87% Of Businesses In South Africa Are Self Funded According To The Latest Seed Academy Report

According to the latest "The Real State of Entrepreneurship in South Africa 2017" report by Seed Academy, 87% of businesses in South are self funded by owners in South Africa. This number grows to 95% if yous start to consider businesses that are not only funded by funded by owners, but also by the owners' friends and family.

Only 5% of entrepreneurs that responded to the survey acquired funds from more formal sources of funding;
angel funding, bank loan and Development Funding institutions (e.g. IDC, DTI).

According to the study, more impactful business development support that provides entrepreneurs in South Africa with robust business basics is needed to increase small business success rates. An interesting trend that emerges from the study is that there is a decline in youth owned businesses in South Africa, which is concerning and could be as a result of a lack of business development support services.

These are just some of the revelations from one of South Africa’s entrepreneurial surveys, "The Real State of Entrepreneurship in South Africa 2017".

The Real State of Entrepreneurship in South Africa 2017
Download The Real State of Entrepreneurship in South Africa 2017" report.

“Encouragingly, we are seeing the gap between the number of male and female entrepreneurs start to narrow as women represented 47% of entrepreneurs surveyed. This gives some indication that efforts focused on the development of women owned businesses are beginning to pay off. Similar initiatives are now urgently needed to develop youth entrepreneurs so that entrepreneurship is viewed as a ‘real’ career option,” said Donna Rachelson, CEO at Seed Engine on 25 July 2017 at an event to present the study's findings.

The Real State of Entrepreneurship in South Africa study is in its third year and is conducted annually by Seed Academy . This year the study canvassed over 1,200 entrepreneurs in South Africa. In 2017 the survey expanded its scope from only considering early stage startups to all entrepreneurs at any stage of business development in South Africa.

Also interesting to note from the report is that quite a sizeable majority, 85% of respondents, had at least one year’s work experience before starting a business with many entrepreneurs indicating that they require education specific to the practicalities of running a business such as marketing support and business planning.

“What we can interpret from this is that entrepreneurs place a high value on cultivating strong trust-based relationships that can help the business owner with access to markets and other opportunities including access to financing, both of which were stated as the most pressing challenges by 67% and 43% of entrepreneurs respectively.” said Rachelson.

More eye-opening, considering how many entrepreneurs highlight funding as a key obstacle for their businesses, is that only 18% of entrepreneurs surveyed attempted to secure funding from banks or development funding institutions like the IDC or DTI.

“Some entrepreneurs indicated that they simply don’t know where to go for funding especially in light of the fact that most early-stage business funding requirements are below the R100k threshold. There is certainly a case to be made for funding providers to revise certain requirements to better accommodate the unique needs of small and early-stage businesses. Of course, one unfortunate implication of self-funding is that growth potential is limited to the owner’s own pocket and diminishes the ability for a small business to increase capacity, hire more staff, and make a more meaningful impact on the South African economy.” said Rachelson.

The 2017 report also revealed that the top sectors represented by respondents are Information Technology (IT), Business Services, Construction, and Advertising, Marketing & PR. These are however weakly aligned to the South African government’s priority sectors of Manufacturing, Construction, Utilities, and Telecoms, indicating that more aggressive efforts are needed to incentivise businesses development in these key priority sectors.

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