Entrepreneurship in South Africa

Business Research Report

Name: Kyara
Lecturer: Kör
Table of Contents
1. Introduction
1.1 Background page 3
1.2 Description of the Country page 4
1.3 Problem Analysis page 4
1.4 Research Question page 4
1.5 Organisation of the Report page 4

2. Methodology
2.1 Introduction page 5
2.2 GEM Data page 5
2.3 World Bank Data page 5-6
2.4 Methods of Analysis page 6
2.5 Conclusion page 6-7

3. Analysis
3.1 Introduction page 8
3.2 Descriptive Analysis GEM Variable page 8-9
3.3 Descriptive Analysis World Bank page 9
3.4 Calculation of the Correlation page 10
3.5 Conclusion page 10

4. Conclusion page 11

5. Bibliography page 12-13

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1. Introduction

1.1 Background

This report is written for the course Business Research at Amsterdam University of Applied Sciences
in order to analyze and describe the available data from the Global Entrepreneurship Monitor on the
perceived opportunities in South Africa.

South Africa has been chosen as the country to research because of the following reasons. The per
capita GDP of the entire African continent is exceptionally low, making it the poorest continent in
the world. The continent’s second largest economy belongs to South Africa. They are the world’s
largest producer and exporter in diverse natural resources. (World’s Top Export, 2020)

Data about entrepreneurial opportunities is available and will give the researcher the opportunity to
gain more knowledge about South Africa – a country where racial segregation existed and where not
everyone is given the same opportunities.

1.2 Description of the Country

South Africa is located on the southern tip of the African continent and covers a total of 1,220.000
square kilometers, making it the 25th largest country in the world. The population of the country is
about 58 million people, where the black population makes up 78.9% of the nation, and colored,
white and Asian population only accounts for the remaining 21.1% combined. (World Meters, 2020)

The multi-cultural diversity in South Africa is noticeable by the 11 official languages it has. The four
most used languages are Zulu, Xhosa, Afrikaans and English. The majority of South Africans have a
good understanding of the English language as the country is a former British colony. English has
become the main language in business, the government and the media. (The World Factbook, 2018)

Even after Apartheid, the country is experiencing poor growth performances economically as well as
socially. Apartheid was a system of racial segregation that was implemented by the South African
government between 1948 and 1994. The system forced colored South Africans to live in separate
areas from white people and human rights were taken away from them. (History Editors, 2010)

According to the World Bank, the inequality rate in South Africa is considered one of the highest
rates in the world. (World Bank, 2019) The gap between the rich and the poor is still enormous. The
white population is seen as the richest of the nation whereas the black population is seen as the
poorest. The inequality can lead people, especially black people, to hold back on entrepreneurial and
human opportunities. (Kate, 2019)

South Africa is the leading country in natural resources such as gold, manganese, platinum and

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chromium. Representing a great part of the export revenue of the country. (World’s Top Export,
2020). The country is also known for the production of wine and is one of the world’s biggest wine
producers. (OEC, n.d)

1.3 Problem Analysis

In 2018, the Gross Domestic Product (GDP) was worth $366.30 billion. This is a significant increase
compared to the previous two years whereas GDP was worth $348.87 billion (2017) and $295.75
billion in 2016. The GDP is expected to slightly increase in the years 2019 and 2020. The measured
GDP of 2018 is 0.58% of the world economy and is ranked 33 rd in the list of largest economy in the
world. (Trading Economics, 2018) (Economy Watch, 2010)

South Africa’s total early-stage entrepreneurial activity (TEA) is 10.96% for the year 2017, according
to the data collected by Global Entrepreneurship Monitor (GEM). The TEA has increased by 4.05%
compared to the previous year and currently holds the highest level of entrepreneurship since 2013.
But although the TEA has reached its highest level, according to a survey conducted by Seed
Academy, youth entrepreneurs are decreasing in South Africa. This is a result of the youth
unemployment problem that the country is struggling with and the wrong mind set young people
have. (GEM Consortium, n.d.)

Perceived opportunities show the percentage of the population that sees a good opportunity to start
a business. Individuals see opportunities exist in the area they live and believe they have the skills
and experience what it takes to start their own business. In a country where inequality is enormous,
the opportunities are not always present for everyone, especially the black population. (GEM
Consortium, n.d.)

The purpose of this research is to describe, analyze and explain the perceived opportunities in South
Africa from 2012 to 2017.

1.4 Research Question

The main question of the research is: How has perceived opportunities developed in South Africa
from 2012 to 2017?

1.5 Organization of the Report

The research question will be answered by dividing the report into four chapters which consist out of
sub-chapters. Chapter 2 will discuss the methodology which explains how and where the data was
collected. Chapter 3 will contain an analysis, which consists descriptive analyses of the GEM’s and
World Bank’s variable. Chapter 4 will contain a conclusion in which the research question will be
answered.

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2. Methodology

2.1 Introduction

Methodology is also known as research design. It is a technique used to collect information and data
to solve problems. The purpose of this technique is to make business decisions and to ensure
reliability. (Sekaran & Bougie, 2016)

Methodology will be discussed in this chapter in regard to the data chosen from GEM and the World
Bank. The data from GEM and the World Bank will be researched based on the elements of research
design.

2.2 GEM Data

Founded in 1999, The Global Entrepreneurship Monitor (GEM) started off as a joint project between
the Babson College (USA) and London Business School (UK). The Global Entrepreneurship Monitor
was established with the purpose to research why some countries are more entrepreneurial than
others. With data collected from over 20 years about more than 100 economies, GEM has been
considered to be the most reliable key source regarding entrepreneurship for many international
organizations. GEM collects data regarding entrepreneurship throughout the Adult Population
Survey (APS), which measures entrepreneurial behavior activity. Another survey that is being used is
the National Expert Survey (NES). This survey gathers the views of experts in the field. (Mission, n.d.)
(What is the Adult Population Survey, n.d.) (What is the National Expert Survey, n.d.)

The purpose of GEM is based on a descriptive nature study. The study collects data that is reliable
and focused on the topic of interest. The data collected from GEM is conducted in a natural
environment in an organization, thus in non-contrived settings and with minimal interference. The
research strategy is survey research. GEM studies entrepreneurship throughout the Adult Population
Survey (APS). The APS is taken directly from at least 2000 respondents in the age range of 19-64
years. Therefore, the unit of analysis is based on individuals. The time horizon is considered to be
multi cross-sectional as data is gathered multiple times over a period of time and the sample varies
every year. (Sekaran & Bougie, 2016) (Mission, n.d.)

The GEM key indicator being used in this report is Perceived Opportunities Rate in South Africa.
Perceived Opportunities Rate shows the percentage of individuals in the age range of 18-64, who see
good opportunities to start a firm in the area they live in. The researcher examines the indicator in
order to have a better understanding of entrepreneurship in South Africa.

2.3 World Bank Data

The World Bank originates from 1944, where it was first known as the “International Bank for
Reconstruction and Development”. World Bank is the world’s largest development organization with
189 member countries. The purpose of the organization is to assist developing countries and reduce
poverty. The World Bank has helped over 100 countries by providing policy advice, research and
analysis, and technical assistance. With the organization’s help, countries have the opportunity to
share innovative knowledge and solutions to difficulties they deal with. (What We Do, n.d.)

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World Bank wishes to achieve two goals by the year 2030. The first and primary goal is to end
poverty by reducing the number of the extreme poor to less than 3% by investing in people through
various ways. For example, through education, jobs, nutrition and health care. The second goal is to
promote shared prosperity by promoting the income growth of the lowest earning 40% for every
country. (What We Do, n.d.)

The purpose of the study of World Bank is considered to be descriptive in nature. The organization
integrates qualitative and quantitative research in their study. The study collects data that is focused
on the topic of interest. The research design is descriptive as the World Bank observes and describes
the behavior without manipulating the data. For this reason, the research interference is considered
to be minimal. The study is undertaken in a natural environment, which makes the study conduct in
non-contrived settings. To gather data and information the World Bank uses surveys every year for
different samples and receives reporting results from countries. The time horizon is multi cross-
sectional and the unit of analysis is countries. (Sekaran & Bougie, 2016) (What We Do, n.d.) (Results
Home, n.d.)

The World Bank key indicator being used in this report is the annual Growth Domestic Product (GDP)
growth in South Africa. The GDP measures the market value of all goods and services produced
during a period of time in a country. The researcher has chosen to examine the annual GDP growth
to have a better understanding of the GDP in South Africa.

2.4 Methods of Analysis

The research question is described through collection of data. The data used in this report is
secondary source and describes the main purpose of the report, the entrepreneurship in South
Africa. The type of research undertaken is a descriptive study as different factors that have an impact
on the research has been described. As research strategy, a case study has been conducted. The aim
of the case study is to collect information about the entrepreneurship in South Africa. The
researcher looks at variables related to the problem and therefore a correlational study has been
done in a natural environment. This implies, the extent of research interference is minimal. The
study is conducted in non-contrived settings, because the work proceeds normally. The unit of
analysis for GEM is individuals and for the World Bank this is countries. The time horizon is cross-
sectional. The data is gathered from multiple time periods. (Sekaran & Bougie, 2016)

The researcher adopted correlation in the report. By using correlation analysis, the researcher
investigates the relationship between two quantitative variables. In this case, the GEM indicator
Perceived Opportunity Rate and The World Bank. (Sekaran & Bougie, 2016)

2.5 Conclusion

This chapter explained the term “research methodology” by implementing the method for three
different studies. The studies are from the Global Entrepreneurship Monitor, the World Bank and
this report. The researcher gathered secondary data to describe the entrepreneurship in South
Africa. For this report, case studies have been adopted to focus on the main purpose and the type of
research undertaken is a descriptive study. The study has been done with minimal interference in
non-contrived settings. The time horizon is cross-sectional, and the unit of analysis are individuals
and countries. (Sekaran & Bougie, 2016)

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 Source: Research Methods for Business, 2016

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3. Analyses

3.1 Introduction

This chapter will answer the research question: “How has perceived opportunities developed in
South Africa from 2012 to 2017?”. The research question will be answered by doing a descriptive
analysis on variables from the GEM and the World Bank. The research question will be answered
using correlation calculation between the two variables.

3.2 Descriptive Analysis GEM Variable

The variable Perceived Opportunities Rate indicate the “Percentage of 18-64 population who see
good opportunities to start a firm in the area where they live.” (GEM Global Entrepreneurship
Monitor, 2017)

Figure 3.1: Perceived Opportunities Rate in South Africa (2012-2017)

Source: (GEM, 2017)

The line graph illustrates the changes in the Perceived Opportunities Rate in South Africa from 2012-
2017. The figures are given as percentages of the population of South Africa.

In 2012, the perceived opportunity rate was 35.4%. From 2012 to 2013, the rate increased steadily
to 37.85%. The graph shows that the perceived opportunity rate in South Africa experienced a slight
downward trend in 2013 where it dropped by 0.85% (from 37.85% to 37%). From 2014 to 2015, the
perceived opportunity rate recovered sharply and reached 40.91%. Then the rate dropped drastically

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and reached its bottom low at 35.03%. In 2016, the perceived opportunity rate started to increase
rapidly again to its peak of 43.17%.

Overall, the graph shows a fluctuation trend in the Perceived Opportunities Rate in the period 2012-
2015. From 2015, the number of the population who sees a good opportunity to start a firm in the
area they live in, dropped drastically. However, in 2016, the population of South Africa has rocketed
and reached its peak. The perceived opportunities rates in South Africa fluctuated, but the general
trend was upward.

3.3 Descriptive Analysis World Bank Variable

The variable Employment to Population Ratio is “the proportion of a country’s population that is
employed. Employment is defined as persons of working age who, during short reference period,
were engaged in any activity to produce goods or provide services for pay for profit, whether at
work during the reference period or not at work due to temporary absence from a job, or to
working-time arrangements.” (Employment to Population Ratio, n.d.)

Figure 3.2: Employment to population ratio, 15+, total (%) (2012-2017)

Source: (World Bank, 2017)

This line graph illustrates the changes in employment rate of the population in South Africa from
2012 until 2017 from the age of 15 and above. The figures are shown as percentages.

In 2012, the employment rate was at its lowest point, 39.64%. The rate then slowly started to
increase, reaching 40.15% in 2013. The employment rate remained stable throughout the rest of the
year. In 2014, the country experienced a rapid increase and reached its peak of 40.90% in 2015.
Right after the peak rates fell sharply to 40.19% in 2016. The decrease in employment rate can be
explained by the decrease in mining and slow activity in the manufacturing sector that year.
Employment rate recovered slowly and reached 40.4% in 2017.

Overall, the line graph mainly illustrates an upward trend right after the country reached its lowest
point in 2012. The country experienced a slight decrease in employment rate from 2015 till 2016.
The rate then slowly increased until 2017.

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3.4 Calculation of the Correlation

In this chapter, a correlation analysis will be discussed to investigate the relationship between the
GEM indicator and World Bank indicator. Correlation is “a relation existing between phenomena or
things or between mathematical or statistical variables which tend to vary, be associated, or
occur together in a way not expected on the basis of chance alone.” (Merriam-Webster, n.d.)

Figure 3.3: Scatter plot – relationship between Perceived Opportunities Rate and Employment
to Population Ratio, 15+, total (%)
Employment to Population Ratio, 15+, (%)

41.000
40.800
40.600
40.400
40.200
40.000
39.800
39.600
39.400
39.200
39.000
34.00 35.00 36.00 37.00 38.00 39.00 40.00 41.00 42.00 43.00 44.00
Perceived Opportunities Rate

Source: (GEM, 2017) (World Bank, 2017)

This graph illustrates the relationship between the Perceived Opportunities Rate and Employment to
Population Rate.

The graph shows a positive relationship between the two variables. This is because as the
employment rate goes up, the perceived opportunities rate goes up as well. This is supported by a
correlation coefficient of r=0.692. This means it is considered to be a moderate positive correlation.
The points in the graph lie close to the line, showing the present of the linear relationship between
the variables.

The p-value helps to determine the significance of the results in relation the null hypothesis. In this
case, the p-value is p=0,127, which is greater than 0.05 (> 0.05). Thus, the results are not statistically
significant. The confidence interval is 95%.

3.5 Conclusion

The research has shown that there is a perfect positive linear relationship between the GEM and
World Bank variables. The results are not significant; therefore, the researcher cannot conclude that
the correlation is different from zero.

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4. Conclusion

South Africa has a low perceived opportunities rate. This is not only because of the recession that
occurred in 2009, but also because of the lack of promotion and initiatives taken by the government
in order to improve entrepreneurship. This has led to insufficient skill development and support.
(SA Entrepreneurs Are Seeing Less Opportunities, 2017). For this reason, it is important to answer
the research question: How was perceived opportunities developed in South Africa from 2012 to
2017?

The perceived opportunities rate was fluctuating from 2012 to 2017 and was the lowest in 2016
where it reached 35%. Meaning only a small percentage of the 18-64 population saw good
opportunities to start a firm. The reason for this low percentage is because the country experienced
many difficulties that year, including the fall in mining and manufacturing production, the reshuffle
of the cabinet and an extreme drought. (The Economy Shrinks In The Fourth Quarter, 2017). The
majority of the population did not see good opportunities or did not have the knowledge, skills and
experience to start a new firm. The economy started to improve in 2017 and the perceived
opportunity rate started to increase rapidly. This implies that the population regained their
confidence to start a firm, knowing the economy was improving.

The correlation analysis between the Perceived Opportunities Rates and the Employment to
Population Ratio showed a moderate positive correlation. The correlation analysis between the
Perceived Opportunities Rate and the Employment to Population Ratio showed that the relationship
is insignificant, and because of this, it is not reliable and valid to make a conclusion based on the
correlational analysis.

It is advisable that the government takes more initiatives that should contribute towards improving
the perception of opportunities. For instance, develop governments programs and improve the
education system. Teaching students the required skills to start a firm are essential and will give the
people more confidence.

Word count: 2941

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