Entrepreneurs won’t create enough jobs without a rethink in how they are supported

It is no secret that South Africa has an unemployment problem. In the past few years, the country’s already beleaguered labor market has faced a number of challenges. Floods, unrest, persistent power shortages and the Covid-19 pandemic have all taken their toll.

According to Statistics South Africa, South Africa’s unemployment rate is just under 34%, and the International Monetary Fund projects that it will soon exceed 35%, giving the country the dubious distinction of having the highest unemployment rate in the world.

Entrepreneurship is often hailed as a solution to the problems of unemployment, poverty and inequality that hamper South Africa’s development goals. However, when dealing with complex issues such as job creation, traditional approaches that only focus on the problem without considering the power dynamics and systems at play are unlikely to transform entrepreneurship into the much-needed progress.

For example, in the last 20 years, physical and virtual innovation centers designed to promote technological and entrepreneurial progress have sprung up across Africa. However, the impact of these centers on joint progress remains unknown.

Because the centers are usually concentrated in wealthy countries and cities, those who are poor, illiterate, lack adequate networks, or live far from cities struggle to access these resources. As a result, centers tend to perpetuate the status quo rather than extend the benefits of entrepreneurship to those who need it most.

Similarly, when it comes to entrepreneurship in the South African context, we cannot simply ‘copy and paste’ global templates and expect real progress. Instead, a more nuanced approach is needed, one that is based on a realistic assessment of the country’s structural problems and how they lead to an uneven playing field that still excludes marginalized groups.

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By looking beyond trying to fix problems in isolation and instead looking at the context and systems that drive them, real social change is possible. This is the power of a systems approach; it tries to address the system that causes the problem in the first place and solve larger systemic problems, often by identifying and solving local problems in affected areas.

Systems change provides the opportunity for innovation that truly creates social change, rather than simply replicating and maintaining the status quo. Interdisciplinary thinking is needed to break the system; we need to draw on the expertise of people across a wide range of sectors and disciplines, expose ourselves to different perspectives, and involve and connect the people most affected by change in the problem-solving process, rather than using them as a testing ground.

For example, at the recent workshop Business Grow Africa – an initiative led by the Western Cape Economic Development Partnership to develop small businesses and support entrepreneurship and job creation in the province – a group of experts from different areas of the small business ecosystem met. gather perspectives and find innovative and practical solutions to address gaps in small business support.

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Entrepreneurs engage with representatives from local governments, technology hubs, academia, the funding community and civil society to understand challenges and then brainstorm innovative ideas to help create jobs in high-potential businesses and support the businesses and communities in which they operate. they did often underfunded.

Several promising experimental ideas emerged from the seminar. For example, developing an early-stage seed fund specifically targeting women and youth entrepreneurs. According to the 2020 Venture Capital Report and the Gender Funding Report, women are systematically excluded from entrepreneurship, and in emerging markets, female-led startups raise only $1 in seed funding for every $9 raised by male teams.

Unemployment figures also show that nearly half of working-age women in South Africa are out of the labor force, compared to 35 percent of working-age men. Therefore, a fund of this nature can open up the field for those who are regularly underrepresented in the entrepreneurial space.

Another pilot idea focused on increasing the support offered to the “missing middle” – a term used to describe companies that are “too big” (mid-sized) to finance early-stage initiatives, but do not grow enough to attract large investors.

In South Africa, most funding is directed towards start-ups or larger businesses, which means that small businesses cannot access the funding they need to grow. Taking into account that in the National Development Plan of the country until 2030, nine out of 10 new jobs will be created due to the fight against small and medium enterprises, supporting the development of insufficient medium entrepreneurship is important for creating jobs in the country.

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A systems lens helps us see how progress is fundamentally rethinking a wide range of assumptions about what we value, how we invest, the rules set by governments and markets, and the people and interests we prioritize. we give, he demands.

None of this is simple. It is a messy, informal and non-linear process that depends on understanding the context, developing proposals for creating business prototypes, exploring carefully designed social experiments and attracting the necessary support and resources that can help turn a prototype into a project. promote social changes.

But only by being brave enough to immerse ourselves in the “mess” of complex landscapes like the Western Cape’s innovation ecosystem can we re-imagine the systems that have created problems like extreme poverty and unemployment. We must think and act differently if we are to empower our entrepreneurs to create the quantity and quality of jobs and social progress we need to fulfill our vision of shared prosperity in this country.

Dr. Phumlani Nkontwana is a development economist and business development specialist. He is the co-author of Bertha’s University of Cape Town GSB short course on Social Innovation Systems Change and Entrepreneurship and Social Impact.

The views expressed are those of the author and do not reflect the official policy or position of the Mail & Guardian.


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