Generally speaking, economic liberalism informs the South African approach when it comes to such things as growing the economy, skills development and innovation (startups). This approach hinges on “strong support for a market economy and private property in the means of production.” For some reason, there is a strong belief that for the country to reduce high unemployment and increase levels of growth, this would happen on its own and without state intervention.
Also, the preoccupation with job creation while there are no fundamentals for new industries, skills and innovation is the most significant impediment to developing a paradigm for redesigning the South African economy. There can only be jobs when there are companies and markets for goods produced.
One of the most preposterous ideas l dislike and dismiss with the contempt it deserves concerns the biggest lie ever sold to peoples in the developing world, i.e. entrepreneurship. The notion of entrepreneurship serious lacks theoretical grounding and is divorced from political power games that produce the distribution of wealth and means of production in countries.
Therefore, my view is that any talk about entrepreneurship divorced from politics but only driven from the delusional free-market perspectives is a hoax and is unlikely to the paradigm shift that is necessary for a “new” economy in South Africa. It looks like the liberal perspective ignores why South Africa struggles with the economic exclusion of its black majority. It also ignores that a country such as the US, which promotes entrepreneurship as a noble concept, failed to explain why minority groups like blacks, Hispanics, and natives occupy lower rungs of that society.
Entrepreneurship, thus, is meaningless when it is looked at as a separate occurrence outside politics and economics. Prosperous nations of the world such as China, Germany, Japan, South Korea and the US never really left their economic development ambitions to chance. A country like South Africa prefers to go against the tide. There is more than just a conviction that the country will escape its loads of socio-economic problems through something called entrepreneurship as if it happens on its own.
Writing for Bloomberg, Natalia Drozdiak reports that the European Union will for the first time “become a direct shareholder in startups through the creation of one of Europe’s biggest investment funds.” The European Innovation Council Fund provides about €3 billion to plug what the EU calls a “critical” funding gap for breakthrough technologies to scale up to commercial levels and better compete with the US and Asia.
In this regard, South Africa and most of the developing world are not seen as threats by the EU in its quest for industrial dominance. To show its readiness for competition, the EU believes that by directly financing scientific breakthroughs until they become viable for traditional investors, “the funding will derisk the investments and thereby attract other investors.” The EU said that the planned ownership levels would range between 10% and 25% of a company, with ticket sizes as much as 15 million euros.
Such high commitment does not exist in South Africa.
This is not a matter of wealth but political conviction. It is safe to say that unguarded free- market dogma informs South African thinking when it comes to creating new businesses or start-ups, in general, and that individual entrepreneurial skills could be a solution. Taught even in management classes, entrepreneurship is seen as a benevolent occurrence that happens on its own.
There are arguments that the education system must equip students with practical knowledge of starting a business. This shallow perspective concludes that this would make an individual “a capable entrepreneur.” This is ludicrous because this cannot occur without interfering with the rigid structural make-up of the economy.
Moreover, experts and economists argue that for South Africa to reduce the high unemployment rate, it must emphasise entrepreneurship development. Entrepreneurship is seen as a panacea for all economic problems the currently faces. What is, however, lacking in this thinking is how this entrepreneurship is supposed to be natured and or supported in the same way the EU does.
This shortcoming was more evident in the middle of the lockdown in 2020 when the Department of Small Business Development appeared to be lost at sea. It could neither distribute the monies that were set aside for small businesses nor force banks to release about R200 billion in loans as part of the Covid-19 Loan Guarantee Scheme. By early December 2020, a mere 8% or R16.7 billion of this amount had been distributed.
Managed by the shrewd commercial banks and the ever recalcitrant South African Reserve Bank (SARB), the scheme was always bound to fail. The SARB has said over and over again that it was least interested in changing its mandate to directly promote growth and similar outcomes in the economy. On the other hand, the banks are as conservative as if South Africa is some developed country in Europe, and European banks aren’t as bad in comparison.
The problems of finance regarding startups and new ideas are well documented. The provision of credit is mainly in the private hands, and this means these individuals or institutions expert better returns and have zero appetite for risk. The R2 billion pledge by two of the county’s richest men, Johann Rupert and Nicky Oppenheimer, exposed this reality when they stated in no uncertain terms that they were not giving any money to anyone gratis.
In her book The Entrepreneurial State: debunking public vs. private sector myths (2013), Mariana Mazzucato contends that the economic success of any nation “is a result of public and state- funded investments in innovation and technology, rather than a result of the small state, free-market doctrine that often receives credit for the country’s strong economy.”
Mazzucato further states that the private sector “only finds the courage to invest after an entrepreneurial state has made the high-risk investments.” In what would sound like the stretching of fact, she exposes that almost every technology, e.g. the Internet, GPS, its touch- screen display and the voice-activated Siri, that makes the iPhone so ‘smart’ would not have been possible without public funding.
In the South African context, these endeavours have been more or less challenging and go above thinkers. The state boasts several research institutions, from the CSIR to the Agricultural Research Council (ARC), plus science, technology, and engineering faculties. However, their output seems to be privatised and benefits a selected few for profit-taking. The black majority still has to accrue some benefit from high research that is state-funded or sponsored.
It is no wonder that many blacks with potential would rather enter business spaces where they don’t provide any impact or competition to established businesses. They also complain that foreign nationals take all business opportunities in townships. And the likes of Gauteng province don’t make things easier with half-cooked ideas about the ‘township economy’. The idea of the township economy lacks intellectual and theoretical grounding and reinforces ancient concepts that blacks are only good as cheap labour and consumers of goods produced by others.
This problem, however, does not start today. For the past 26 years, South Africa has struggled to define the nature of small businesses that should be supported through public funds. A spazashop owner and resellers of goods produced by others are more than convinced that they should be funded from the public purse. As a result, less and less attention is given to innovators and inventors.
Starting a business occupied in serious value-addition is not a small feat and cannot, therefore, happen through entrepreneurship alone. This explains thousands of ideas that get flushed down the drain because of a lack of backup or equity shareholding. Even those who make it on their own, like Nkosana Makate, are left to drown. To this day, Makate has not received any political support in his lengthy legal battle with Vodacom. Entrepreneurship in South Africa is like growing potatoes in a desert.
Entering the tertiary sectors of the economy requires more than just lip service. Not even the abundance of entrepreneurship can help individuals become suppliers of quality parts to car manufacturers. The policy environment and incentives have to be prioritised if everyone has to enjoy the economy.
Economic exclusion of the black majority starts at the policy level and goes all the way to value chains dominated by a few large players.
Siya yi banga le economy!