Will an SA MBA set you up for success?

Do you suffer from atychiphobia? Or kakorrhaphiophobia? If the answer to either question is yes, then entrepreneurship is probably not for you.

Atychiphobia is the fear of failure. Its multisyllabled big sister is the extreme fear of failure. Together, they are among the biggest causes of the miserable success rate of SA business start-ups.

SA desperately needs successful entrepreneurs to grow GDP and make a dent in the unemployment rate. Instead, this year thousands of small and medium companies have gone bust because of lockdown and other ills inflicted by Covid-19. Millions of workers have lost their jobs.

Given the unique circumstances, many of the failures were probably inevitable. As Wits Business School entrepreneurship specialist Boris Urban says: "Small companies and entrepreneurs are always the first victims of devastation. They are small and vulnerable, often short of skills and funding."

Mikael Samuelsson, Urban’s counterpart at the University of Cape Town’s Graduate School of Business, says most small companies can survive no more than two months without income, while they really need reserves for four or five months. Entrepreneurship training simply does not prepare companies for "this kind of catastrophe", he says.

Maybe it should. As SA eases into Covid alert level 1 and the last closed business sectors reopen, experts say it’s time to reassess SA’s approach to entrepreneurship.

Among other questions, they ask if it is taught correctly. Many universities and training colleges offer some preparation. Business schools include entrepreneurship in MBA programmes. Some teach it as a speciality.

"This is a watershed moment for everyone teaching entrepreneurship in the traditional way. We should all rethink what we take for granted," says Regent Business School director Ahmed Shaikh.

Johannesburg Business School director Lyal White wonders if MBAs shouldn’t be more exploratory than instructive. "The MBA prepares us for the current world and is informed by the past," he says. "[But] are we preparing people for the future?"

It’s a thought echoed by University of the Free State Business School director Helena van Zyl, who observes: "Entrepreneurs (and entrepreneurship teaching) will have to be much more proactive and future-orientated. Even big corporates will have to rethink their business models."

Lockdown has already given schools the space and confidence to explore new ideas, says Shaikh. Now it is imperative that they act upon what they have learnt.

He has long argued that higher education in general should focus less on traditional academic ideas and more on "employability" — providing students with the skills and tools that the workplace and economy require.

"We need to look at curriculum reform," Shaikh says.

‘Freedom from fear’

Entrepreneurship programmes generally include subjects such as finance, marketing and supply chain management; traditional business attributes designed to give them the best chance of success. But SA entrepreneurs also need freedom from fear, says Allon Raiz, whose company, Raizcorp, is SA’s biggest incubator of fledgling enterprises.

"There is a problem with our culture," he says. "We’re afraid to fail. In the US, business failure is a badge of honour. You are encouraged to get back up and try again. In SA, we’re ashamed to fail once."

Circumstances, of course, differ. US banks are less risk-averse. Family, friends and private investors there are more likely to support entrepreneurs. In SA, where many families struggle to put relatives through college, there may be enough money for only one shot at glory.

"People from your village who helped you get to university did so in order for you to get a proper career," says Norah Clarke, entrepreneurship director at Universities SA, the representative body for SA’s 26 public universities. "Entrepreneurship isn’t considered one, though attitudes are changing."

Milpark Business School dean Cobus Oosthuizen calls the fear of failure a "tragedy".

"There are people out there who could transform the economy and provide meaningful employment, but because they are fearful and uncertain, their ideas remain ideas," he says.

White, similarly, says: "People think that the moment they fail, they are in the gutter and so are the people who helped them.

"Failure is not an option, so people are too afraid to try."

Even if they do take the plunge, the same fear may prevent entrepreneurs from taking decisive business decisions, which means fear of failure becomes self-fulfilling.

But, says Urban, "failure experience" and the ability to bounce back can play key roles in the making of a successful entrepreneur. "Perseverance or resilience will enable you to overcome repeated rejection, particularly as rejection is the rule rather than the exception in many endeavours."

He estimates only 20% of SA start-ups survive longer than three years. So it’s hardly surprising that the Covid-induced jobs bloodbath should have persuaded many potential entrepreneurs to remain in the more secure corporate world.

Anyone with dependants and a sense of responsibility will think carefully about risking everything in a time of upheaval.

"If you have a salary, I can fully understand why you might think this is a good time to hold on to it," says Henley Africa Business School dean Jon Foster-Pedley.

But many believe this is precisely when entrepreneurs should take the plunge — when turmoil reigns and markets demand new ideas.

Foster-Pedley, whose school recently partnered with Raizcorp to create an accredited programme for entrepreneurs, says SA needs to stimulate a more diversified economy. "We want people to find opportunities both in the existing space and in others that haven’t been explored yet."

Management College of Southern Africa (Mancosa) director Zaheer Ahmed, for one, believes this is "a great time for start-ups and new business models to emerge".

And as Andile Nobatyi, acting academic director at the Unisa Graduate School of Business Leadership, points out, history shows that successful innovations can come out of disasters such as Covid-19.

Gordon Institute of Business Science interim dean Morris Mthombeni also believes the time is ripe for entrepreneurs. "This is a good time for people to start their journey, when assets are cheap. Entrepreneurs pick up assets when the tide goes out."

Assets aren’t the only things that are currently cheap, says Jako Volschenk, MBA director at the University of Stellenbosch Business School. "Interest rates are low, property rentals are low. You’ll never get them cheaper."

Seizing the moment

Not everyone has allowed Covid-19 to dictate to them. Some have turned it to their advantage.

While many small and midsized engineering companies have gone out of business since April, Wesley Augustyn’s Port Elizabeth firm, Black Sheep, has doubled its client base.

Augustyn, who failed matric twice but went on to complete an MBA at Nelson Mandela University (NMU) Business School, has "probably opened and sold 10 businesses" since he left school.

When orders at Black Sheep started dropping, he began manufacturing protective personal equipment for health-care clients. Many of his new clients, picked up from other engineering firms that collapsed, are pharmaceutical and health-care providers who had not heard of Black Sheep before Covid-19. As a result, he expects his workforce to grow by 20%.

Ntando Kubheka, also an NMU MBA alumnus, ran a car-sharing business at the start of this year, before social distancing put paid to it. He managed to find a buyer and has now built a logistics and transport company, after realising that the crisis would accelerate demand for e-commerce and immediate delivery. He started with one leased truck and now runs a busy fleet.

Kubheka, who teaches at business schools when he’s not making deals, says: "It’s interesting how you can build a business from scratch and from boredom. I don’t get married to businesses or to an idea. If the opportunity comes along at the right time and right price, I will sell."

Ntando Ngobese has used skills she learnt at Mancosa to become a commercial crop farmer near Port Shepstone. With no previous farming experience, she launched her enterprise this year and is already looking for more land, having found customers for everything she produces.

Then there’s serial entrepreneur George Diab, whose local accounting clients began defaulting on payments when Covid-19 hit their revenue. His solution was to find clients in the UK and Australia.

"Companies there are looking for ways to save money," he says. "SA has very good accountants, we’re half the price of those in countries with strong currencies, have twice the skill and a good work ethic."

From zero six months ago, Growth Accounting Services (Gas) now earns 20% of its income in foreign currency and expects to grow overall revenue by 15% this year.

Diab, who says he launched his first entrepreneurial enterprise aged 11, says he is looking at other overseas opportunities.

Behind the curve

Such innovation is not common. International studies show SA’s entrepreneurial success rate is poor by global standards. This is confirmed in the latest Global Entrepreneurship Monitor (Gem) SA report by Angus Bowmaker-Falconer and Mike Herrington.

It says SA ranks 49 out of 54 global economies for its "entrepreneurial ecosystem", meaning the social and economic environment affecting entrepreneurship. The country is ranked 101 out of 141 for onerous government regulations and 129 out of 141 for the time it takes to start a business.

Raiz says the government needs not only to make it easier to launch companies but also decide if it really wants people to do so.

"It’s forever sending out mixed messages," he says. "One day it says it wants to encourage business, the next that we are greedy capitalists who need to be controlled. We need a single message. Red-tape complexity is beyond where it should be. We are not in a country that can sustain that level."

Augustyn has a different take. It’s very tempting, he says, to rush into a new business venture without considering the consequences. "I’m glad there’s red tape," he says. "It slows you down, makes you think before you commit."

Rhodes Business School director Owen Skae, though, considers existing regulations counterproductive. "You need a welcoming environment that encourages entrepreneurs to take risks. If the government is serious about wanting to encourage small business, it has to get rid of the regulations that inhibit. If it doesn’t, we will be left with only diehard entrepreneurs."

It would be wrong, however, to blame regulations alone for SA’s entrepreneurial weakness. Successive international Gem reports have implied that South Africans are not natural entrepreneurs, particularly compared with other populations in Africa.

The idea is given credence by a North-West University Business School report into micro-and small-business development in the province’s villages, townships and "small dorpies". The report found that only 17.7% of shop owners in these areas are South African. By far the biggest group, 43%, are Bangladeshi, followed by Ethiopians, at 19.6%. A scattering of other groups, including Mozambicans, Somalis, Chinese and Pakistanis, each have about 5% of the market.

The report’s author, Ronnie Lotriet, says most Bangladeshi shop owners are part of a national network able to buy in bulk and therefore offer lower prices while maintaining profit margins. This network also provides "seed" money to set up shops. Nearly all staff are relatives of the owners, leaving few jobs for locals.

"There is no skills transfer or knock-on benefit for locals," he says.

Up against such an organised force, it’s no wonder untrained South Africans struggle. Instead of concentrating on the formal economy, Lotriet says government and the education system, including business schools, should turn some of their entrepreneurial attention to the informal sector.

Raiz and Clarke argue that education should start at pre-primary level, to instil a lifelong awareness of entrepreneurship.

"You can never start too early," says Clarke. "To begin with, you introduce buying and selling in its simplest form."

Raiz says the subject should be part of the curriculum at every level, "but it needs to be relevant. What they teach in economics at school is outdated. It’s approached in an academic way, not a practical one."

There is a strong argument for business schools to invest in the ideas they teach — putting their money where their mouths are

—  What it means:

How much more practical could it be than business schools investing in their students’ ideas?

Shaikh has previously floated the idea of Regent becoming a partner in student enterprises. And Mthombeni believes that idea should spread.

"We in the business schools community should find ways to support and fund the businesses that come from our students," he says. "Teaching the programme is not enough."

Stanford University, in the US, reaped huge financial rewards by investing in Google, created by its students. Mthombeni wants to see SA business schools show similar confidence in the entrepreneurial and business principles they teach.

By all means offer mentoring and business advice, he says, but "we should also invest money in these businesses". Those who succeed would be contractually bound to invest back into the school.

Now that really would require schools to put their money where their lecturers’ mouths are.