How South Africa’s young entrepreneurs can achieve success
By Tope Toogun, CEO, Cognity Advisory
There are many ways to achieve success in today’s increasingly globalised and fast-changing world. That said, it’s a highly competitive environment that is plagued by high levels of unemployment on the one hand, and a skills shortage on the other. While education is a vital component of overcoming these obstacles and achieving success, it’s not the only one.
Unlike previous generations that had to contend with a traditional working environment that placed great importance on academic qualifications, young people now need a variety of different skills to get ahead. Entrepreneurship is a critical sector in Africa that is gaining ground, but it’s not something that can simply be learnt. The critical thinking and hard technical skills that students learn in university and training colleges respectively are good foundations – but they don’t automatically translate into thriving business success.
The 2018 Forbes Africa 30 Under 30 list highlights the continent’s most promising young change-makers. It emphasises the value of soft skills like problem solving, empathy, communication, customer-centric focus, positivity and a strong work ethic. These skills aren’t traditionally defined as success factors, and yet they can be the make or break between entrepreneurial growth and failure.
To build something successful takes drive and determination. Often people who have made it had to deal with a number of rejections and setbacks first. Like elsewhere in the world, South African entrepreneurs have to navigate a number of hurdles to get their dream business off the ground. Let’s take a look at six of the main challenges – and how these can be overcome by improving access to funding.
Challenges facing South African entrepreneurs
- Access to finance
A great idea is not worth much on paper. However, to turn that idea into a reality requires funding – which is not always easy to find. This is made doubly difficult by the fact that many first-time entrepreneurs are not familiar with the pitching process or how to ‘sell’ their idea to an intimidating boardroom of potential investors. These would-be financiers want to see a business plan that includes market research, financial forecasting and some initial results. Too many young entrepreneurs approach prospective funders underprepared simply due to a lack of knowledge and experience.
- Low-levels of innovation
Many South African entrepreneurs start their own businesses as a means to survive. Unable to find work, opening a small business provides a gainful alternative to unemployment. This is highly commendable and keeps many families fed and sheltered. However, the focus is on subsistence and survival, rather than innovation and growth. Not enough of South Africa’s small business owners know how to take their enterprises further through research and development.
- Lack of skills
South African small business owners battle to find the skilled workers they need. The problem is not just a shortage of available skills in fields such as finance, IT and sales, it’s that start-ups are typically volatile and subject to changing needs. Entrepreneurs are reluctant to hire someone on a permanent basis as they won’t be able to absorb those costs in quieter periods.
- Limited infrastructure
Digital and terrestrial infrastructure is key to small business growth. However, step outside of the cities and suburbs and access to electricity, water, communication services, roads, and affordable, safe public transport is often in short supply. What’s more, internet connectivity is often unreliable, hampering business services and communication beyond a start-up’s immediate location.
- Networking options
Young entrepreneurs need guidance and mentorship. A good mentor can save a start-up much time and money and help them avoid typical errors that can be very costly. Unfortunately, many first-time business owners don’t have access to such a professional network and can’t draw on the experience of established business leaders. This lessens their exposure to funding opportunities too.
Globalisation offers enormous opportunities for some businesses’ growth and expansion, while simultaneously limiting others. International companies have benefitted hugely from access to cheaper labour and production processes in certain countries – sometimes at the expense of local manufacturers who cannot afford to keep up with the more powerful competition.
How to access funding in South Africa
A lot of start-up success depends on the entrepreneur. While the challenges listed above are prohibitive, it’s up to small business owners to find out what their funding options are and improve their business management skills. Fortunately, there are a number of ways young South African entrepreneurs can access the finance they need.
In terms of grants and funding, the National Youth Development Agency (NYDA) is a government initiative aimed at providing finance, mentorship and development programmes. The Gro-E Youth Scheme is geared at helping young entrepreneurs grow through both financial and non-financial support. By growing entrepreneurs, the scheme hopes to contribute towards sustainable job creation. The Youth Entrepreneurship Fund aids youth-led businesses in the form of funding and development. There is a commitment fee which depends on the assistance package chosen.
Seed capital is essentially the money required to get a business idea off the ground. This type of business finance can come from a variety of different sources; relatives, friends, banks or individual investors. There’s also a growing number of firms that specialise in providing specific capital for specific businesses. A benefit of such a relationship extends beyond funding and includes access to networks and mentors that could prove very lucrative. However, it’s important that first-time entrepreneurs remember that nothing in business is done for free: seed funders will always require a return on investment.
Ask for help – and be prepared to sweat
Entrepreneurship is a tough career path, but it can be incredibly rewarding. Given its growing importance in Africa, it is becoming a far more structured and formalised sector. South African entrepreneurs in particular can now benefit from access to more funding and networking opportunities than ever before.
That said, the challenges involved in realising a successful business are not to be ignored. All the money and mentors in the world won’t achieve anything if the young business owner doesn’t have the necessary soft skills, attitude and determination. A university or college degree is a great start, but the learning doesn’t stop there.
In July this year, Cognity Advisory announced the start of the Universities Business Challenge (UBC) and special competition to tackle South Africa’s high level of unemployment. The initiative invites students to take part in an annual competition that simulates the business environment. Participating teams need to flex their analytical thinking, problem solving, commercial awareness and collaborative skills. The winning team could win up to R50, 000. For more on the UBC and special competition, you can visit the news & updates section on the Cognity Advisory Website.