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working with entrepreneurs, videos, role playing games and joining a student’s entrepreneurial club.
Entrepreneurship education in South African tertiary institutions has to have more of a focus on educating ‘for’ entrepreneurship in order to produce the much needed competent entrepreneurs that are urgently required in the country. However addressing the issue of entrepreneurship education is not the only intervention that needs to be done to ensure successful entrepreneurship as young people face other challenges which negatively affects their successful entrepreneurial achievement.
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Another major problem that businesses owned by young people in South Africa face is that their enterprises usually have a lower market value or inventory. Young people’s businesses also have a narrower range of activities and therefore have difficulties competing with already established enterprises (Chigunta, 2002: 6). A lack of operational space also hinders the success of young people’s businesses as they tend to operate from homes or streets and also usually rely on simple tools or at times no equipment at all (Chigunta,2002: vi)
A lack of experience and expertise tends to push youth entrepreneurs into high risk and low value adding self-employment situations where failure is highly probable (Motts, 2000).
Many youth entrepreneurs have little or no business management skills and abilities, they therefore have inadequate, inaccurate or non-existent financial records and this has a direct negative impact on the performance of their businesses (Chigunta, 2002: 6).
Generally many young people face the challenge of their age, limited life and work experience (Organization for Economic Cooperation and Development (OECD), 2001: 17).
Other problems faced by youth entrepreneurs include; the challenge that young people do not bring contacts to the business, lack of access to new technologies and equipment, lack of product development and value addition, poor marketing and branding, inadequate planning, lack of new product development and a lack of on-going business support (Chigunta, 2002: 6).
2.9.1 Macro- economic challenges
In South Africa some of the government regulatory laws are considered a threat to the Small, Micro and Medium Enterprises (SMME) sector. Even though overregulation remains an issue, South Africa has introduced significant trade policies that have supported entrepreneurship (Luiz, 2002: 54). These include for example the Growth Employment and Redistribution (GEAR) and Reconstruction and Development Programme (RDP) policies among others (Nasser, et al. 2008).
South Africa ranks on place 34 in the ‘Doing Business Report 2010’ of the World Bank Group (World Bank, 2010). This is not a bad position but South Africa could improve its ranking so as to make it easier for young people to engage in business in the country. The government is making efforts to promote youth entrepreneurship for example through the National Youth Development Agency (NYDA) which offers start-up capital in the form of loans for new
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youth entrepreneurs, however most potential entrepreneurs in South Africa do not have knowledge of existing government support mechanisms or how to access them, therefore more effort has to be made to ensure that prospective entrepreneurs know and have access to these support structures (Fielden, et al. 2000: 56).
The majority of young entrepreneurs in South Africa operate in the consumer or retail sector (71, 2%) which has low barriers to entry with regards to start-up capital and skills requirements, but generates low margins due to high competition. Table 3 depicts the involvement in entrepreneurial activity by sector in South Africa:
Table3. Involvement in entrepreneurial activity by sector in South Africa
Source: Global Entrepreneurship Monitor (GEM), South Africa 2009 Report
The table shows that most entrepreneurs in South Africa are involved in the consumer services sector. This sector includes services in education, motor vehicles, recreational services and so forth.
Although this sector has lower barriers of entry than other sectors, such as business services and the transformative services sector, it has a lot of competition due to its comparatively easy access. This is the sector in which most young entrepreneurs in South Africa are active.
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2.9.2 Administrative challenges
South Africa is relatively in the lead when it comes to administrative support to potential entrepreneurs. According to the World Bank’s ‘Doing Business Report’ 2010 in the sub- category of “starting a business” South Africa is ranked 44th out of 183 economies. A prospective entrepreneur has to overcome at least six legal procedures within an average period of 22 days to register a new business (World Bank, 2010)1. Even though it is easier to register and to start a business in South Africa in comparison to most other African countries and other countries in the world, the country could still make it easier for young entrepreneurs to register and start operating a business.
2.9.3 Social challenges
Macro sociological factors such as general social and cultural surroundings strongly influence entrepreneurial activities. The relationship between these factors is very complex and a number of studies, for example the work done by Hofstede (1967-2009) investigate cultural differences influencing business structures and entrepreneurial activities.
The social and cultural norms in South Africa are among the most negative entrepreneurship framework conditions and thus rather constrain entrepreneurial activity (Global Entrepreneurship Monitor South African Report, 2010: 49-50). Short term orientation is a major obstacle in South Africa, as people especially from poorer communities often only want to achieve short-term profits instead of reinvesting profits into their businesses.
There is a strong patriarchal culture in South Africa and this likely has an impact on gender differences when it comes to business engagement (Hofstede, 1967-2009). Another important challenge that is relatively new and is still being investigated in South Africa is the problem of ‘tenderpreneurship’ (Mackenzie-hoy, 2010). This is a trend whereby people set up a business to provide a service to the government or local municipalities through acquiring contracts; they then charge a sizeable above market value for the service. There is allegedly a lot of behind the scenes corruption and lack of transparency in the awarding of these government contracts. This means that young entrepreneurs who do not have money or are not well connected will not be able to acquire these contracts (Kota, 2011);
1 The World Bank Business report is produced annually and it measures the business regulation environments of 183 countries.
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this might contribute negatively to young potential entrepreneurs’ perceptions of the business environment in South Africa and thus might eventually hinder entrepreneurial development among young people.
It must however be said that ‘tenderpreneurship’ is a rising culture within society and does not apply to all individuals. Research that has been done on this phenomenon is still at its initial stages and therefore it is difficult to come up with concrete conclusions on the impact of ‘tenderpreneurship’ on entrepreneurial development among young people in South Africa.