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Taking the myth out of entrepreneurship

Riaan Steenberg, CEO of entrepreneurial and management consultancy Altovation was a guest speaker at a recent breakfast organised by the JCCI and Pleiades Media.  The breakfast, held at Sakhumzi Restaurant in Johannesburg’s Soweto, was aimed at linking township entrepreneurs with corporate executives from Sandton.  Interest in entrepreneurship in South Africa is increasing in this depressed and precarious economy. Steenberg threw light on some of the common myths about entrepreneurship and what it takes to be an entrepreneur.

  • What are the five most common misperceptions about entrepreneurship among would-be entrepreneurs?
    • That it is really hard to be an entrepreneur
    • That we need to raise lots of capital before we start (needs to be a clear understanding of what you are providing customers, then capital follows)
    • That people will just buy what I create (we need to research adoption of our product before spending money on it)
    • You are likely to provide the product to your customers (you will have to employ others and entrepreneurship is incredibility administrative initially)
    • That the only way to make money is to import good from China or India and sell it locally.
    • Franchises are low risk options.
  • What are the five most common misperceptions about entrepreneurship among SA corporates who want to assist them?
    • Everyone wants to be an entrepreneur
    • People have the full skill set to run a business and that the role of a corporate is just to give an opportunity.
    • That a business plan is an endpoint.
    • Pitching is a viable strategy to communicate a business plan.
    • That it takes long to start a new business – so companies provide long term mentorship programmes that have limited support for startups.
    • Companies support startups, without understanding if their business is viable.
  • How do the approaches to entrepreneurship here differ to other parts of the world?
    • South Africa has woken up to the need for entrepreneurship in the last year.
    • We have very high security requirements for borrowing to entrepreneurs. This is significantly lower in other parts of the world.
    • An entrepreneur in South Africa, must solve many more problems that in other parts of the world, due to both high quantities and complexity of regulations while having developing world challenges of limited access to basic infrastructure etc. An entrepreneur in most countries can add to an existing ecosystem, while an entrepreneur in South Africa and Africa may have to build the whole ecosystem, while competing with international players at the same time.
  • You mentioned the massive injection of entrepreneurs required to meet demands of population growth and need for employment? 1000 x 1000.  Were you putting it out there to be facetious or any realistic chance of attaining that number?
    • From unemployment statistics, we know that we need about 300 million jobs in India, 600 million in Africa, 300 million in South America, 100 million in China and 100 million in the Russian and former soviet republics. This is 1,4 billion jobs that can be used today from a world population of 4 billion people in BRICS. We know that a generally new small business creates 4.5 jobs which means that we need to create 300 million new companies is BRICS to satisfy the needs of customers. These needs must drive the basis of these companies being formed to be sustainable.
    • Okay – so if 1000 corporates supported the creation of 1000 entrepreneurs, creating 1 million entrepreneurs and each entrepreneur on average employs 4.5 people then that puts us at 4,500,000 jobs. We know that it takes us about R 4000 to move a person from start to being ready for their first sale and about R 29,000 to support them for a year, which greatly enhances their probability of success. So, these objectives are achievable, without having to create massive stress in our existing economy.
    • The net impact of 4,5 million jobs will be to support an estimated 15 million people economically in the South African economy using an impact multiplier of 3,3 which is typical for this type of situation. If we sustained such a programme for 10 years, we would not only have transformed South Africa, but we would have expanded our economy 10-15 times, and would be adding R 20-trillion to the bottom line of South Africa annually. We currently have an annual tax revenue collection of R 1,3 trillion and our whole economy is just above R 2 trillion. So the bottom line is that South Africa can benefit tremendously from investing in entrepreneurship.
  • It seems South Africa’s economy is systemically screwed – given our export of raw material habits etc.  What three things could we do to change this to benefit emerging entrepreneurs?
    • Interrogate trade statistics for opportunities and develop business plans to do local production to international standards.
    • Create local industries that invest in key needs that we can supply locally such as cars, computers.
    • Work with international companies to drive local production of goods.
    • Focus extensively on buy African, produce African schemes.
  • Can we close education and earning gaps through entrepreneurship?
    • Earnings gaps can be closed through entrepreneurship. Entrepreneurs can close the education gap, but entrepreneurship itself requires a different type of education.
    • The education gap is a factor of poorly developed markets. People that can do more jobs will lead to a greater need for education. People are likely to move into areas where they are needed. Being “education led” –i.e. waiting to have the skills until we start serving our customers, is part of what is going wrong.
  • What approach does Altovation take to training entrepreneurs that makes you effective?
    • We have created an entrepreneurship training methodology that takes the best from business schools and turns it into practical steps that people can follow. Our methodology is based on customer focused and disciplined entrepreneurship. We have put a lot of focus on the process of entrepreneurship in order to take the challenges out of what the entrepreneur has to do and focus more on where is the market and how do I optimize value out of it. This methodology has also been stress tested in local conditions and we have learnt what it takes to take a person from putting up their hand to getting them to their first sale. To make it interesting, we have put a money back guarantee that we can assist an entrepreneur to get to their first sale, and we have not had to give back money yet.
    • Altovation is also working with the DHET through their Entrepreneurship Development in Higher Education Programme (www.edhe.co.za)  to ensure that we create maximum exposure for entrepreneurship in the higher education system. The exciting aspect about this is that we are looking at how to enable to 1 million students in higher education to have entrepreneurship as a viable option as part of their studies. This will go a long way to changing the entrepreneurship culture in South Africa.
  • Are you optimistic?
    • Absolutely. A lot of the people that I speak to are very pessimistic about the future of South Africa. Entrepreneurs, per definition is people that look at the situation differently and that makes something from that. Where others see rot, decay and systemic failure, the entrepreneur sees opportunity and growth. I have met the people that will run the future, and they are running small businesses now – but in a few years, these will be big businesses and I believe that we can then talk about economic transformation from a different vantage point.

“We need to create 300 million new companies is BRICS to satisfy the needs of customers,” Riaan Steenberg

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