Cape Town outshines rest of SA in entrepreneurship

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An international study analysing the entrepreneurial activity in 34 world cities has shown that Cape Town has far higher levels of opportunity-based entrepreneurship than Johannesburg and is well above South Africa?s national entrepreneurship average.

The report, published this August under the Scientific Analysis of Entrepreneurship and SMEs (SCALES-initiative) as part of the 'SMEs and Entrepreneurship Programme' financed by the Netherlands Ministry of Economic Affairs, analysed five years of Global Entrepreneurship Monitor research (GEM).

GEM is the world?s leading study of entrepreneurship.

The analysis shows that Cape Town is clearly more entrepreneurial than the rest of the country - Cape Town is ranked at number one out of the 34 countries in terms of having an Early-Stage Entrepreneurial Opportunity Activity level greater than the national average.

Cape Town?s Early-Stage Entrepreneurial Activity is a massive 190% greater than South Africa?s national average.

Dr Mike Herrington, Director of the UCT Centre for Innovation and Entrepreneurship (CIE) at the UCT Graduate School of Business and research team leader of the South African leg of GEM research since 2001, explained that this means that there are more people between the ages of 18 and 64 years in Cape Town taking advantage of business opportunities.

"This finding suggests that Cape Town has a much higher level of knowledge, innovation and opportunity than elsewhere in the country,' said Dr Herrington.

"It is imperative to examine in detail the factors that contribute to Cape Town being so much more entrepreneurial. Through understanding these, South Africans will be able to copy the recipe and introduce interventions in other cities. By increasing city and town levels of entrepreneurial activity this will considerably increase the country level which in turn will create employment and reduce both poverty and crime,' he added.

Compared to Cape Town, Johannesburg?s Early-Stage Entrepreneurial Opportunity Activity level was only 60% above the national average (6th out of the 34 countries).

Cape Town?s Total Early-Stage Entrepreneurial Activity, which includes both those who start a business due to an opportunity and those that do so as a last resort, is also better than Johannesburg?s - Cape Town ranked at 14 out of the 34 cities, while Johannesburg ranked at 22.

Cape Town is also ranked at number one in the analysis for having more people confident in their ability to start a business relative to the national average.

Capetonians were 70% above the national average in terms of perceived business capability, while Joburgers were only 20% above the national average.

Cape Town ranked at 9th position when measuring the city population?s perceived capability to start a company, while Johannesburg trailed at 28th.

Herrington explained that the high levels of entrepreneurship in Cape Town, and to a lesser degree Johannesburg, is due in part to a number of contributing elements.

"There is an interdependent relationship between certain characteristics of a metropolitan city, the number of talented people within the city and the amount of entrepreneurial activity. Talented people are more creative than the rest of the population, they are more entrepreneurial and hence prefer cities with attributes like tolerance, economic welfare and knowledge intensity. Cities like Cape Town and Johannesburg also offer a great range of infrastructure which is of interest especially for younger and/or highly educated people. This increases the pool of entrepreneurs,' he said.

But the study shows areas where both Cape Town and Johannesburg are not faring so well.

Only 5% of people involved in Early-Stage Entrepreneurial Activity in Cape Town, and 6% in Johannesburg, are making use of the latest technology in their business ventures.

This is markedly lower than the level in developed countries where the percentage equals 48% or more.

This means it is less likely that local entrepreneurs are creating world products or services that can compete internationally.

Both cities also performed badly where new product introductions are concerned - Cape Town ranked 25th and Johannesburg 22nd out of the 34 cities - indicating more of a "copycat' mentality than of a creative class of industry start-ups.

Again, the Cape Town rate was low when considering job growth orientated businesses - only 15% of start-ups expect to have 10 employees or more after five years in business.

Herrington maintains that this statistic is perhaps the most worrying of all when the city and country levels of unemployment are taken into account.

"With such high levels of unemployment in South Africa, more needs to be done to help and encourage small businesses to grow if Early-Stage Entrepreneurial Activity is to translate into real job opportunities.

Herrington said a closer investigation of the elements that advance and inhibit city entrepreneurship levels are key. "More than 50% of the global population live in urban areas which make cities very important for economic development.'

The South African leg of the GEM research has been conducted annually by the CIE since 2001 as part the worldwide examination of entrepreneurship that has included over 50 countries.

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