Entrepreneurship in Khayelitsha

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For me entrepreneurship has a very romantic side. I associate it with hard working and risk affine people, who change the world before they turn 30 and retire early in life to enjoy prosperity.

Necessity Entrepreneur in Khayelitsha (Picture: Stefanie Julia Urdang; http://backorhome.blogspot.com/2011_04_01_archive.html)

Necessity Entrepreneur in Khayelitsha (Picture: Stefanie Julia Urdang; http://backorhome.blogspot.com/2011_04_01_archive.html)

However, the time I spent in Khayelitsha, Cape Town’s biggest township, has highlighted a different reality to me. Different from entrepreneurship in developed countries many entrepreneurs in townships are not opportunity driven but necessity driven: “Entrepreneurship is often a means of survival in under-resourced communities where jobs are scarce. Driven by the desperate need to earn money, most entrepreneurs start their businesses without adequate funding, infrastructure, knowledge or experience. Limited access to these vital resources severely compromises their chances for success” (Heart Capital, Hubspace). Numbers published by local researchers estimate that around one third of all start-ups in South Africa are necessity driven.

One reason for that high rate of necessity entrepreneurs might be that during the last 370 years South Africa has experienced 350 years of colonialism, segregation, apartheid and economical suppression. The aftermath is still present. South Africa is pretty much separated into two worlds: a black world that has the Human Development Index (HDI) with the equivalent to the HDI of Zimbabwe and a white one in which the HDI rests comfortably close to that of Italy. The crucial problem that resulted out of apartheid, is the socio-economic polarization in which class and color almost perfectly correlate. The result is townships where people live separated from each other by color and ethnic origin with almost no economic knowledge or infrastructure. Only during the last 20 years it became possible for people in townships to get economically involved. But because of the ongoing industrialization of the nation more and more jobs are shifting to more skilled mostly white held jobs. The status quo in South Africa is that 29 percent of all black people but just 7 percent of white people are unemployed. Therefore entrepreneurship is sometimes the only chance for people in townships to get economically active.

Currently South Africa’s government tries to increase black enterprise development through their Black Economic Empowerment program and by increasing education expenditure. The goal is to lower poverty and offset inequality, which is important for a country in transition in order to keep the country politically and economically stable. However black unemployment stays high and, according to the latest Global Entrepreneurship Monitor, South Africa still lacks behind in most of the key metrics concerning entrepreneurship.

Entrepreneurship, be it necessity or opportunity driven, is maybe the most effective way to tackle South Africa’s social problems bottom up and therefore has to be supported. A good starting point might be to understand and explain why there is a lack of entrepreneurship in black communities and specifically intervene at the root of the problem to successfully boost entrepreneurship in the townships around Cape Town.