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How to nurture entrepreneurship

SA lacks economic vision – incubator CEO.

JOHANNESBURG – An appropriate level of business development support was more important than funding to accelerate entrepreneurship, an industry insider has argued.

Addressing an audience about the challenges facing entrepreneurs at the launch of Dalberg’s book, 17 Big Bets for a Better World, Pavlo Phitidis, CEO of Aurik Business Incubator, said funding followed good deals, while capable people built good businesses.

There was “no doubt” that this capability could be taught, he said.

Governments also had to show vision and serious intent to restructure economies, Phitidis added.

“The only vision that I’ve seen that is clearly articulated and put into action I’m afraid to say with my limited experience in Africa is in Rwanda, because what I’ve seen achieved there in the last three years is quite remarkable.”

“South Africa is a deeply, deeply privileged country with zero economic vision, and that zero economic vision translates to people not investing either their money to build businesses further, or their time to create an economy that is so desperately needed.”

Large organisations that were established during the early apartheid years continued to dominate economic activity, yet 68% of private sector job creation resided with businesses employing 50 or fewer people, he added.

Phitidis said a lot of government institutions – in South Africa and abroad – concentrated their efforts on very large businesses to create jobs. This was the case with the Department of Trade and Industry, while a lot of the Department of Small Business Development’s efforts focused primarily on youth unemployment in townships and rural areas.

Survivalist activities were something different than entrepreneurship, he said.

The Ashish J. Thakkar Global Entrepreneurship Index ranked South Africa’s entrepreneurial environment 46th out of 85 countries last year.

Ashish Thakkar, CEO and co-founder of Atlas Mara, said the research proposed practical solutions for governments around entrepreneurship. Rwanda, the UAE en Ghana reached out to the group after the publication of the report.

South Africa was very different to the rest of the continent, Thakkar said.

“The sophistication and the access and the pure depth of capital here is so much higher than the rest of the continent, yet there’s so many things lacking.”

In the rest of Africa, access to finance was still a real issue. Banks typically took deposits, but invested it in government treasuries rather than lending to businesses. Against this background, public-private-partnerships were critical, he argued.

Samuel Mensah, CEO and founder of Kisua Fashion, said the key difference between the hustler and the entrepreneur was the ability to grow.

While a degree and prior work experience were helpful to become more adaptable and increased the individual’s ability to learn, the biggest challenge for hustlers in becoming real entrepreneurs was that they were not able to grow and expand as opportunities presented themselves, he added.

Mensah said as an entrepreneur himself, his position was not to expect anything from politicians or governments.

“I expect nothing and if I get anything it is a bonus. That is my de facto position when it comes to any expectation from government or from policy.”

In trying to solve the problems faced by entrepreneurs, it was important to keep inclusive economic growth top of the agenda, Maryana Iskandar, CEO of Harambee, added.

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The incredibly disenabling environment created by the ANC Govt does not help. You cannot grow under a corrupt government.

I agree with the gist of this article and in particular with the comments by Menash. I have been trying to get a tech incubator off the ground for the past two years. I prepared a detailed business plan and go-to-market strategy and presented this to several government departments, some mentioned in this article. Every time a coconut. Doors were slammed in my face partly because I’m white, but far more importantly because there is genuiune lack of entrepreneurial thought leadership and understanding at most government levels. These are civil servants who have never owned a busines and have zero understanding of start ups. Therefore, they have no idea of how to respond to innovative business plans and requests for support.

Billions have been wasted in futile attempts by government in trying to be seen to be proactive by throwing money at lame duck initiatives because they simply cannot assess viable business opportunities. The same can be said for our retail banks. Gone are the days where you could discuss your business needs with your local bank manager and get him to grant you an OD. Today, the branches only have clerks with no mandate beyond filling out forms.

SA government and the retail banking industry have a business prevention mentality. That’s why the likes of Elon Musk, Mark Shuttleworth and others have taken their smarts off to jurisdictions more amenable to innovation and start ups. As things are, SA will continue to lose innovators, thought leaders and rain makers who have a genetic disposition towards low tolerance for red tape and who do not suffer fools gladly.

You’ve encapsulated it excellently.

Seed capital should be available from banks with a government guarantee.Yes, major banks should have an entrepreneur department which assesses the abilities of prospective clients and gives them access to interest free funds. They should mentor and monitor.

The incentive to them succeeding is that the bank will eventually have a fee-paying client.

There are many, many innovative options but as you write, the government is run by small-minded bureaucrats who have no idea of creativity in business.

Sigh …

Your frustrations are noticeable and personally share the experience. In case you are not aware, the DTi have an Incubation Support Programme (ISP) co-funded by …..who and/or industry. The application process is transparent and no animosities. Sadly, this is aimed at a preferred partnership with “big business” whom invariably have its own agendas and “limitations”. Should industry not have the appetite or vision or a headache, it remains detrimental and a disservice to another capable person on the road to independence, self determination and sustainable job creation. Such as is the SDL-dichotomy; in general, when you are employed, no hassles as the system provides for you to be up skilled. However, when unemployed (and I should think that this includes redundant people replaced by technology or a lack of another skill) you are outside the web of SDL and sadly, unless an effort is made to up skill unemployed people, the road to that is less paved to gain access to SETA grants.

“In this sense socialism means the abolition of private enterprise, of private ownership of the means of production, and the creation of a system of “planned economy” in which the entrepreneur working for profit is replaced by a central planning body.”
― Friedrich A. Hayek, The Road to Serfdom

“The more the state “plans” the more difficult planning becomes for the individual.”
― Friedrich A. Hayek

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