GEM Report 2013: Recommended Reading For The Next MEC On Economic Matters In The Western Cape

The Global Entrepreneurship Monitor (GEM) project has just released its global reports on participating countries that includes South Africa, reflecting on the entrepreneurial aspirations and attitudes of individuals in these countries.

Started in 1999 as a partnership between the London business School and Babson College, it now covers almost 100 countries, surveying 75% of world population and 89% of world’s GDP. It is the largest ongoing study of entrepreneurial dynamics in the world.

The GEM project is unique in that it explores the behaviour of individuals in its studies at grassroots level from starting, to managing a business. It also explores the role of entrepreneurship in the country’s economic growth, revealing detailed entrepreneurial features and characteristics that are unique to that country. Data from each country is collated by a central team of experts guaranteeing its quality and facilitating cross-national comparisons.

GEM has three main objectives, to measure the differences in the level of entrepreneurship between countries, uncover factors leading to appropriate levels of entrepreneurship and then suggest policies that could enhance the national level of entrepreneurial activity.

GEM South Africa, based at the Graduate School of Business at UCT, has been involved in GEM since 2001 and is led by Mike Herrington, Director of the Centre for Innovation and Entrepreneurship.

In its study of the Western Cape, GEM notes that the province is South Africa’s major agricultural export area,  is an important international tourism draw-card, has top higher education institutions, is a major source of professional, business and educational services and is a key logistics node with two major ports. It also accounts for 14 percent of the national gross domestic product (GDP) and has the lowest unemployment figure of 21 percent compared to compare to 26 percent for Gauteng and 38 percent for the Eastern Cape and Limpopo.

In its ONECAPE 2040 document, the Western Cape government has identified a number of key focus areas to enable it to achieve its vision of a ‘’highly skilled, innovation-driven, resource-efficient, connected, high opportunity and collaborative society’’ by 2040.

Education remains a key priority, particularly in the quality of maths and science education, subjects that are needed to improve the innovation capabilities in South Africa.

The GEM indicators are that the basic requirements in order to have a efficiency-driven economy is a healthy foundation phase and primary education, for without this it is difficult for effective enhancers to influence business activity. GEM South Africa reports that the majority of early-stage entrepreneurs have some secondary education or degree compared to those will little education that start new businesses.

People who feel confident that they possess the skills to start a business are four to six times more likely to be involved in entrepreneurial activity and while Gauteng has the highest provincial rate of potential entrepreneurs at 29.7 percent, just over a fifth of the population in the Western Cape and the rest of South Africa believe they have the skills and knowledge to start a business and that there are opportunities in the area they live.

Opportunity-driven businesses have a more positive impact on job creation and in the Western Cape entrepreneurs are 6.7 times more likely to be opportunity-driven than necessity-driven compared to the rest of South Africa.

Although provincially the Western Cape has a low unemployment rate there are areas, such as the Southern Cape with higher unemployment rates that are comparable to those in KwaZulu Natal, Limpopo and the Eastern Cape.  GEM recommends that policy makers in the Western Cape should address why, even with such high unemployment in certain areas, the rate of necessity-driven entrepreneurship is so low.

Read or download the report here

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