Enterprises are made by their background, either in opposition to or because of it. The shape of South Africa’s economy and society has been forged by its collective history. Apartheid was designed to uplift one group of South Africans over all the others. Today, while legislated inequality is a ruin of the country’s past, the structural inequalities of apartheid’s design, and the historical consequences thereof, persist.
To alleviate this problem, government has focused much time and energy in crafting policy that seeks to address these imbalances. Today, enterprise development is one such area of policy focus, among others, to achieve this goal.
What are some of the big picture, societal benefits of enterprise development and why is it key to the socio-economic future of South Africa?
1. Heightened economic inclusivity
One of the major after-effects of apartheid is how it created barriers to entry across South Africa’s different economic and industrial sectors. Access to the tools needed by entrepreneurs to start a business, and more accurately to grow it, were restricted. While there has been some entropy as time has passed, the structural disadvantages faced by many continue.
The majority of South Africa’s working population continues to be excluded from having an opportunity to become centres of economic activity. Enterprise development seeks to give those entrepreneurs a chance to enter the economic mainstream, assisted in ways that those from privileged backgrounds take for granted, such as access to financing, skills, education and mentoring.
If more businesses are given the opportunity to survive beyond their beginnings, the chances of increased job creation increase, which thereby plays a role in reducing poverty and lessening inequality. If this effect can occur on a wide scale, the socio-economic multiplier will be felt across the country as more money enters the economy and poverty is alleviated.
2. Inter-generational wealth creation
A hallmark of wealth is its ability to perpetuate itself over months, years and to following generations. Wealth, apart from providing for current needs and lifestyle, allows children to access higher levels of quality education and the opportunities such education affords. This is compared to many South African youth, who for various reasons cannot access the same level of education.
The opportunities such education provides, provided through generational wealth, support’s their ability to seek higher paying jobs. Further, access to such wealth assists other major costs, be it a home or their own children’s education, perpetuating the cycle once more.
Enterprise development creates the opportunity where an entrepreneur that benefits from provided assistance to build sustainable wealth through their own business. If that success can be maintained, the socio-economic mobility it generates allows for the entrepreneur, their family, friends or other known parties to be able to access opportunities previously the domain of the privileged. Further, if possible, such businesses can be kept in the family, a characteristic of wealth creation.
3. Increased innovation and market competitiveness
South Africa’s economy features established players with entrenched market footprints, specific to each sector, who operate at a large regional and national scale. Such companies can find it harder to innovate due to their size and lack of organisational ability.
Small, Medium and Micro Enterprises (SMMEs) are hot beds of innovation because as SMMEs, they need to be innovative to exploit market niches left unattended to by incumbent actors. Once an SMME hits a tipping point and is able to challenge incumbents in their established market niches, incumbents are forced to innovate or face the negative effects of failing to innovate.
That, or incumbents will seek to partner with innovative SMMEs so their expertise can be brought internally, aiding their own ability to innovate while allowing for those SMMEs to have greater access to resources and new markets.
If your organisation wants to learn more about the benefits of running an enterprise development programme, how to do it, and were to start, contact Letsema’s Economic Development team here.