01 MARCH 2019
The state of the South African entrepreneurial ecosystem
2019 is a pinnacle year for politics as we embark on our 6th general national election. The success of startups in South Africa is dependent on the strength of progressive policies that create an enabling environment for small businesses to thrive.
In 2014, SiMODiSA released its first industry research paper, which unpacked factors impacting the growth of SMEs in South Africa. The research paper laid out 7 comprehensive policy recommendations that will enable the government to enhance South Africa’s start-up ecosystem.
This year, SiMODiSA launched a 4-year review report of where we are as an entrepreneurship ecosystem, what we have done and what we are still missing. This is not an ecosystem analysis but rather a gap analysis based on the 2014 recommendations, with the purpose to determine the status quo of the ecosystem, four years after publishing said policy recommendations.
Having asked several ecosystem players - including start-up founders, support entities, investors and policy makers - their thoughts on how far we’ve come and if any of the policy recommendations have been implemented (and if there is still a need for them), our report highlighted that:
- The Section12J policy has seen substantial improvement, however, we recommend monitoring the outcome of the TLAB submissions. It would be vigilant to investigate other incentives with which to stimulate additional sources of and practices involving start-up funding.
- Labour laws are quite a hinderance for SMEs, which counteracts the idea of small businesses being providers of jobs as the local labour market is not at all conducive to incentivise sustained employment opportunities by start-ups.
- There has been no change since 2014 in R&D tax incentive which is critical to stimulate start-up activity. We recommend that the incentive be amended to include a R&D Tax credit for small businesses.
- There has only been moderate improvement in Exchange Control which remains a hindrance but is not considered a fundamental impediment.
Please visit www.simodisa.org for more and to download the report.