Job creation and income equality are two of South Africa’s major challenges. The
foresees the creation of 5 million new jobs by 2020 and a total of 11 million new jobs by 2030. This means that around 700 000 new jobs have to be created annually over the next 15 years.
Global statistics indicate that up to 80% of new jobs are created by small businesses, while in South Africa it is estimated that about 70% of all employment is provided by businesses with 50 or fewer employees. This means that the majority of these new jobs (70% of 11m = 7,7m) will have to come from small businesses.
However, according to the authoritative Global Entrepreneurship Monitor report, South Africa does not fare well in the area of entrepreneurship and the creation of sustainable small businesses in comparison to other countries. Some of the drivers of the high failure rate of entrepreneurs and small businesses in South Africa include the lack of business education and lack of experience.
In South Africa, a huge number of experienced people leave their employment as a result of voluntary early retirement or because of retrenchment. These people have many years of practical, technical and business experience, and more of them should be encouraged and supported to start small businesses.
However, starting a business is a high-risk activity and one should not expect people at this late stage in their lives to put at risk the capital with which they need to retire. Innovative funding solutions are necessary.
The South African population is ageing in an unconventional manner, showing characteristics of both young and older populations with a low median age (young population), with an intermediately high share of people aged 65 and older. This situation can be turned into an opportunity. Traditionally, a situation like this would indicate that a young (and mostly unemployed) population will have to carry the additional responsibility of caring for the older population. With a different approach, the burden on young generations to take care of the older generations can be turned into a situation where the older generations can play an active role in creating sustainable opportunities for the young generations by applying their experience and expertise to create wealth through business ventures.
It makes sense to look at measures to empower and support people in their early retirement phase to start businesses (without putting retirement funds at risk). They can become a rich source of economic growth by applying their expertise and experience, thereby creating opportunities for the younger generations to tap into.
There is also a neurological basis for such an approach to economic development. It has been scientifically illustrated that people older than 40 (who have had exposure to a wide array of life experiences) act more creatively in solving complex problems than people in their early twenties. This results from the fact that the connections between the left and right brain have become more intense over the years and with experience. This makes the older generation a valuable source of the cross-functional expertise needed in order to start and manage a small business successfully.
Older entrepreneurs will probably have wide networks of business contacts, loyal friends, as well as previous and existing colleagues. Since no new business can survive without the support of a strong network around the entrepreneur, this puts the older entrepreneur in a definitive position of advantage.
Recent research in the USA has revealed that people aged between 55 and 64 had the highest rate of entrepreneurial activity over the past 10 years.
Harvard Business Review recently published results from the Kauffman Foundation that indicated that people over 55 are almost twice as likely to start up and run a successful venture than people between 20 and 34.
Both corporates and the government should act upon this growing opportunity to unlock the potential of the ageing (but smart and under-served) part of the population.
Government could put measures in place to assist retrenched and early retired persons to protect their retirement funds while getting involved in promising business activities. People in their pre-retirement year or people faced with retrenchment should be encouraged to develop their business knowledge and skills and to prepare themselves for starting and managing a small business.
Companies which retrench experienced people or offer voluntary early retirement should make provision for measures to support individuals who consider starting a business to prepare themselves through training programmes, to develop proper business plans, and to get access to enterprise development funding.
Training and development of such entrepreneurs should also be based on experiential learning methodology where mentorship and business coaching play an important role.
De Wet Schoeman heads the USB-ED Centre for Applied Entrepreneurship. His area of expertise is the development of training and support programmes for entrepreneurs and SMMEs.
Doris Viljoen is a facilitator and project leader at the USB-ED Centre for Applied Entrepreneurship. Her fields of expertise and interest include the feasibility assessment of new initiatives.