Entrepreneurship thrives on discovery, as economist Israel M. Kirzner observed. Using crude oil’s transformation from a nuisance to a global resource as an example, he highlighted how innovation turns obstacles into opportunities. For South Africa, rich in resources but hampered by regulation, fostering economic freedom is key. Simplified policies, protected property rights, and reduced taxes can empower entrepreneurs to innovate, unlocking the country’s vast potential and driving sustainable economic growth.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here.
By Eustace Davie*
Professor Israel M. Kirzner, an economist of the Austrian School who studied at the University of Cape Town, has described entrepreneurship as a discovery process. He defined entrepreneurial discovery as the ability to identify opportunities for value creation where others see only problems. Entrepreneurs, he explained, are not experts with unique knowledge but individuals with the insight to see opportunities where others see problems.
This concept of discovery is particularly relevant for South Africa, a country rich in resources and human capital but often held back by legislative challenges that obscure its opportunities.
From nuisance to necessity: The story of oil
Kirzner often illustrated his ideas with the story of American farmers and crude oil. In the early days of the United States, farmers regarded crude oil as a nuisance. It seeped from the ground, polluted streams, and killed livestock. Ranchers lamented their misfortune, seeing the black substance as an obstacle that reduced the value of their land.
However, where others saw only a problem entrepreneurs saw potential. They discovered that crude oil could be refined into cheap kerosene, which revolutionised lighting by replacing expensive whale oil. Later, the same substance was refined into petrol, powering motor vehicles and driving the industrial world forward. What had once been seen as a hazard became one of the most valuable resources on Earth, thanks to entrepreneurial discovery.
This transformation exemplifies Kirzner’s insight: value is not inherent in resources but is created when individuals uncover new ways to use them. Without the entrepreneurial process of discovery, crude oil would have remained a nuisance.
South Africa’s untapped potential
Like those American farmers, South Africa is surrounded by opportunities hidden beneath apparent challenges. The country’s abundant resources, both natural and human, remain underutilised. The entrepreneurial discovery process that Kirzner described is essential for turning these latent opportunities into drivers of economic growth.
Kirzner emphasised that entrepreneurship does not rely on government directives or planned solutions. It emerges naturally when individuals have the freedom to explore and act. South Africa has seen entrepreneurs create value in difficult circumstances, but their efforts are often hindered by avoidable obstacles.
Government interference and its consequences
Kirzner’s insights remind us that discovery depends on freedom, the freedom to experiment, to take risks, and to innovate. In South Africa, government interference frequently stifles this process. Excessive regulation, complex compliance requirements, and burdensome taxes create barriers that make it harder for entrepreneurs to act on their insights.
When government policies interfere in the discovery process, they prevent solutions to problems from emerging. Kirzner’s example of crude oil highlights the importance of leaving space for entrepreneurs to experiment and innovate without being constrained by unnecessary restrictions.
Discovery through economic freedom
South Africa’s policies must shift towards fostering an environment where entrepreneurial discovery can thrive. This means:
- Simplifying regulations: reducing unnecessary bureaucracy to give entrepreneurs the freedom to act.
- Protecting property rights: ensuring that individuals can confidently invest in and develop their ideas.
- Reducing tax burdens: allowing entrepreneurs to retain more of their earnings so they can reinvest in innovation.
These changes do not dictate results but create the conditions necessary for discovery to occur. It is through these discoveries that new industries emerge, resources are transformed, and economies grow.
The story of crude oil transforming from a farmer’s nuisance into a cornerstone of the modern economy is a powerful illustration of Kirzner’s principle of discovery. South Africa’s challenges, whether in energy, unemployment, or resource utilisation, represent similar opportunities waiting to be uncovered.
Opportunities that often lie hidden, possibly for centuries, make it clear that the solution to these challenges lies not in central planning or government control, but in creating the conditions for entrepreneurial discovery. By reducing interference and embracing economic freedom, South Africa can unlock its untapped potential and move towards prosperity. Entrepreneurs, not policymakers, hold the keys to turning problems into progress.
Read also:
- 🔒 Your olive oil might be unfit for human consumption: Lara Williams
- 🔒 Oil market turmoil: OPEC+ grapples with shifting dynamics – Liam Denning
- SA’s largest oil refinery sold for a few cents: Will BP and Shell be held accountable for environmental damage?
*Eustace Davie is a Director and Board member of the Free Market Foundation and author of Unchain the child.
