Fostering Entrepreneurship in South Africa: Funding, Competition and Mentorship
Last week, at a graduation ceremony at the African Leadership Academy in Johannesburg, Planning Minister Trevor Manuel said promoting an entrepreneurial spirit among young Africans will cut youth unemployment. Michael Hastings, global head of corporate citizenship and diversity at KPMG said: “It was entrepreneurship that changed the face of Europe, much of Asia and America, and it is what will change Africa too”.
The question in most minds when the thought of starting a business in South Africa arises, is if this is the kind of economy to be doing something new in. Traditionally struggling economic conditions don’t lend themselves to creating the “right” environment for entrepreneurship, not only because consumers are tight fisted, but so are banks- which at times like these are even less open to giving loans to start-ups. Ideas are wonderful things and can grow to amazing heights, but without that critical injection of funding at the outset, wonderful ideas and innovative concepts often diminish and even shrink in scope.
The first barrier that most entrepreneurs stumble on is acquiring the right amount of funding to launch their business. The requirements that most lending institutions put forth to potential entrepreneurs- just to be considered for a loan, are not always practical to young people. Collateral is often at ZERO and someone just coming out of college, or in a lot of cases- not having had a tertiary education at all would be hard pressed to comply. When I questioned Ms. Tsengiwe, CEO of Youngpreneur Media, on how potential entrepreneurs should tackle this obstacle, she said:
“The typical answer would be to look at the currently available systems, like crowd-funding and venture capitalist. A lot of venture capitalists are looking towards Africa- and it is very important for entrepreneurs to ask themselves what are the needs of venture capitalists? What are they really interested in? What do they want? All of these things must be considered before taking that route, and you have to be true to your business idea, you need to be sure of it. You also need to do something to stick out- do something different, even in the way you write your business proposal.
On a small project basis, I believe businesses should depend on strategy and not on money. You need to consider what is it that you actually need- often it’s not money- you need the money to buy a particular thing, but what exactly is that thing? Focus on how to get that thing, without money, find a way around it and many times you will find that you can actually get what you need, without spending a dime. If you speak to the right people and make deals with them, it is possible that you can get some of these things given to you.”
While what she said goes against the grain, I have noticed and heard of young entrepreneurs (particularly in Africa) exchanging services in the absence of steady cash-flow. Business advice is exchanged for design work; design work is exchanged for legal work. And this Bata system that worked before the advent of real currency is where entrepreneurs are finding a way around the money system. Naturally of course no business can remain completely cash-free, but it is a measure that can ease the financial burden on young entrepreneurs without landing them in debt or giving up on their dreams.
After the hurdle of funding is cleared and a business is birthed- products and services are created, the question of how an entrepreneur gets their offering to compete well in the market was tackled by Ms. Tsengiwe, she pointed out, the disturbing development of consumer insensitivity to new products.
“New businesses which enter the market are competing for the same wallet and they will face the same challenges that existing businesses are facing, customers are unwilling to spend and are tired of seeing new brands, and the market is congested. New businesses have to find a way to stick out- they have to get noticed and that comes from paying attention to the customer and being realistic about business. It’s one thing to have a strategy about what you want to do- it’s another thing to keep doing it when it’s not working and your business and market is moving in a different direction. In a pasture full of cows, you need to be the purple cow that stands out. Know your business, listen to your business- if your business is showing that going online is profitable, then go online- don’t stick to a strategy simply because it exists.”
That is easier said than done, when the average young person starting an entrepreneurial venture has little or no experience to gauge what is that they can do to stand out in a cut-throat business environment. And this according to Ms. Tsengiwe can be remedied by mentorship.
Mentorship is something that we should see a lot of on the continent, because it is part of African culture for elders to take younger people in hand and teach them what they know. Yet in business this doesn’t seem to be the case, whether it is because business people don’t feel the need to raise up future leaders, or don’t know the imperative of mentorship, one can only guess. On this topic of mentorship, Ms. Tsengiwe shared how vital her mentors have been in her entrepreneurial journey;
“I have two mentors- they are part of my support system. My mentors are realistic with me, they provide realistic advice- that applies to me and they have helped me understand who my customer is and where I should focus my attention. They believe in me. They don’t ask if I am going to succeed, instead they help me come up with strategies to succeed and that has taught me to learn from my mistakes, and keep going. They also teach me from their mistakes, so that I don’t have to make the same mistakes. It’s something that every young entrepreneurs needs.”
As South Africans, particularly the youth continue struggle to find a place in the eight-to-five working environment, entrepreneurship should be championed as a realistic option. Although in recent years a push has been made through organizations like SEDA (Small Enterprise Development Agency) to provide skills training for those interested in starting their own business, more needs to be done to make entrepreneurship more appealing. Funding needs to be made available to those interested in starting businesses.
Additionally those that that have succeeded should be given a platform to share their successes and hopefully inspire the stranded youths of the country to make their mark on South Africa’s business stage, through creating innovative goods and services that can compete not just locally but internationally.