The state of entrepreneurship and its socio-economic impact in the Cape Metropole area

Abstract

Entrepreneurship is distinguished by its developmental and transformative qualities, particularly in the context of emerging economies. Entrepreneurship plays an important role in developing the economy of a country as the entrepreneur sparks economic activities through his/her entrepreneurial decisions. These entrepreneurial decisions lead to the creation of new business activities which in turn are a driving force in economic growth, creating jobs and enhancing fiscal credibility. However, the role of entrepreneurship in economic development varies from economy to economy and depends on the availability and accessibility of material resources, the industrial climate and the effectiveness of the political system underpinning the economy. In South Africa, there are major challenges that contribute to the unstable state of the economy. Retrenchments, the high failure rate of new businesses and the lack of growth in existing ones give credence to the summation that the South African economy is not expansively equipped to meet the challenges of a sustainable growth environment. A thriving entrepreneurial environment has significant benefits for job creation and the equitable distribution of economic wealth. In recent years, South African economists have been scrambling for solutions to the static economy that has seen a decline in new businesses of 34% from 2013 to 2014, resulting in continuing economic instability. Considering the trend highlighted above, the researcher was intrigued to examine the state of entrepreneurship and its socio-economic impact in the Cape Metropole Area. The researcher made use of a mixed-method research approach with an explanatory purpose, employing triangulation to achieve complementary results. The research invoked both interpretivist and positivist paradigms, though leaning towards the collection of qualitative data using semi-structured interviews and open-ended and closed questionnaires. The confidentiality of the information from respondents was ensured. The findings revealed that most entrepreneurs experience difficulty in accessing crucial entrepreneurial framework conditions, which hinders their activities. The findings also revealed that South Africa is at present not realising its job-creation potential and is therefore making little progress with unemployment and poverty reduction. In conclusion, entrepreneurs are essential to the economy and the society in any country regardless of its economic development. Their entrepreneurial decisions give hope to the growing number of unemployed people in South Africa. However, entrepreneurial activities are more fruitful in an environment that is condusive to buineess growth. Unless a favourable entrepreneurial environment is created, the entrepreneurial and labour classes will be incapable of realising their potential as a major engine for job creationand catalyst for economic growth. In South Africa, only a vigorous performance of the SMME sector and entrepreneurship, creating millions of sustainable jobs can stimulate economic growth and make it possible to reduce unemployment and for millions to escape the poverty trap. It is therefore recommended that the government and independent organisations work together to initiate programmes enabling existing and potential entrepreneurs to excel and initiate successful entrepreneurial activities. In general, there is a need for a macroeconomic environment that is friendly to labour-intensive investment, in order to generate spill-over growth effects, because entrepreneurs are more likely to invest productively, create jobs and contribute to poverty reduction.