A new study conducted by the UCT Graduate School of Business and just released by the Global Entrepreneurship Monitor finds that South Africa is falling behind in the global entrepreneurial economy.
The latest data shows that the South Africa’s entrepreneurship ranking has dropped from 20th position (out of 34 countries) in 2004 to 25th position (out of 35 countries) in 2005. And the country's Total Early-stage Activity (TEA) was only 5.1% in 2005, down from 5.4% in 2004. Significantly, South Africa also has the lowest entrepreneurial activity rate of all the developing countries participating in GEM.
The authors suggest that government policy in South Africa needs to shift its policy away from wealth redistribution toward more support of entrepreneurial activity and the jobs it creates.
Given our high levels of unemployment and the indisputable relationship between unemployment and poverty, we would argue that job creation should supersede poverty alleviation, not as a national objective, but as an SMME objective. Job creation in itself is the most effective, sustainable strategy within the context of SMME policy that could alleviate poverty and reduce inequality.
I would go one step further in this recommendation. I would suggest that attention to supporting entrepreneurial activity should replace South Africa's focus on wealth redistribution. Their policies have proven to decrease total wealth by creating a zero-sum game between the rich and the poor. By focusing on entrepreneurship, more wealth will be created by a much broader number of South Africans of all ethnic backgrounds.
Decrease government regulation of small business, cut taxes, and improve entrepreneurial and economic education is the formula to improve South Africa and all developing nations for generations to come.
(The GEM studies are supported in part by Babson College).
