Toolkit—Enabling Tools for Entrepreneurship in South Africa

Abstract

Entrepreneurship is an increasingly important factor in the well-being of individuals and society. Entrepreneurship is a way to tackle head-on the constantly changing business environment of the twenty-first century: building sustainable development, supporting the economic growth of countries, creating new job opportunities for young graduates, and promoting societal well-being in general. Entrepreneurship and business creation are increasingly important alternatives in many countries for young people facing a labour market with double-digit unemployment rates. Supporting the future of business in developing countries requires sustainable businesses that are innovation driven. One way to do this is through co-sensing. Co-sensing entails observing—Observe! Observe! Connect with different people and different places to get a sense of the overall ecosystem and discover mutual opportunities for business development. ‘Co-sensing’ is about connecting with people and ideas to learn more about how things work. This chapter looks at building a business model that will show us what our business could be and do. In doing this, we will look at where opportunities could be located.

1 Introduction

Entrepreneurship is an increasingly important factor in the well-being of individuals and society.

Entrepreneurship is a way to tackle head-on the constantly changing business environment of the twenty-first century: building sustainable development, supporting the economic growth of countries, creating new job opportunities for young graduates, and promoting societal well-being in general.

Entrepreneurship and business creation are increasingly important alternatives in many countries for young people facing a labour market with double-digit unemployment rates. Supporting the future of business in developing countries requires sustainable businesses that are innovation driven. One way to do this is through co-sensing.

Co-sensing entails observing—Observe! Observe! Connect with different people and different places to get a sense of the overall ecosystem and discover mutual opportunities for business development.

‘Co-sensing’ is about connecting with people and ideas to learn more about how things work. This chapter looks at building a business model that will show us what our business could be and do. In doing this, we will look at where opportunities could be located.

2 Inspired Action

People from every walk of life take up the challenge of starting a business and building a successful future. The future of South Africa—and all of Africa—depends on the ability of young people to shape our future economies by harnessing the forces of the Entrepreneurial Revolution—the ‘Entrevolution’—as it came to be called at the Entrepreneurship Development in Higher Education (EDHE) Lekgotla held in Durban in June 2019, where some of the ‘movers and shakers’ told their stories of business start-ups.

3 Opportunities

When we think about starting our business, we should ask ourselves four questions:

• 1. Which sector or sectors are we interested in?

• 2. How does this sector supply services to other sectors?

• 3. Which sectors supply the sector that we are interested in?

• 4. How can we use what we are currently learning (our current knowledge and skills) to enter this sector?

3.1 Economic Sectors in South Africa

In any country, the businesses that sustain the economy can be sorted into different sets of sectors or industries. Whatever business a new entrepreneur starts up will fall into one of these categories, as illustrated in Fig. 5.1.

Fig. 5.1

Economic development sectors in the South African economy (Adapted for South African indexing from the North American Industry Classification System)

Understanding the sector that our business fits into will make it easier to identify the people we need to work with or collaborate with or who can give us the most useful support.

Table 5.1, which shows business turnover by industry, can help us identify opportunities in the economic sectors where there may be a niche market or evidence of potential profits that could be made.

Table 5.1 Business turnover (income) by industry sector (2019)

3.2 South Africa Needs Entrepreneurs

The unemployment rate among the youth in South Africa is staggeringly high. The official unemployment rate among youths (15–34 years) was 46,3% in Quarter 1 2021. The rate was 9.3% among university graduates.

This means that two out of every three job seekers cannot find work, not even counting the people who have simply given up looking. In addition, many people have jobs that do not pay well, and there is much potential in the South African economy for more entrepreneurs to enter the workspace.

One of the first places to look is in ‘import replacement’. Can we start a business making and supplying a product or service currently being imported from overseas? In doing so, we will not only fulfil a local need but also help to stem the outflow of valuable foreign exchange.

In South Africa, we currently import about R1.3 trillion (US$ 88,037 million) worth of goods annually. This is mainly paid for by the demanding work of our miners and through the export of our natural resources. It is time that we started asking ourselves why we are not producing more products for the African continent, instead of making money for international companies who seem to understand our customer needs better than we do.

In the textile industry, for example, the country’s protracted struggle with low economic growth and falling incomes, recently exacerbated by the coronavirus outbreak and national lockdown, have restrained consumer spending. In the textile manufacturing sector, production and employment have stagnated, and many producers are uncompetitive relative to the cheap Asian imports.

3.3 We Can Succeed as Well

As shown in Table 5.1, there were 344,576 businesses in South Africa in 2019, and the owners of these businesses—over time—do much better than the average employee. We, too, can succeed in our own business.

As a prospective start-up, it is important to look at the businesses around us and ask ourselves, can we do something similar? Can we do it better?

While it is true that we cannot go blindly into setting up a business without some understanding of how a business works, it is still perfectly possible for anyone with sufficient common sense to run their own business. Starting and running a business can be a tremendously rewarding experience.

3.4 Addressing a Niche

Addressing a niche—a gap—is all about the ability to identify opportunities, the willingness to take risks, and being able to innovate. There are plenty of stories of entrepreneurs who started small businesses during their schooldays by selling basic products (snacks, stationery, t-shirts, homemade jewellery, cooked meals, etc.) to other school kids or their parents. The same is true of people who started businesses at their universities and colleges or even workplaces. If we can find things that people need, we can address a niche in a market.

Many of these small businesses survive, and their founders go on to develop the skills that help them serve larger customer segments and bigger markets. Indeed, some of the biggest businesses were started when their founders were on campus: Google, Microsoft, and Facebook, which were all begun by student entrepreneurs. In South Africa, Internet Solutions is another good example. Students created these ideas while they were at university and transformed them from humble beginnings into mega-corporations known all around the world.

The skills that we need to run a small business, which could just be selling cold drinks from a cooler box or selling advertising by developing a following on YouTube, are the same skills needed to run a large multinational corporation. All businesses are made up of processes that include managing suppliers, getting customers, and delivering a quality product. When we put these processes together to meet a need, we are on our way to running a business (Fig. 5.2).

Fig. 5.2

(Source Van der Westhuizen, 2022)

Digital ecosystem for ‘laptop-preneurs’

‘Laptop-preneurs’ are creating an ‘Entrevolution’ in the way that new businesses start-up. Building a business from your cell phone is a perfectly workable possibility; these days, you can do just about everything on a smartphone. But despite the apps and great technologies, we need a little bit more than a cell phone to start and run a good business.

A cell phone can be used to:

• Buy products from various local and international suppliers

• Market those products to other people

• Organise payments; and

• Arrange the delivery of products.

A tech-savvy entrepreneur might need nothing more than just their smartphone and the right apps to operate an entire business, which could be an online business or traditionally office-based.

3.5 What About Exporting?

Going beyond our own backyard: A way of harnessing potential markets is to sell our unique products to foreign markets. South Africa is known for its precious metals, but we are also gaining a share in other areas. When we develop a product that can be exported, we can earn money that makes our country wealthier by supporting our balance of payments. There is a massive market for South African goods in other African countries (Table 5.2).

Table 5.2 Total South African exports to all foreign markets (2019)

3.6 What Are We Importing?

We also import many goods that can—and should—be produced locally. Importing these items may be an ideal market to enter.

Table 5.3 shows total South African imports from all foreign markets (2019).

Table 5.3 Total South African imports from all foreign markets (2019)

The combined BRICS countries (Brazil, Russia, India, China, and South Africa) need to create a million businesses annually in the years to come, each employing more than five people, to sustain the rate at which jobs need to be created. We all need to think seriously about running our businesses and using the skills that we have developed to find workable markets and grow the economy of South Africa in a global context. Each of the markets we currently import from is a major potential market for locally manufactured goods.

4 Financial Returns for Entrepreneurs Versus Employees

In this country, a successful business owner can make as much as ten times more than an average employee over their working lifetime.

Entrepreneurship is all about creating something new and introducing change because of innovation. The effort is profit-driven, obviously, but entrepreneurship can also bring about dramatic changes and create major new influences in the world. Entrepreneurs’ incomes tend to be higher than those of their corporate counterparts. Financial growth for an entrepreneur tends to be greater than that of an employee because the employee is constrained by a salary or a wage that usually gets reviewed only once a year, whereas the entrepreneur’s income is limited only by how hard he or she works.

Entrepreneurs do not earn market-related salaries; they earn returns on selling products to customers and employing others to enhance those returns. When thinking of the choice between becoming an entrepreneur or working for a company, earning potential—how much money you can earn now and, in the future, is a major consideration. But the choice is also between working for yourself or somebody else.

These are some salary indicators based on estimated figures: Let’s say that the average salary of a school-leaving employee in South Africa is approximately R7 500 per month. This means that you could earn around R90,000 per year if you got a job as a matriculated school-leaver working in a company. The median starting salary of a recent graduate in South Africa in 2020 was estimated at about R220,000 per year. This may sound great, but an entrepreneur can earn even more (Fig. 5.3).

Fig. 5.3

(Source Authors)

Example

Also, remember that while university graduates have a better earning potential than matriculants, graduates earn little or nothing during the three or four years of studying. They also often have huge study loans to repay as soon as they graduate or over the following years.

However, for most entrepreneurs, salaries are a secondary consideration. Many entrepreneurs are driven by factors other than money, including impacting the world. This is called an ‘anchor’. It may be good for us to spend some time reflecting on what our anchor is and what will make us get out of bed every day to make a difference in the world. If we can find this anchor, our heart-spirit will grow, and we will work to make the difference that the world needs us to make.

5 A Youth Entrepreneur Development Tool

Questions of internal and external domains, collaboration with stakeholders, and linking sources of inspiration with the discovery of entrepreneurial passion are all concepts that should be explored, developed, and encouraged in entrepreneurial education and business friendship interrelationships.

Youth entrepreneurs can use the tools shown in Fig. 5.4 to map the entrepreneurial actions that will be necessary to develop themselves and their new venture idea and ultimately contribute to socio-economic development (Harrington (2016, 2017).

Fig. 5.4

(Source Adapted from Harrington (2016, 2017); Scharmer & Käufer, 2013)

A toolbox for enabling ecosystemic interpersonal actions

For youths who can take charge of their personal development and continuously take action to resolve perceived barriers and collaborate with the ecosystem to discover enabling business factors, these abilities might hold the key to reconstructing the most important systemic role-player: the microsystem.

6 Conclusion

This chapter has looked at the opportunities available to the entrepreneur in South Africa, particularly in the area of import substitution. It also described the industry sectors in this country to indicate the scope of the opportunities available and sectors that entrepreneurs may not have considered.