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But the rate at which women start businesses, and the scale that they reach, is below potential. The ideals of equity and inclusive growth mean nothing without the full participation of women in the South African economy.
Historically, women have faced numerous barriers to their engagement in the economy, which are being progressively overcome as policies and transformative measures take effect. However, the risk of complacency is high, especially in difficult economic times where women’s advancement often takes a back seat.
Women are still in the minority when it comes to the entrepreneurial landscape. More than half of South Africa’s population is female, yet only 31% of entrepreneurs are female.
The 2016/17 GEM Global Report shows this disparity detailing that, while the ratio of male to female participation in early-stage entrepreneurial activity varies, men are more likely to be involved in entrepreneurial activity. This is confirmed by a survey conducted by Facebook in partnership with the World Bank and OECD, which finds that in its sample of SMEs, 34%of South African small and medium businesses were women-led, 28% have balanced teams and 38% are male led.
This is slightly better than the 31% global average for women-led SMEs. Women face greater difficulties in becoming and succeeding as entrepreneurs.
Common barriers highlighted in studies include:
“The narrowing of the gender gap in tertiary studies could lead more women to become entrepreneurs in these fields”
A report by SBP on ‘Understanding Women Entrepreneurs in South Africa’ finds that, despite being in the minority as well as facing greater barriers, women tend to be optimistic about the business environment. Encouragingly, the widening of the gender gap noted in 2015 has narrowed. For every ten men, over seven women were engaged in early stage entrepreneurship in 2016, a promising figure in line with averages for the African region as well as efficiency driven economies.
South Africa’s TEA (Total Early-Stage Entrepreneurial Activity) rate declined in 2016 compared to 2015. A decrease in activity from South African men – a decline of 31% – is the main contributor to this whilst the female TEA rate only decreased by 16% from the previous year.
The narrowing of the gender gap in terms of entrepreneurial involvement is accompanied by a robust increase in opportunity-motivated TEA for both genders.
Although overall TEA rates in South Africa are low compared to the average for the African region, this is counterbalanced by opportunity-motivation rates for both genders that are considerably higher than for their African counterparts.
The SME Growth Index estimates that 21% of its panelists are female, most of whom are in the tourism sector. The numbers in business services and manufacturing are much lower although this is consistent with international trends. The main barrier women face is the high entry requirements in the form of:
The SME Growth Index has shown that firms owned by women are typically smaller than firms owned by men. Women have fewer employees and make less in turnover when compared to men.
The average turnover of a women-owned firm on the SBP panel is R8.2m, less than the R12.1m average turnover among firms owned by men. Men-owned firms produce much larger turnovers in the business services and tourism sectors although by contrast the gap between the average turnover of firms owned by men and women in manufacturing is relatively modest.
Women-owned firms tend to employ smaller numbers than their male counterparts. This is most evident in the tourism and manufacturing sectors. The gap between business services firms owned by women and those owned by men is far closer.
Another noteworthy finding is steadily rising levels of tertiary education among South African women. More and more women are obtaining qualifications in what have been traditionally male-dominated fields like engineering and science. The narrowing of the gender gap in tertiary studies could lead more women to become entrepreneurs in these fields.
Insights From International Experience
The challenges facing women as entrepreneurs are not unique to South Africa. It is worth considering international experience when it comes to insights and approaches that may inspire action.
It is important to counter the notion that women cannot become visionary entrepreneurs, if given the opportunity. If we take research by startup fund First Round Capital using a decade’s worth of experience based on 300 companies, we learn that women-led firms produce attractive returns. In fact, the tech-focused fund found that in founding teams with at least one woman, the returns were 63% higher than that produced by all-male teams.
“It is important to counter the notion that women cannot become visionary entrepreneurs, if given the opportunity”
Despite indications that they provide better returns, women entrepreneurs face higher barriers to entry in business. The Future of Business Survey, a collaboration between Facebook, the World Bank and the OECD examining digitally active businesses in 33 countries, found that there are fewer women led business than those led by men (31 percent versus 45 percent). The figures are lower for technology start-ups. A study by Crunchbase of 43 008 start-ups across the world raising funding between 2009 and 2017 found that only 15.8 percent of these companies had at least one female founder.
Women tend to have similar levels of confidence in their businesses than men, and are also more likely to use digital tools to advance their business than men, the Facebook survey found. In line with findings in South Africa, the survey also finds that women-led businesses tend to be smaller: 68%of women-run businesses are sole proprietors whereas only 49%of male-led businesses are sole proprietors. Only 6.3% of women-led businesses had more than 10 employees, compared to 15% for male-led SMEs. A similar dynamic is at play when it comes to age of business: only 18% of women-led businesses were older than 10 years, compared to 28% for male-led businesses.
To the extent that women tend to be solo founders, this may explain the relatively small sizes of their business. First Round capital found that teams created companies that were valued at 25% more that soloists. Yet a study in the UK by AllBright, a company financing and supporting female entrepreneurs, found that 60% of women-led businesses had one founder.
Men and women-run businesses report similar challenges, according to the Facebook survey. This bucks conventional wisdom and the authors suggest that this might reflect the nature of the sample, namely businesses that are digitally active. Technology may be a way to remove some barriers to entry. Women-led businesses in the survey were more likely than men-led businesses to use online tools to market their products and services and to provide information about the business (opening hours, contact information). When it came to the management of internal business processes, men-led businesses were more likely to use online tools, perhaps reflecting the scale of their businesses.
This review of the local and international literature leads to the following conclusions:
1. supporting women-led businesses is an important element of a country’s economic growth strategy;
2. women-led businesses need support to scale up and to enter into collaborations with other businesses – these businesses tend to be smaller in scale, have solo founders and are younger in business age, which is a disadvantage when it comes to unit costs and long-term potential;
3. education and training efforts need to provide women with the skills to start businesses in a greater diversity of sectors;
4. technology may provide ways to reduce the barriers that women face in accessing the marketplace and participating in the economy;
5. greater scrutiny of big business on its commitment to empower women-owned
businesses is justified and required.
About the author: Trudi Makhaya is CEO of Makhaya Advisory and a consulting economist to Mercantile Bank.