lack of collateral to secure lending affect an entrepreneur’s ability to access appropriate funding and limit the growth and scalability of their business.
– The majority of entrepreneurs require R50 000 or less to fund their businesses. It is evident that the risk appetite for supplying funding to early-stage and perceived risky entrepreneurs is low in South Africa.
3. State of entrepreneurship
– The ecosystem remains difficult for entrepreneurs to navigate with several entrepreneurs reporting that they do not know how to access available support.
– Entrepreneurs are not thriving and they are not growing at a level and pace that will significantly influence the National Development Plan (NDP).
– Entrepreneurs are starting to mature with an enhanced understanding of the aspects that need to be addressed in their businesses as well as identifying the requirement for high-impact business development support (BDS).
– Entrepreneurs in South Africa are mostly educated, have prior work experience, vary in age and are driven to entrepreneurship through identifying and seizing opportunities.
– While there has been a gradual increase in the number of female entrepreneurs, female representation remains the same as in the previous year (47%). The opportunities available in the market are mostly for male and youth-owned businesses.
– The key challenges that entrepreneurs face include finding customers, an inability to raise funds, wearing too many hats, a lack of guidance, slow sales, customers paying late and unpredictable business conditions.
4. Sector focus
– The number of for-profit social enterprises has increased by 10% since 2017, demonstrating that businesses that address social and community issues are on the rise.
– Sectors are misaligned to those highlighted in key economic policy documents of national government, such as the Industrial Policy Action Plan (IPAP), Black Industrialist Programme (BIP) and NDP.
5. Keys to success
– Keys to success for entrepreneurs remain strong personal networks, proper business planning, access to business support services and the ability to present for new market opportunities.
– Areas of BDS that are most desired and have the greatest success in terms of entrepreneur interventions include business strategy, financial support, people development and training, systems support/interventions and mentoring.
– While there has been a slight decrease in the number of part-time entrepreneurs (37% in 2017 vs. 31% in 2018), it is interesting to note that 31% of their businesses are post-revenue and 86% of their businesses are self-funded.
– Of the businesses that are post-revenue, only 5% have a turnover of greater than R5-million. 22% of entrepreneurs have revenue of less than R10 000 per annum and the majority of post-revenue entrepreneurs (26%) have revenue of between R50 000 and R100 000 per annum.
– Business focus is key to business success. An interesting finding of the research is that 47% of businesses are engaged in business-to-business (B2B), business-to-consumer (B2C) and business-to-government (B2G) at the same time – thus making market focus difficult.
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