A nation of shopkeepers

“Forget about old-style corporate ladders to success. South Africans need to be entrepreneurs and have small businesses that grow”, is one of the mantras of economic planners and pundits. We’ve put our faith in the little man’s economy in virtually every big idea that’s come out these past 30 years. Yet most people have that faith already.

Starting in the 1980s, every national economic plan, including those of the post-1994 RDP, Gear and latterly the NDP, puts the need for entrepreneurship front and foremost for our growth and employment chances. These propose what is anyway happening – a relentless move by ordinary people away from formal business structures to greater independence. Often this has been forced by the country’s limited formal economic growth, less reliability of long-term jobs, politics, and the increased competition of globalisation, but working for ourselves we increasingly must.

SA is rated by the World Bank as 35th easiest (out of 183 surveyed countries) in which to do business. Adcorp Analytics reckons one in three formally employed South Africans to be temps; trade union membership continuing a long fall. Adcorp puts real unemployment at only 9% to 17%.

The Department of Trade and Industry counts the number of small businesses growing 27% just between 2004 and 2007. The FinMark Trust reckons that 62% of these are younger than five-and-a-half years old; with 95% having four employees or less; while 83% of small businesses are black African owned.

The fact of having a youngish population may not even be such a problem, with Zambian economist Dambisa Moyo arguing that this will give Africa the entrepreneurial energy and markets for strong growth ahead.

Why, then, do politicians not walk the route of greater business freedom? A study released last week by Johannesburg’s Small Business Project, surveying 500 small businesses through 2012 (not the smallest businesses, mind), found the vast majority finding no threat to their ability to do business, but only 6% thinking that things had become easier.

Why things are tougher mostly has to do with “input costs” and tightening demand. But significant groups also pointed to the politically avoidable problems of excessive red tape and big spikes in energy prices. Businesses employing fewer than 21 people are spending twice as much, proportionate to turnover, on following regulations and other red tape, than those with more than 40 staff.
Government gives incentives to established companies to include small business in their supply chains, or even to fund these through enterprise development programmes, but skews rewards away from business success and resultant job creation to ideological dreams of racial and gender “transformation” instead.

Ideology and big plans aside, we shouldn’t expect our hidden economy of entrepreneurs to come from anywhere except ground up. And that, suggests Zazida Institute of Entrepreneurship CEO Vincent Joyner, has less to do with red tape or access to capital – than with a blend of experience, through things like micro-franchises or start-up businesses, along with proper post-school teaching.

Which might explain our business schools, from the universities of Cape Town to Johannesburg to the more niched Gordon Institute of Business Science and the community-based TSiBA, increasingly changing focus to teaching entrepreneurship. They’re way ahead of the politicos in this, panting to catch up with ordinary folk.

– By Paul Pereira (first published in The Citizen, 26 February 2013).