Entrepreneurship key as large corporates reduce body count – remove red tape

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South Africa’s entrepreneurs need to be commended for their ability to continue running successful businesses in a challenging economic environment. That being said, what established companies need now is a business environment that is more conducive to growth. As significant contributors to GDP and employment, what our entrepreneurs require is support from government, financial institutions, regulators as well as corporate South Africa.

The country is struggling with low growth and this is putting direct and indirect pressure on business owners. In addition, consumers are reluctant to spend money, debt levels remain high and interest rates are rising.

Amid these conditions, established entrepreneurs continue to make a meaningful contribution to economic growth and employ a significant number of people. In a country with an official 25% unemployment rate this is no small feat, considering that many business owners often face pressure to cut costs by downsizing operations or automating processes.

But South African entrepreneurs are resilient and are considered to be among the best in the world. Even with lacklustre economic conditions, we still have entrepreneurs who are building thriving businesses. The country has many success stories of bright young minds who are building successful companies nationally and internationally, and is highly regarded for its favourable legal and banking environments.

Economic and regulatory realities for business owners

More effort needs to be placed on removing unnecessary red tape and creating an environment that is more conducive to supporting these critical industry players.

South Africa is also known for being amongst the most highly regulated labour environments in the world and thus making it hard for established business owners to operate. According to the SME Growth Index, published by research specialists SBP, 12% of business owners indicated that they are overburdened by excessive labour legislation, which is cited as being one of the main factors that negatively affects the ease and cost of doing business in the country. Furthermore, it reduces the potential for the entrepreneurs to create new jobs.

It is critical that this sector receives the support it needs otherwise South Africa will struggle to meet its job creation targets, particularly as we see more and more large corporates reducing the sizes of their workforce. We need more entrepreneurs who can grow, develop, create employment and deliver on their potential.

So where does this leave the entrepreneur?

To ensure the ongoing success of their business, we would recommend that right now business owners keep a close watch on cash flow – this is often what determines if an entrepreneur stays in business or not. They should consider holding off on embarking on large capital projects, which may place additional pressure on the business. While it is important to prepare for the next positive business cycle, they must always ensure that the business can survive the wait while the market turns.

A successful business owner must have an in-depth understanding of the industry they operate in, as well as their market. Hire forward-thinking employees who can help the business to grow and compensate them well, but most importantly offer them opportunities for growth. This will help a business to retain valuable skills, which will help ensure they are ready for expansion when the business environment is positive again.

Entrepreneurship is therefore critical to ensuring we have a sustainable and growing economy in the future. We need to ensure that entrepreneurs get the support they need which will in turn make this possible.

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