Jacque Joubert and Andreas Procopos own a consulting business for incipient hedge funds. They also give trading lessons, make R50 000 a year and are publishing a book on starting a hedge fund, a private investment scheme, and one of interviews with industry role-players. They exchange handshakes with managers and brokers at meetings and are long used to the condescending stares. Much of the time they are not taken seriously because they are both only 21.
“We haven’t got our degrees yet. We look younger than 21, in fact, and we have to deal with people looking down on us because [they think that] without age, how can you have the necessary experience?” said Procopos, a final-year investment management student at the University of Pretoria. Joubert is studying towards a BCom in financial management.
Worrying about being taken seriously among industry players is a luxury. The partners are a rarity in reality. Less than ten percent of the youth in South Africa are entrepreneurs, according to a 2011 regional report by the Global Entrepreneurship Monitor (GEM). Only 6.8% of South Africans between the ages of 18 and 24, and 10.2% between 25 and 34 are entrepreneurs. This in an age where small and medium enterprises (SMEs) are widely held by experts to play a definitive role in modern economies.
Not only do small businesses outnumber large companies, they also have a larger workforce. This lack of entrepreneurship is causing the country to miss out on opportunities, while 90% of Americans were self-employed 40 years ago, according to Kobus Engelbrecht of the Sanlam/Business Partners Entrepreneur of the Year competition as quoted by TimesLIVE.co.za.
This follows news that the Y-Age Project, a R30-million initiative launched in March last year by the Gauteng Department of Economic Development seeking to encourage entrepreneurship and create a million jobs for the youth, failed to bear fruit and is now being “rebranded.” Its 100 000 participants will be assimilated into other internal programmes.
Joubert and Procopos, who own hedgefund-sa.co.za and forexfraternity.com, think the main reason they have so few peers is that the youth have neither experience nor access to start-up capital.
“Money makes money,” said Procopos. “Capital is very important for entrepreneurship and I can’t imagine a lot of young people have it.”
“As a young person … you don’t really know that much about the business environment, which I think is fine,” said Joubert. “It’s a normal process. You just need to learn. The second thing is that when much older people see how young you are, they automatically discount your knowledge even though you might be right in what you’re saying.”
Professor Eric Wood of the Centre of Innovation and Entrepreneurship at the UCT Graduate School of Business who works first-hand with start-ups said we do not fully understand the answer to the question and he does not see adequate research done to get to the bottom of it.
“In a school where teachers are either not preparing for classes, don’t come to classes or don’t understand enough of the curriculum … what the pupils learn is a pattern of behaviour that if one happens to be in the right place – that is, a job in the public sector – then you continue to do the job no matter how much you do – it’s not correlated to reward. That passes on an important message to the youth: [land] yourself with the right deal. And the public sector frankly is attractive to those who lack any marketable skills and have no intention of making a real contribution but sponging. It creates a very strong sense of entitlement and that effort and contribution are not required if one is to succeed in a South African society.”
Wood said the corrupt government procurement system, news on which has spawned the pejorative term tenderpreneur, is hugely discouraging to entrepreneurs who lose out on lucrative government tenders.
“What South Africa does in many ways is instead of creating role models of successful entrepreneurs, it creates to some extent dishonest tenderpreneurs. And that problem is exacerbated in a very serious way by the behaviour of people in senior positions in our society. Not only as business leaders but as government officials and the president, dare I say it? There [is] very strong evidence that running a successful business does not qualify you for winning government tenders but [rather] relations with government officials. It’s a huge disincentive to entrepreneurs [when they realize that] unless I’m willing to break the rule, I shouldn’t bother. Or unless I have the right family connection and people in high places, I’m left alone. It reinforces the view that it’s about people helping themselves to money that’s not there. So there are very powerful forces at work which are acting as disincentives to entrepreneurial activity – particularly for low-skilled black youth.”
The country needs less powerful unions, Wood conjectured, and courageous black leaders who would scrap the BEE system that makes it hard for the market to perform. But the biggest factor hurting entrepreneurship in the country is the high failure rate of start-ups.
“It creates a graveyard of failed entrepreneurs who act as a powerful warning that you do so at your own peril. [There’s] good evidence to show that rates of failure is very much worse than elsewhere in the world. So for whatever reason we have very low success rates. In the main, if a large proportion of people lack fundamental skills like effective communication and numeracy, that is going to stand in the way of a successful outcome. It may not preclude it but it massively increases the risk of the venture.”
On top of the skills shortage, Joubert and Procopos blame the culture of entitlement among the youth and lack of daring.
“They [should] step out of their comfort zones, create something with technology as opposed to just being a sheep and following the trend,” said Procopos. “Very few people contribute and create as opposed to listen and comment. The youth need to create more.”
“More than anything else you need to be a doer,” said Joubert. “You need to be a leader. You need to move. You need to go out there, pick up a broom and start sweeping.”