/ 19 February 2010

Where is World Cup jobs boom?

Where Is World Cup Jobs Boom?

Findings of an annual survey of South Africa’s entrepreneurial levels within the past year are still being tabled, but it already sounds like there’s not much to blow a vuvuzela about.

And this is despite the promise of an economic boom in the year that the country hosts the football World Cup.

It’s also against the political backdrop of President Jacob Zuma’s February 11 State of the Nation promise that the government would create more jobs for a nation of largely unemployed and poorly skilled citizens.

Dr Mike Herrington, director of the University of Cape Town’s Centre for Innovation and Entrepreneurship, believes that both these scenarios are just plain bad news for local entrepreneurial growth.

‘One of my past MBA students has a successful business that incorporates a bed-and-breakfast. She said that it’s still unbelievably quiet and she’s not fully booked for the World Cup. Many people [who run bed-and-breakfast spots] she knows are not full either. I’m starting to wonder about this 2010 hype,” says Herrington.

‘There have been jobs with people working on roads and stadiums but what happens after 2010? Where will all those people go? South Africa’s mascot [Zakumi] for the World Cup hasn’t even been produced in South Africa. It was made in China and then imported.”

Herrington’s sentiment alludes to a gripe that trade union federation Cosatu and other local businesses have with Fifa’s unilateral stance on merchandise and business ventures around the World Cup.

The football body has, in effect, considerably stifled — if not buried — the already dwindling local spirit of entrepreneurship. That’s probably just as bad as Zuma promising jobs in a country where most people expect a handout or, better yet, a job from the government — instead of making lemonade with their lot of lemons.

Herrington confirms the widely held perception: ‘We have a mentality that the government and large corporations must provide a job and we’re entitled to that.” He knows all too well that the entrepreneurial spirit in South Africa is borderline pathetic.

Currently, he’s preparing the country’s entrepreneurship report for the Global Entrepreneurship Monitor. It will be released later this year.

Results from the Monitor’s most recent investigation show that South Africa is ‘significantly below the average for all middle- to low income countries” in its level of entrepreneurial activity.

These results were gauged from the Monitor’s global survey of people aged 18 to 64 who are running their own businesses. The Monitor has studied the patterns of early businesses and hindrances to their success since 1997 and currently researches 60 nations.

Herrington started the South African leg of this report in 2001, the same year he established the innovation centre based at the Graduate School of Business in Cape Town’s V&A Waterfront area. Last month Herrington was appointed one of four country representatives on the Monitor’s eight-member board.

It’s an accolade of prestige as the Monitor presents its findings to international development agencies such as the United Nations, governments that formulate entrepreneurship policies and various grant-makers. It’s the situation down on the ground back home that agitates him, though.

Herrington says it ‘bothers me a lot that South Africa is not more entrepreneurial”. ‘You would expect a high level of entrepreneurial activity in developing countries because they have little formal employment. But entrepreneurship is very low in South Africa. That’s the result of a lack of education and training,” says Herrington.

‘This country has a culture that doesn’t teach one to be entrepreneurial. You’re looked down on if you fail. In America if you fail, people say: ‘Good for you. You learned not to do the same again.”

Herrington says the local entrepreneurial appetite is stifled even among teenagers. Like the rest of the population, they place ‘soccer stars and politicians on pedestals”.

He refers to his centre’s youth survey, which showed that teenagers are interested mostly in fast-tracking their path to wealth by catching a ride on the gravy train.

‘We asked youth that if they wanted to make money, in what area would they go. We gave them choices: to be an entrepreneur, soccer star, movie star, doctor or politician. Unanimously they chose to become a politician,” says Herrington.

‘That tells us that they wanted to become a politician to become rich through corruption. Studies have shown that South Africa is one of the most corrupt countries in the world.” It doesn’t seem as though churning out more entrepreneurs will happen miraculously.

Most activity in this sector remains very informal and there’s not enough business education on the ground, says Herrington.

‘There are entrepreneurs that don’t know how to write business plans that are acceptable to funders. Many use templates to write business plans. The bank is not going to lend money to a project that doesn’t make sense,” he says.

‘Then entrepreneurs say there’s a lack of funding in South Africa, yet the country is awash with money. ‘But there’s also a problem on the funding side. You have government institutions that are there to lend money and support small businesses. The problem is that many of them have been singularly unsuccessful,” he says.

One obstacle that could foster entrepreneurship is the ‘cutting down of government red tape”. ‘A study on the costs of red tape showed that small businesses spend 8.2% of their turnover on filling in forms and complying with government regulations. That’s killing business.

Government could make things so simple. There should be incentives and tax breaks for businesses. There are incredible opportunities in South Africa.”

What is the Global Entrepreneurship Monitor?
The Global Entrepreneurship Monitor was established in 1997 by academics from the United States and Britain. Its task is to undertake annual surveys of the entrepreneurial environment across different countries.

Dr Mike Herrington, director of the University of Cape Town’s Centre for Innovation and
Entrepreneurship, is one of eight board members of the Monitor.

Other country representatives on the current board are from Brazil, Spain and the UK and each serves a pro bono two-year role. ‘We measure early-stage entrepreneurship and also new firms that have been going for not longer than four-and-a-half years. It’s not a survey on established businesses,” Herrington says of the Monitor.

‘It seeks to understand what factors hinder entrepreneurship, what enhances it and what policies are needed to improve the levels of entrepreneurial activity.” Herrington says this survey is needed because the ‘level of entrepreneurship in a country is linked to its GDP”.

‘You need to know what’s happening in your country. And if you don’t have small businesses you’re in trouble, especially in developing countries, because these businesses provide jobs.”

The Monitor’s survey starts with a ‘standardised questionnaire” sampling small business owners aged 18 to 64 across 60 countries. Herrington says it costs at least R1.4-million a country to complete the survey — the total budget is about R80-million.

‘It’s the biggest study worldwide. Individual studies are done to compare entrepreneurial activity for different groups like women and social entrepreneurship. We have done periphery studies on information communication technology use in entrepreneurship, access to finance and youth entrepreneurship.”

The Monitor’s credibility is backed by its commitment to keeping the survey independent. Herrington says that ‘no country involved in it may administer the questionnaire”.

‘The survey has to be done by an independent institution. The results are sent to the London Business School for authentification. Then 20% of the people who were surveyed are revisited to make sure that they were surveyed.

The results are then sent to an institution in each country to write the report,” says Herrington. ‘In some cases governments have tried to manipulate the results to suit their own needs. A few years ago one government that didn’t like the results wanted to do that.”

Herrington says the board selects only one institution in each country to take responsibility for the Monitor. This representative could choose to partner with other institutions to conduct the countrywide survey.

‘The board has to monitor those representatives because we don’t want fly-by-nights. We also have to monitor the quality and credibility of the data,” he says.

In sub-Saharan Africa the survey is conducted in Angola, Ghana, South Africa, Uganda and Zambia. North African countries include Egypt, Morocco and Tunisia.

Herrington says the Monitor would ‘like Kenya, Tanzania and Nigeria to participate, but that’s a matter of funding because it’s an expensive study”.

In South Africa the survey is sponsored by a number of entrepreneurship role-players, including banks, grant-makers and government departments.