Being an entrepreneur in South Africa has its own set of specific challenges. Here are a few to be aware of…
While South Africa is known for its entrepreneurial spirit, and there’s no doubt that the Rainbow Nation is full of opportunity, there are also specific, unique challenges that face South African entrepreneurs. We highlight a few – and how to overcome them.
Cash flow
Cash flow is no doubt on every entrepreneur’s watch list, but with a lack of access to finance for start-up and expansion, it can be particularly difficult for South African entrepreneurs to manage cash flow, especially in the critical first two years. Unfortunately, our financial and operating environment is not that conducive to start-up businesses, as regulations, policies and access to capital pose challenges. Banks are still the predominant funders of new businesses, and entrepreneurs often struggle to get the necessary funding to start their venture.
Fear of failure
Interestingly, for a country known for its entrepreneurial spirit, South Africa has the lowest entrepreneurial activity in Africa – that’s according to the Global Entrepreneurship Monitor, the world’s largest study of entrepreneurship. The main reason cited? A fear of failure. In fact, the 2010 GEM report revealed that only 16.7% of South Africans had entrepreneurial intentions and a staggering 29% have a fear of failure. Interestingly, this could be because of the response to failure that is inherent in many South Africans, including the banks and the press. While in many other countries, failure at a business means that valuable lessons have been learnt, in South Africa it is assumed that if you have failed once, you’ll fail again.
Lack of skills
Many entrepreneurs in South Africa simply have no idea how to physically run a business. They have a fantastic idea and the skills necessary to run with the idea, but when it comes to registering the company, managing accounts, marketing and managing the business, their knowledge is sorely lacking. This can lead to increased failure, which in turn leads to an increased fear of failure – and so the cycle continues.
Labour unrest and lack of infrastructure
Despite the large number of potential workers available in South Africa, as opposed to many first world countries, labour unrest is a reality – and a real challenge. Strikes can cause huge financial burdens for large companies, and the effect is felt even more acutely in SMMEs (Small, Medium and Micro-sized Enterprises).
A lack of infrastructure – specifically transport – also hinders South African entrepreneurs, as it makes it exponentially more difficult to expand their client base and reach new markets.
Despite all these challenges, South African entrepreneurs continue to launch new and exciting companies every year… And will no doubt continue to do so for many years to come. What do you think is the most pervasive challenge for South African entrepreneurs?