Rating the best: South African vs. Sub-Saharan Africa entrepreneurs

By on July 30, 2014

There has been much talk around the rise of the African continent and many comparisons have been made between entrepreneurship and business levels in South Africa and other African regions, but who is leading the way? 

According to Christo Botes, while some countries report higher entrepreneurship levels, this doesn’t necessarily mean that the small and medium enterprises operating within them are more financeable or sustainable than those in other regions.

“It is unfair to compare entrepreneurs of different countries, as each region contains its own strengths and weakness, all of which can impact a business, either positively or negatively.”

Botes says that as an economy develops, so does its entrepreneurial opportunities, but that these opportunities differ depending on a country’s economic structure.

“The recent economic boom in Africa has seen many sectors develop and expand and it therefore isn’t surprising that more individuals are exploring entrepreneurship as a possible career choice to capitalise on the continent’s expansion and growth.”

He points to the latest Global Entrepreneurship Monitor (GEM) 2013 Global report, which revealed that Sub-Saharan Africa has the highest Total Early-stage Entrepreneurial Activity (TEA) rates globally. Leading these figures are Zambia and Nigeria with 39.9 percent of the adult population involved in early-stage population activity, while South Africa, only has a TEA rate of 10.6 percent.

Botes adds however that although countries, such as Nigeria, have become a hub for investment opportunities, South Africa remains Africa’s gateway to sustainable business and investment opportunities, due to the country’s infrastructure and economic structure.

“Countries around the globe are divided into factor-driven, efficiency-driven and innovative-driven economies, depending on their economic structure and development levels. Countries such as Ghana, Zambia and Nigeria, operate in a factor-driven economy, which thrives on advantages such as low cost labour and untouched natural resources. However, this type of economy is also susceptible to global economic cycles, commodity prices and exchange rate fluctuations.

“In an efficiency-driven economy, such as South Africa, an economy has become more competitive, enabling it to produce and deliver more advanced products, this aids the establishment of more sustainable businesses.”

Botes adds that job creation is also a key differentiator when comparing the countries entrepreneurial business ventures.

“In the recently released 2013 South African GEM report, it indicates that while Sub Saharan Africa displayed higher rates of TEA, only an average of 5.5 percent of early-stage entrepreneurs between 2001 and 2013 will create over 20 jobs. On the other hand, South Africa, which reported a lower number of TEA, indicated 14.6 percent of early-stage entrepreneurs will create over 20 jobs during the same period.”

Botes says that, ultimately, factors such as investment in infrastructure, access to investment capital and investor security, play a vital role in the success of a business. “While the rest of Africa is home to many growing and successful entrepreneurs, more developed and established business owners are prevalent in South Africa, due to the country’s developed infrastructure, investor security, as well as the established and successful international and local trade relationships.

He adds that the regulations within a country can also impact a business. “The World Bank’s Doing Business 2014 report, which investigates the regulations that enhance business activity and those that constrain it, revealed that it takes an average of 19 days to register a new firm in South Africa, which is roughly a week longer than it takes in higher-income countries, but 10 days less than countries in Sub-Saharan Africa.

“With the introduction of the Small Business Development Ministry in South Africa, with its promise to cut the red tape for SMEs, the amount of days should improve further which will bodes well for entrepreneurs in the country.”

It will be interesting to witness the shift in factors motivating entrepreneurs in South Africa as other Sub-Saharan Africa regions continue to boom. “This can also be an important motivating factor for South African entrepreneurs to continually ensure their competitive advantage, in order to be sustainable for years to come,” concludes Botes.

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