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2020 could be the year of the entrepreneur in South Africa

2020 could be the year of the entrepreneur in South Africa

South Africa is home to many aspiring entrepreneurs and with the unemployment rate currently sitting at 29%, it may just be the answer to South Africa’s shrinking economy. Never before has there been such a dire need for entrepreneurs to positively impact and transform the community.

Small business represents the greatest opportunity this country has to grow the tax base and provide employment. In an effort to assist small business an economic policy paper titled Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for South Africa has been released and proposes the following steps to promote growth in small, micro and medium enterprises (SMMEs)

  • Reducing red tape by 25% over 5 years
  • Requiring government to pay interest on late payments to small businesses
  • Consolidating existing funds for SMME support into a single fund with a clearly defined mandate.
  • The creation of a subcontracting ombud

What makes a successful entrepreneur?

It takes a particular kind of person to become an entrepreneur, someone who is willing to step out of their comfort zone and take a calculated risk. Here are some characteristics often used to describe successful entrepreneurs:

  • Creative: Every business starts with an idea and, to be successful, that idea needs to be unique and creative.
  • Optimistic: Do you see the glass as half empty or half full? Entrepreneurs need to see it as half full in order to thrive.
  • Flexible: An entrepreneur needs to be able to adapt to different situations. For instance, if a project requires that they learn a new skill, they do it.
  • Self-motivated: Steve Jobs, the founder of Apple, once said: “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” A successful entrepreneur needs to be self-motivated and willing to put in the effort required to launch and run a successful new business.
  • Resourceful: Businesspeople don’t run away from a challenge – they face it head-on and find the most effective and creative way to solve it.
  • Decisive: Lastly, entrepreneurs need to be decisive, they don’t have the option to procrastinate. They need to know what needs to be done and how to do it without hesitation.

Entrepreneurship in South Africa – What the future holds.

According to the Allan Gray Orbis Foundation, entrepreneurship in South Africa is failing in one of the key areas where it is intended (and where it is sorely needed) to have the most impact: job creation. Young South African entrepreneurs are not receiving the support needed to be successful in the industry. Due to this lack of support, only 15% of our start-ups become successful.

One of the reasons for this failure may the gap between skills and ideas. Our entrepreneurs may be able to come up with fantastic business ideas, but they lack the knowledge and skills needed to develop those ideas and turn them into reality. On the other hand, it may be the other way around. While a solid understanding of entrepreneurship is vital, knowing which industries to focus on will increase your chances of being successful.

The top 5 industries in which small businesses are likely to succeed in 2020 are:

  • Agriculture
  • Manufacturing
  • Tourism
  • Information Technology (IT)
  • Infrastructure

Could 2020 be the you start your own business?

Starting a business isn’t for the faint of heart. It takes hard work, patience, and a solid understanding of business strategy to come up with a unique idea and turn it into a successful business plan. If you think you have what it takes to be the next Bill Gates or Oprah Winfrey, sign up for one of our business qualifications to make sure your business is built on a solid foundation. For more information about the courses we offer visit our website, or contact us at 0861 466 476 to speak to one of our skilled consultants.

African consumer prosperity: Big dreams or actual spend?

When it comes to whether Sub-Saharan African consumers are feeling more prosperous and how this influences their propensity to purchase, Nielsen Africa MD Bryan Sun says markets are significantly polarised in terms of feeling ‘better off’. It is therefore imperative to dig deeper to gain a comprehensive understanding of how consumers truly feel about improvements to their lives and the impact this will have on their purchasing behaviour.

Across Sub-Saharan Africa (SSA) there are a considerable number of consumers who feel optimistic about improvements in their quality of life and financial wellbeing, despite their relatively lower levels of income and limited advancements in personal economic and living conditions. Forty-one percent of Nigerians and 38% of Kenyans display a positive outlook based on their quality of life sentiment, while 50% of South Africans base theirs on financial wellbeing (higher than the European average of 37%).

In SSA’s developing markets, what may seem like slight changes can have a deep impact on consumer lifestyles and outlooks, for example, upgrading their feature phone to a smartphone, improvements in connectivity, or the ability to purchase better quality, staple food products. These small advancements can make a big impression on consumers’ quality of life, day-to-day interactions and how they are able to provide for their families and translates into more upbeat perceptions about their wellbeing.

Underlying this more optimistic outlook, an even larger proportion of consumers are feeling upbeat about their immediate financial outlook. Eighty percent in Nigeria, 77% in Ghana, 65% in Kenya and 61% of consumers in South Africa consider their finances to be ‘excellent’ or ‘good’ for the upcoming 12 months.

Counter conditions

As with most things consumer related, the situation is complex given that SSA is highly fragmented when it comes to feelings of prosperity. There are substantial numbers of consumers at the opposite end of the prosperity spectrum within the same countries. In terms of those feeling ‘worse off’, Nigeria and Kenya rank in the bottom 10 global markets, together with Greece, Ukraine, Argentina and Japan.

The effects of this are reflected in the fact that 45% of African and Middle Eastern consumers say they have enough for the basics and 43% say they live comfortably, and only 12% feel that they are able to spend freely.

Reality check

With divergent consumer sentiment, it’s clear that despite some of the highest global levels of GDP growth in many SSA markets, this hasn’t yet translated into broader feelings of prosperity and spending ability. The reasons become more apparent when digging further into some of the macro-economic indicators.

Average per capita GDP in SSA has not kept pace with global gains, growing on average at 2.3% versus the global average of 3.1% (per 25 years). Real wages have also declined in Nigeria, Tanzania and Kenya over a 10-year period.

Positivity is also swayed by consumers’ perceptions of inflation, reflected in the day-to-day price changes of goods they are especially familiar with. The reality is that medium to short term inflation has improved in Kenya, Ghana and Nigeria, but the lingering perception of rising prices remains strong. For example, in Nigeria, despite inflation recovering substantially from a high of 20% in 2016 to currently below 14%, 91% of Nigerians still perceive food prices as increasing and 60% said they buy only essentials and are cutting back on luxuries.

The ‘recency’ phenomenon also has a profound effect on emergent market sentiment, where consumers often live hand to mouth and therefore don’t have a transparent and impartial longer term view of whether their circumstances have improved. For them, every day may be a struggle, so often their point of reference is whether today was better than yesterday or last week. This precludes a viable, longer term assessment of overall improvement in their lives.

While many consumers’ circumstances are improving, it’s not at the rate that macro indicators would suggest. Therefore, even though many are feeling more prosperous, that doesn’t yet mean they have the ability to spend significantly more as the positive effects of this will take time to truly touch their everyday lives.

Progressive spending

Despite polarised prosperity sentiment and slow reaching economic elements, the outlook for consumer spending is positive. More than four in 10 consumers in Nigeria (44%) and Ghana (43%), and over a quarter of consumers in South Africa (30%) and Kenya (27%) consider the present a good time to buy what they need or want. In addition, a quarter (23%) of SSA retailers say this is reflected in increasing in-store spend, and 42% believe it is about the same as five years ago.

Though current economic times are tough in many SSA countries, consumer spending shows an upward trend. In Nigeria, Ghana and Kenya Q4’2018 Consumer Packaged Goods (CPG) volume and value growth is positive and outstripped annual growth levels, pointing to ongoing opportunities.

All realities considered, Africa’s consumers are still seeking new and better products; for example, 66% of SSA consumers are more willing to try new products today, up from 63% five years ago. Even though a massive portion of the continent’s consumers don’t have a huge amount of money, there are plenty of highly aspirational consumers across the income scale that are able to spend in different ways.

Diverse influencing factors

This has created unique sets of Sub-Saharan consumers with a diverse range of influencing factors when it comes to their propensity and ability to purchase. Upper or lower income consumers who feel worse off are looking for value for money products, while those who are feeling more prosperous look for better quality products, and often those associated with premium characteristics.

This makes for a highly challenging environment for manufacturers and retailers trying to develop and sell products that appeal to these disparate mind-sets, within highly fragmented markets. This emphasises the fact that for businesses to realise the range of opportunities that do exist, it will be dependent on bringing the right products and services at the right prices, across the value and premium product innovation spectrum.