This is according to the South Africa Global Entrepreneurship Monitor (GEM) 2014.
Christo Botes, spokesperson for the Sanlam/Business Partners Entrepreneur of the Year competition, says that while the country has a good infrastructure and banking system, both of which are enablers of entrepreneurship, South Africa is faced with many other constraints hindering the growth of entrepreneurial activity.
"South Africa's largest problem is unemployment - officially reported as 25.3%. It is, however, believed that this figure is largely understated as it doesn't include the percentage of the population underemployed - earning very low wages - as well as the discouraged unemployed workers who have stopped reporting their unemployment status, and are therefore not included in the official statistics. It is therefore estimated that the unemployment rate could be as high as 45%, and youth unemployment even higher," says Botes.
Over the last few years, the private sector's employment levels have not grown; each year either remaining at the same level, or shrinking. "In order to improve unemployment levels there needs to be a call for the sector to become more involved with initiatives contributing towards growing the pool of interest in entrepreneurship.
"While government has implemented several initiatives to improve entrepreneurship, the most successful have been supported by only a few select private companies. Enterprise development and entrepreneurship must therefore be seen as a key area that can unlock growth," explains Botes.
He points to a statement by Small Business Minister Lindiwe Zulu on the aspirations for the Ministry of Small Business Development - "All of us must accept that we carry a joint responsibility to re-distribute the wealth of our nation". Botes says: "It is hoped that civil society and government will consider ways and means to 'crowd-in' the business sector's considerable resources, skills and capacity to foster sustainable development."
He says that there are six fundamental policy, legal and regulatory tools which government can make use of to 'crowd-in' and engage the private sector:
"If we can increase the number of intentional entrepreneurs in South Africa (11.8% of South African adults in 2014 had entrepreneurial intentions vs. 58% in sub-Saharan African), as well as our nascent entrepreneurial rate of 3.9% (vs. in sub-Saharan African rate of 14.1%) for those that have taken steps to start a business, we can fill the entrepreneurial pipeline, and aid them to become new entrepreneurs, and later on, established entrepreneurs.
"If the business environment is enabling - and the mentioned six points are being adhered to by both civil society, government and the business sector - the failure rate and number of discontinued businesses will decrease as these entrepreneurs are being nurtured, and not left to their own devises.
"By implementing these six measures in a real and collaborative way, it will assist in lowering the levels of unemployment, poverty and inequality in the country, as well as aid in improving South Africa's total entrepreneurial activity numbers," concludes Botes.