Global Entrepreneurship Monitor (Gem)-2001 South African Executive Report

The 2001 South African Executive Report ranks thecountry 14th out of the 29 countries participating in the 2001 GlobalEntrepreneurship Monitor on the Total Entrepreneurial Activity (TEA)index.The country ranks 13th on the startup index, and 25th on the newfirm index. Three investigation methods are used in the series of national GEM studies:an adult population survey; interviews with entrepreneurship experts in thatcountry; and selected national and demographic data.The GEM modelexamines general framework conditions for economic growth and nineentrepreneurial framework conditions – financial support, government policy,government programs, education and training, research and development transfer,commercial and professional infrastructure, market openness, access to physicalinfrastructure and cultural and social norms. In terms of distribution of entrepreneurial activity in South Africa,findings suggest that the low rate of entrepreneurial activity among blackadults is partly explained by different rates in urban and rural areas; inmetropolitan areas, differences in entrepreneurial activity rates by race aresmall. It is estimated that 83% of entrepreneurial activity in rural areas isdriven by necessity, compared with 50% in the metropolitan area; 66% of suchactivity among blacks is necessity-driven compared with 23% among whites.Entrepreneurial activity among owner-managers of established businesses hashigh rates, and the survival rate of startups is more than twice as high amongestablished owner-managers, pointing to the value of entrepreneurial experiencein launching a successful venture. Evaluating the relationship between entrepreneurship and education, it issuggested that tertiary education increases the likelihood that someone willperceive good opportunities for starting a business, although not to highlevels (by international comparison). The most common sources of financingamong startup entrepreneurs are found to be: self-finance or savings(regardless of race, location, gender, or education) and immediate or extendedfamily. Four significant factors hindering entrepreneurial capacity are: (1)education; (2) cultural and social norms; (3) financial support; and (4)government policy. A small proportion of entrepreneurs account for most of thejob creation by new firms in South Africa, and necessity entrepreneurship tendsto be a response to poverty. (CBS)