CHAPTER 2

ENTREPRENEURSHIP
 The four factors of production
Natural Land, industrial sites, minerals, forests,
water
Cannot be increased.
Human effort required
Human Physical & mental skills
Size of population, education, retirement
Without humans, natural & financial can’t be
utilised
Capital Buildings, machinery, computers – make
production possible
Long life – but expensive
Takes a long time to build up stock
Entrepren Accept risks, but can suffer losses
eurship Not everyone willing or able
Who are entrepreneurs?
• Harnessing
• Driving force behind organisations and the
country’s economy
• Identify need and decide how to fulfill, what to
product, how and when
• Someone who starts a business with intention
of making profit
• Are managers
entrepreneurs?
Different concepts of what an
entrepreneur is
• Entrepreneurs have been described as
people who:
– Are creative
o Have innovative ideas

o Identify opportunities

o Find resources to pursue opportunities for

financial gain
o Take financial risks

o Bring about change, growth and wealth in the

economy
o Re-energise economies and create jobs

o Start,manage small businesses.

Why is this so important?
• Creates life-changing new businesses
• Around the world, contributes to a decline in
unemployment
Entrepreneurship in South Africa
• Growth in SA economy has declined
• GDP growth rate of 6% needed to improve
economic growth
• Contribution of entrepreneurs is relied on to
attain this
• Entrepreneurs are focused on growing their
business
• Current interest in entrepreneurship is
understandable
• SA’s rate of entrepreneurial activity is lower
than would be expected
Unemployment
• Official unemployment figures
• Expanded unemployment figures
Entrepreneurship in South Africa
• SA’s rate of entrepreneurial activity is lower
than expected (for a number of different
reasons)
• We are ranked only 23rd out of 43 African
countries and our Entrepreneurial Activity
levels are below the average for African
countries
• Research has shown that high
entrepreneurial activity is linked to lower
unemployment rates
• With our unemployment figures at an alltime
high, the current interest in entrepreneurship
is understandable
Herman Mashaba

•“You cannot sell

something unless you
are passionate about it”
 Herman Mashaba
• 1980 in 2nd yr B.Admin. at University of the North - shut
down due to political unrests
• Late 1980 - clerical job with Spar Pretoria (7 months)
• Worked 23 months for Motani Industries (longest & last
salaried job)
• Bought a car & two months later resigned and started his
business career
• Sold different products on commission from the boot of his
car for 2 years (insurance, fire detection systems, linen,
crockery, dinner services)
• 1983 sold hair products on commission for Jhb company
• Took him 19 months to make up his mind to start his own
hair care manufacturing business.
 Herman Mashaba
• 1985 the first bottle of Black Like Me products
hit the South African market.
• 3 partners and his wife with a R30 000 loan, in
a 200sm SBDC unit in Ga-Rankuwa
(Bophuthatswana)
• Massive growth from the start
• Built and moved to own factory in Mabopane by
1990.
 Herman Mashaba
• July 1997 sold business to Colgate Palmolive
• August 1999 bought business back from Colgate Palmolive
• 2001 launch products in London, UK
• 2002 took a decision to join the BEE arena. Formed
Leswikeng Minerals & Energy (Pty) Ltd
• January 2004 resigned as CEO of Black Like Me. Still
remained as major shareholder
• 2004 elected as Chairman by the Cosmetic Industry in S.A.
to guide the process to develop Black Economic
Empowerment Initiatives.
• To-date has invested in various sectors; mining,
construction, exhibitions, real estate, security, aviation and
information technology.
• 2005 sold 49.9% of Black Like Me to Amka Products
 Herman Mashaba
• Directorship in 14 organisations
• 1993 Oude Molen Reserve Order of Merit
• 1994 New Nation/Engen Businessman of the Year
• African Chamber of Commerce Marketing Person of the
Year by the Institute of Marketing Management
• 2001 SABC/Tribute Achievers Award
• 2003 Award for Entrepreneurial Leadership by Henley
Management College
• 2004 Free Market Foundation President’s Award by the
Black Management Forum
• 2005 Honorary Award by UNISA: Outstanding Entrepreneur
and Leader in the Business Environment.
Patrice Motsepe
•"The fact is I've had the
entrepreneurial spirit
since I was a child. It
was part of the way I
grew up."

•"For me it was always

about hard work, blood
and sweat and coming
out on top”.
 Patrice Motsepe
• Age 6 - wake early to help his entrepreneurial father
by selling liquor to mine- workers (6am – 8pm)
• Age 8 – “choose a career that would keep me away from
that shop”
• BA from Swaziland University, a LLB from Wits University
• 1994 – 1st black lawyer made a partner at Bowman
Gilfillan (specialized in mining & business law)
• Wanted to go out on his own – but nobody would give him
a loan
• 1st 9 months he ran his business from his briefcase - a
contract mining operation called Future Mining, (services
to the then Vaal Reefs gold mine), now part of AngloGold.
 Patrice Motsepe
• Major SA gold groups like AngloGold were restructuring
- to survive an extended downturn in the gold price.
Solution = dispose of marginal shafts
• Motsepe formed African Rainbow Minerals (ARM) in
1997 and acquired a number of marginal shafts at Vaal
Reefs in January 1998 on favorable financial terms.
• Bought more marginal shafts owned by AngloGold in
the Free State.
• His challenge = turn them around through tighter cost
control and better working efficiencies.
 Patrice Motsepe
• Biggest single shareholder of the world's fifth-largest gold
mining company (ARM) – 8 yrs after leaving law firm
• ARM controls 19.8% of Harmony (SA’s largest gold miner) –
turns old digs into new digs
• 2002 ARM’s gold assets were listed on the JSE as ARMgold
= the 1st black empowerment mining company
• Patrice is a rand billionaire
• His family trust owns 55.8% of ARM, valued at
approximately R7billion (US$672million)
• President of the National African Chamber of Commerce &
Industry (Nafcoc).
• South Africa's Best Entrepreneur for 2002.
• In 2008 he was 503-rd richest person in the world
 Patrice Motsepe
• strong personality,
• innovation and determination,
• Coupled with an unflinching desire to
succeed,
• has enabled the development and
implementation of a "we do it better"
management style
Why do entrepreneurs do what
they do?
• The reasons behind individuals initiating
ventures:
o The individual’s traits and characteristics
o Their skills and industry experience
o The opportunities that outsourcing has to offer.
Adam Ebrahim
•Greatest enemy of
success:
•“The fear of failure, which
results when you do not
trust fully your own
abilities”.
•Qualified in accounting
•10 yrs experience in
financial services sector
•CEO of Oasis - assets
worth over $4 billion under
its management
Entrepreneurs’ traits and
characteristics
• Achievement motivation
• Internal locus of control
• Innovation and creativity
• Risk-taking
• Other traits (including high levels of energy,
confidence and optimism, desire for
feedback, high tolerance for ambiguity,
flexibility/adaptability, passion, commitment
and determination, opportunity orientation
and motivation to excel)
Entrepreneurs’ skills and industry
experience
• Contributes to identifying an opportunity,
establishing a business and managing it:
o Experience
o Training
o Education.
Opportunities arising owing to
outsourcing
• Organisations are outsourcing many
services/components they need
• Services most often outsourced (in order):
o Architectural design
o Trash and waste removal
o Housekeeping
o Landscape maintenance
o Property appraisals
o Major moves
Opportunities arising owning to
outsourcing (continued)
• Services most often outsourced (in order)
(continued):
o Hazardous-materials removal
o Major redesigns
o Furniture moves
o Food services.
The entrepreneurial process
• Entrepreneurs must make a bewildering
number of choices:
o Possession of personal characteristics, abilities
and skills
o Access to resources
o Opportunity and ideas
o Feasibility study
o Compilation of a business plan
o Launch and manage the new business.
The entrepre-
neurial
Process

A framework
for decision-
making
regarding
new ventures
The dynamics of the
entrepreneurial process
Skills required for
entrepreneurship
• Strategy skills
• Planning skills
• Marketing skills
• Financial skills
• Project management skills
• Human relations skills
Resources needed to start a
business
• Financial resources
• Human resources
• Operating resources or physical resources

It is important to realise that the

acquisition of resources implies a risk
New venture ideas
• Look at trends:
o Economic trends
o Political trends
o Social trends.
• Look at growth industries:
o Education
o Health care
o Tourism
o Privatisation of government and semi-government
services.
New venture opportunities
• The fundamental requirements for a good
investment opportunity:
o A clearly defined market need for the product
o A sustainable competitive advantage must be
attainable
o Growth potential
o Should be rewarding to the investor and/or
entrepreneur
o The timing of the opportunity must be right.
Buying an existing business
Franchising
• Acquisition of franchise
• Opportunity to start business that has been
proven in market
• Entrepreneur becomes franchisee
• Franchisor gives franchisee the right to
operate a business, using franchise name,
products and systems
• Franchisor as entrepreneur
• View franchisee as intrapreneur who initiates
ideas in the franchise system
Corporate entrepreneurship
(intrapreneurship)
• Entrepreneurship in existing business
• Person develops a new corporate business
within a business though identifying a new
opportunity
• Method by which a corporation introduces new
and diversified products or services
• Done through internal processes and
corporation’s resources
• Enables investment and profits through
establishment of business within business
The feasibility of the idea or
opportunity
• Not all ideas can be converted into
successful ventures
• Entrepreneurs should conduct a feasibility
study to determine if a venture/opportunity
will survive
• After feasibility has been established, a
business plan can be drawn up
Difference between small business
owners and entrepreneurs
• Entrepreneurs
o Entrepreneurs mobilise natural, human and
financial resources
o Create wealth for society and themselves
o Bring other factors of production into motion

• Small-business owners
o Satisfied with some autonomy
o Earn reasonable income
o Need for independence or lifestyle needs
o No intention of growing and developing business
o Not all small businesses are entrepreneurial
 The small business
• Difficult to define
• Defining criteria:
o Number of employees
o Sales volume
o Value of assets
o Market share
• National Small Business Amendment Act
(2004) defines SMEs & SMMEs as having one
or more of following:-
• Fewer than 200 employees
• Annual turnover less that R64 million
• Capital assets less than R23 million
• Direct managerial involvement by owners
The role of small businesses in
the economy
• Strategic role of small business:
o Producing products and services
o Innovation
o Aiding big business
o Job creation (85% employed by SMMEs in US)
Summary
• Entrepreneurship as the driving force behind
business organisation
• Role of the entrepreneur in the economy
• Assessment of the entrepreneur's unique
abilities and skills, access to resources,
search for opportunities and feasibility study