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Entrepreneurship South Africa

Key findings from the 2023 State of Entrepreneurship in South Africa Survey

Small business owners in South Africa have no shortage of entrepreneurial spirit and grit, and most are building multiple businesses without help, but the two major challenges standing in the way of their growth in 2023 is lack of access to funding and the impact of ongoing load shedding. These are the findings of the 2023 State of Entrepreneurship in South Africa Survey by the Entrepreneurs' Organisation (EO) South Africa chapter.
EO Cape Town chapter chairman Richard Rayne | image supplied
EO Cape Town chapter chairman Richard Rayne | image supplied

EO is a global support network of close to 1, 500 entrepreneurs in more than 75 countries who help each other to fulfil their potential. EO-SA polled its own members for the survey.

The survey findings, which were released this week at the annual international EO conference, held for the first time in Cape Town, paint a picture of entrepreneurial courage and resilience. When asked why the respondents became entrepreneurs, most (26.6%) said, “there was an opportunity and I took it”, followed by being “born with an entrepreneurial spirit” (26.1%) and “turning a passion into a business” (22.9%).

Most entrepreneurs (53.2%) had one successful business but had in fact started between three and five businesses (39.9%). The vast majority of respondents (89%) had started their own businesses. Over a quarter (29.4%) of the businesses in the survey had been in operation for more than 15 years, while 26.1% had been in operation for four to eight years.

Most businesses (42.2%) were a combination of business-to-business (B2B) and business-to-customer (B2C) solutions, followed by pure B2B at 35.3% and pure B2C at 20.2%. Most of these South African entrepreneurs (46.3%) ran what could be classified as “small businesses” with less than 10 employees, but around a third (31.7%) ran scalable start-ups. Almost a third (27.5%) were still building or refining their product or service. Only about 20% ran bigger businesses that employed between 11-30 people.

The most common annual turnover for their main businesses was R10m to R50m (27.1%), followed by less than R500,000 (22.5%), but of all those, only 63.3% posted profit growth over the past 12 months.

Looking at industry distribution, the most common sector reported was information and communication (21.1%), followed by other service activities (14.2%) and manufacturing (10.6%).

Work location insights: Cape Town and work-from-home flexibility come out tops

The Western Cape was the most common location for head offices (59.2%), followed by Gauteng (31.2%), while no head offices were recorded for the Northern Cape, North West and the Free State.

Working from home was still a big trend with 33.5% working in a hybrid fashion with some days at home and some days in the office, and 31.2% working fully remotely, although 35.3% of businesses were already fully back in the office.

A third (33.5%) said their businesses did not record a growth in profits over the past 12 months.

The major hurdle to growth was the lack of funding support. Only 10.1% of respondents reported that their businesses had ever been supported by the government, while the majority (89.9%) said they had not received any government support.

Half of the entrepreneurs (49.1%) said they needed more public or private funding support to grow their businesses, and most (24.3%) said lack of funding was their biggest business constraint.

Other challenges included energy security, physical security, access to resources, mentors and markets, struggling with red tape, and tax burdens. Compliance with BEE and labour regulations was also challenging for some businesses.

Crime affected 24% of entrepreneurial businesses annually and 11.9% of small businesses experienced crime both monthly and/or daily. One of the gravest concerns for business owners, however, was load shedding, which caused financial losses for six out of 10 businesses (58.7%).

Policy support is required to boost entrepreneurship in South Africa

“This survey about the state of entrepreneurship in South Africa provides valuable insights into the experiences of entrepreneurs in the country today - as well as the policy and funding support our job creators need,” said EO Cape Town chapter chairman Richard Rayne, whose board initiated the survey.

“The findings reveal that most entrepreneurs start their businesses because they look for opportunities and have a passion for entrepreneurship, and they put everything in to make it work,” said Rayne.

“Our business owners face the prevalent South African challenges with courage, and despite it all continue to create jobs and contribute significantly to the economy, without much external support. Most entrepreneurs feel that their business growth is stifled by a lack of support, funding and systemic stability and security - and this tells us that they need both policy support and capital to make an even greater positive impact on society.

EO Cape Town chapter chairman Richard RayneWe appeal to our partners in local, regional and national government to listen to our entrepreneurs and to support them, for the benefit of the country,” Rayne concluded.

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