WHAT IT MEANS: South Africans have relatively low entrepreneurial drive. Lack of financial skills main reason start-ups fail.
Are business risk-takers born or created? SA, with its perilous unemployment rate, desperately needs entrepreneurs to kick-start job creation. But who’s going to find them? And, more important, who’s going to set them on their way?
SA business schools have made it their mission to create new generations of entrepreneurs. Almost without exception, they are making entrepreneurship a core part of their MBA programmes. Some go further, and take their efforts into the broader community.
Their ambition? To replicate the impact of higher education in countries like the US. A report from the Sloan School of Management at the Massachusetts Institute of Technology (MIT) reveals that, as of 2014, MIT alumni had launched 30,200 active companies, employing about 4.6m people and generating US$1.9trillion in annual revenues.
If these alumni were to create their own country, it would have the world’s ninth-largest GDP.
The growth of the US is founded on business enterprise. SA’s record is more patchy. It fares poorly in rankings like the Global Entrepreneurship Monitor (Gem), which compares entrepreneurial start-up and success rates around the world.
In its 2015-2016 report, which assesses 60 countries, including eight in Africa, SA ranks 44th for general entrepreneurial interest and 57th for the desire of corporate employees to break out into their own businesses. And South Africans are among the most risk-averse when it comes to fear of failure.
So how can business schools change all this? Part of the problem, says Henley Business School dean Jon Foster-Pedley, is that entrepreneurship is not instilled in South Africans early enough. By the time they study it at university, it’s too late. "The schooling system is not geared towards an entrepreneurial approach," he says. "It should be incorporated in all learning."
Then there are the historical drawbacks. Milpark Business School dean Cobus Oosthuizen argues that true entrepreneurship is foreign to large swathes of the population. Generations of Afrikaners grew up in a state-swaddled environment of job security, while apartheid made it next to impossible for blacks to create sustainable businesses. For both groups, "it could take three generations to catch up", he says.
But they won’t do it on their own, says Theuns Pelser, dean of the University of KwaZulu Natal’s Graduate School of Business & Leadership. They need help from government, by removing the red tape that deters many would-be entrepreneurs from following their dreams.
Is that the real reason, or just an excuse? The fear factor identified in the Gem report may be a stronger disincentive. At a recent business schools workshop, a series of speakers told their audience how, if they wanted to be real entrepreneurs, they must be prepared to lose everything they have ever worked for, including their homes.
That’s not necessarily a wise message to be spreading in SA. Stellenbosch University Business School academic Seraj Toefy says that in the US, business failure is worn like "a badge of honour", as proof that you tried. In SA, it is "worn like a scar".
Gordon Institute of Business Science (Gibs) dean Nicola Kleyn says there’s no shortage of people wanting their own enterprises. SA has a high proportion of corporate employees with private businesses on the side.
But Regenesys Business School academic Riaan Steenberg says: "Our experience is that 60% of our students with their own companies have never traded." Regenesys sees the challenge in its joint venture with a bank to train entrepreneurs. Of the 2,000 people who applied, only half said they had any intention of starting a business afterwards. Of those who have been trained, he estimates only 20% will submit a formal business plan. The rest are risk-averse: many expect a funder to put up the money.
Wits Business School academic head Chris van der Hoven adds: "If you are in the corporate world and you have a cushy life, or even if you have a steady, reasonable income, will you risk losing it? Do you have the confidence for that leap of faith?"
That’s what entrepreneurship education is intended to instil.
However, there is a view that entrepreneurship can’t be taught: that you are either a born, self-driven innovator and a risk-taker (think Elon Musk, Christo Wiese, Whitey Basson, Richard Branson, Steve Jobs) or you are not.
Schools tend to dismiss this idea or, rather, have a different take on it.
Wits lecturer Ogundiran Soumonni says: "We don’t teach innovation. We teach management of innovation." Steenberg echoes this: "It’s not about risk-taking but about risk-management, which is a well-established science. If you set up a business and encounter a problem you have never seen before, you are in trouble. Entrepreneurial education prepares you for the real world."
Risk, according to this view, is only part of it. Entrepreneurs also need business skills like finance, human resources, marketing and leadership. Free State University Business School director Helena van Zyl identifies lack of financial skills as the single biggest reason for the failure of SA business start-ups. "What MBA entrepreneurship studies provide is basic knowledge transfer," says Pelser.
"We are giving students the skills they need to run a business. A bright idea on its own won’t work."
Perspective and reality are also useful. "Having a clear business plan is part of entrepreneurial success," says Steenberg. "But you’d be surprised at the number of people who haven’t tried to find out if the market wants what they are offering."
Business schools confront entrepreneurship in different ways. Some have specialist entrepreneurship centres, with innovation hubs and business incubators, to enable the development of start-up companies. For example, the Bertha Centre for Social Innovation & Entrepreneurship, at the University of Cape Town’s Graduate School of Business, is developing a global reputation for its activities. MBA head Segran Nair says: "There are a lot of potential entrepreneurs out there whose needs are not being met. How do we bring them into the net and give them the opportunity to contribute to SA growth? Only by doing things differently."
Stellenbosch MBA head Martin Butler says his school liaises with the main university’s small-business incubator "to add value to entrepreneurs while exposing our students to the real issues faced by entrepreneurs".
North-West University’s School of Business & Governance takes a slightly different tack. Director Tommy du Plessis says its small business advisory bureau, with more than 50 years’ experience of helping people start enterprises, allows the school to offer a uniquely practical approach to students.
Nearly all schools encourage their MBA students to work with micro-enterprises. Butler says: "We need to expose our students to these entrepreneurs since they may be paying their invoices and inflicting pain on start-ups due to decisions they make in organisations which are in business partnerships with small enterprises."
Market research for this cover story suggests many MBA graduates were not impressed with the general level of MBA entrepreneurship teaching (see tables). Individuals have a different story. Stacey Brewer, co-founder of Spark Schools with fellow Gibs MBA graduate Ryan Harrison, says the primary schools network was the direct result of her studies. "I didn’t realise before I started studying that I was an entrepreneur. But after learning how bad the SA education system is and seeing how things worked in India during an MBA study tour there, we decided to start Spark in 2013."
She says: "Great ideas are great only for so long. They need execution. My MBA gave me the confidence, skills and support to push ahead."
Tshibvumo Sikhwivhilu, co-founder and CEO of renewable energy company Lamo Solar, says he used the Wits MBA classroom as a live laboratory. "It was only after I started my full-time MBA and tested ideas in class that Lamo started to see significant growth. My co-students had business experience and were able to suggest solutions."
Sikhwivhilu adds: "Subjects like marketing and finance also helped me to understand the business better. The overall result was that we successfully realigned Lamo based on my MBA experience."
Business schools consider it part of their responsibility to teach entrepreneurship beyond the MBA. The question is: how do you define an entrepreneur? In principle, informal street traders meet the definition, though they are generally referred to as "survival entrepreneurs" — people whose aim is to make enough money every day to meet basic needs.
Though most schools prefer to use their resources for people who will create multiple jobs, Management College of Southern Africa’s (Mancosa) Zaheer Hamid says: "Nationally, we have unemployment of 40%, big business is downsizing, lots of formal start-ups are failing, yet we ignore the informal sector which accounts for about 20% of the SA economy. We should be giving them more skills and moving them into the formal space."
Regent academic Anis Karodia says: "There are 100,000 spaza shops out there. These are entrepreneurs at the cutting edge. We can’t dismiss them.
"We should be reaching out to them, giving them new skills, helping them to grow and employ more people."
Rhodes Business School is taking an innovative approach. Under a pilot project, students are offered seed-money loans of up to R5,000 to set up their own businesses. They are charged interest and repay the money at the end of one year, when they also pitch their business idea to a "Dragons’ Den" TV-style panel of entrepreneurs.
If the project proves successful and a suitable sponsor is found, says school director Owen Skae, the idea will be extended to more people, possibly including the local community.
"There is so much that needs to be done to encourage entrepreneurs, and not enough people doing it," says Skae. "Business schools are in a unique position to help. We can’t solve all the problems ourselves but we can show the rest of the economy what is possible."