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Why Businesses Fail in South Africa. By Ekos Akpokabayen

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Why Businesses Fail in South Africa.
By Ekos Akpokabayen

 

South Africa, like many emerging markets, experiences a high rate of business failure, particularly among small and medium-sized enterprises (SMEs). Statistics from the Small Enterprise Development Agency (SEDA) and the Global Entrepreneurship Monitor consistently reveal that over 70% of small businesses fail within the first two years of operation. This trend is concerning given that SMEs are vital contributors to economic growth, job creation, and innovation.

 

As a finance professional and Chief Investment Officer at Ovid Capita, I have closely observed the structural and operational challenges facing businesses in South Africa. Drawing from both analytical frameworks and on-the-ground experience, I will explore the critical reasons businesses fail and offer pragmatic advice to entrepreneurs aspiring to build resilient and sustainable enterprises.

 

1. Lack of Market Understanding and Strategic Positioning

One of the foundational causes of business failure is inadequate market research and poor strategic positioning. Too often, entrepreneurs are guided by passion, anecdotal evidence, or fleeting market trends rather than grounded, data-driven insights. While enthusiasm is essential, it must be paired with a thorough understanding of customer needs, behavioral patterns, and competitive dynamics.

A robust market analysis should answer essential questions: Who are our customers? What do they value? Who else is serving them, and how can we do better? Unfortunately, many business owners overestimate demand or misjudge pricing sensitivities, resulting in products or services that fail to gain traction.

To thrive, entrepreneurs must prioritize feasibility studies, competitive analysis, and customer validation exercises. Without this due diligence, they risk entering saturated markets, pricing incorrectly, or offering products with no long-term demand.

2. Weak Financial Management and Planning

Financial mismanagement remains one of the most persistent causes of business collapse. Many entrepreneurs lack fundamental financial literacy—unable to distinguish between profit and cash flow, or between gross margins and net income. This lack of understanding leads to poor decision-making, uncontrolled spending, and an inability to budget or forecast.

A successful business must implement sound accounting practices, establish clear financial controls, and adopt budgeting processes that align with strategic objectives. Entrepreneurs should leverage modern accounting software and, where possible, seek guidance from professional advisors or financial consultants.

Moreover, understanding unit economics—how much it costs to acquire a customer versus the lifetime value of that customer—is critical. Without these insights, even high-revenue businesses can fail if their cost structures are inefficient or unsustainable.

3. Cash Flow Constraints and Insufficient Capitalization
Cash flow—the lifeblood of any enterprise—is often misunderstood. Many business owners confuse profitability with liquidity, only to find themselves unable to cover operational expenses such as rent, payroll, or inventory.

This issue is compounded by a failure to raise capital at the right time. In South Africa’s volatile economic climate, unforeseen disruptions—such as load shedding, regulatory changes, or currency volatility—can quickly derail undercapitalized businesses.

Entrepreneurs must adopt a proactive approach to financial planning that accounts for seasonal fluctuations, delayed client payments, and potential economic shocks. Building a capital buffer and securing access to credit or investment capital can significantly increase a business’s resilience.

4. Underestimating the Competitive Landscape
South Africa’s business environment is dynamic and competitive. Many new entrants mistakenly believe their offerings are unique or that existing competitors are unsophisticated. This assumption is often misguided.

Competitor analysis is not a one-time event—it should be an ongoing process. Understanding the pricing models, service delivery mechanisms, customer retention strategies, and marketing approaches of competitors can offer valuable insights for differentiation and strategic agility.

Those who ignore competition risk being undercut on price, outpaced in innovation, or simply forgotten by consumers in a saturated market.

5. Inexperience in Hiring and Managing Talent
Even the most innovative ideas require strong execution—and that depends heavily on people. Unfortunately, many entrepreneurs lack experience in human resource management. Hiring based on convenience, cost, or personal relationships instead of merit and cultural fit can lead to operational inefficiencies and internal discord.

Effective recruitment is not just about filling roles; it’s about building a team that shares the vision, values, and ambition of the enterprise. Furthermore, poor leadership, lack of delegation, and micro-management often demotivate high-performing employees, leading to high turnover and loss of institutional knowledge.

Investing in people—through careful recruitment, team building, and leadership development—is essential to business sustainability.

6. Neglect of Employee Training and Development
In a fast-evolving economic landscape, businesses must constantly adapt to changes in technology, consumer behavior, and regulatory frameworks. Yet, employee training is often seen as a cost rather than an investment.

This mindset is dangerous. Inadequately trained staff can negatively impact customer satisfaction, productivity, and compliance. Conversely, continuous professional development fosters innovation, efficiency, and loyalty.

Entrepreneurs must create a culture of learning. This can be done through formal training programs, peer learning, mentorship initiatives, and access to industry certifications. Knowledge is a competitive advantage—and businesses that invest in human capital tend to outperform their peers.

7. Failure to Build Strategic Networks and Partnerships
In South Africa, many entrepreneurs operate in isolation. They overlook the value of business networks, industry associations, and collaborative ecosystems. However, successful businesses are rarely built in a vacuum.

Networking provides access to partnerships, funding opportunities, mentorship, and market intelligence. Engaging with other business owners, attending industry conferences, or joining business chambers can open doors that would otherwise remain closed.

Moreover, strategic alliances—whether for distribution, marketing, or product development—can reduce costs, increase market reach, and accelerate growth.

Conclusion: From Vulnerability to Viability
The entrepreneurial journey in South Africa is not for the faint-hearted. The economic landscape presents both opportunities and obstacles, and while many businesses begin with promise, too few survive long enough to reach their full potential.

To reverse this trend, entrepreneurs must shift from reactive to strategic thinking. They must invest time in market research, build solid financial foundations, plan for cash flow disruptions, and hire with intentionality. Furthermore, cultivating talent, embracing lifelong learning, and fostering collaborative relationships can significantly enhance business longevity.

At Ovid Capita, we advocate for an integrated approach to entrepreneurship—one that combines passion with planning, and innovation with execution. With the right guidance, tools, and mindset, South African entrepreneurs can overcome the systemic barriers that currently hinder SME growth and unlock the full potential of their ventures.

By addressing these avoidable pitfalls and embracing best practices, we can build a stronger, more inclusive, and sustainable business ecosystem that not only drives economic transformation but also uplifts communities across the country.

Ekos Akpokabayen has an MSc in Finance, and also the Chief Investment Officer at
Ovid Capita

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Journalists for Good Governance Shines Searchlight on Local Government Administration

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Journalists for Good Governance Shines Searchlight on Local Government Administration

…Calls for Accountability in Nigeria’s Grassroots Governance

 

LAGOS, Nigeria — A civil society coalition known as Journalists for Good Governance(JGG) has intensified public debate on transparency and accountability within Nigeria’s local government system, urging media professionals, civil society actors, and citizens to hold grassroots leaders accountable.

Speaking an event in Lagos recently, the acting chairman of the society, Comrade Bunmi Obarotimi said that despite reforms such as the Supreme Court’s 2024 ruling granting financial autonomy to all 774 Local Government Areas (LGAs), systemic challenges continues to hinder effective service delivery and responsible stewardship of public funds.

“Local governments are the closest tier of government to the people — yet too often they remain the least transparent. Without civic oversight and vibrant media, promises of autonomy ring hollow.” the acting chairman said.

The Journalist for Good Governance emphasised crucial roles that journalists can play in uncovering discrepancies in council spending, flagging poor service delivery, and educating citizens on their rights. Their call comes amid wider efforts by media and civic organisations to bridge accountability gaps. The civil society initiatives had previously launched monitoring campaigns to track local government expenditures and have been quietly advocating for transparency in how public money is deployed.

The leaders of the Journalists for Good Governance (JGG) highlighted the importance of physical assessment and citizens engagement on projects to boost people’s confidence, urging local councils to adopt open data platforms and proactive information dissemination in compliance with the Freedom of Information Act. Experts say the majority of LGAs currently lack operational websites or digital portals, further limiting public scrutiny.

The Journalists for Good Governance initiative aligns with sustained advocacy by civil society groups and governance experts calling for a collective approach to strengthening democratic accountability, and has decided to engage in critical and holistic assessments of how Local Governments is being run and the impact and quality of projects they embark-on and to address deficits in transparency and public trust.
Meanwhile, some state governments have signalled support for improved community engagement. In Lagos State, authorities reiterated a commitment to enhancing community media platforms as vehicles for civic participation and accountability at the grassroots level.

The renewed spotlight on local government administration has reignited public debate over fiscal responsibility and priorities. Controversies such as the widely criticised Adamawa council chairmen’s wives trip to Istanbul — which drew public outrage for perceived misuse of public funds — underscore why watchdog groups say stronger oversight mechanisms are urgently needed at the grassroots.
Citizens and activists have welcomed the journalists’ initiative, calling for sustained media engagement that goes beyond headlines to influence policy and accountability reform.
The civic rights advocates note that real change will require robust legal frameworks, a free press, and empowered communities equipped to demand transparency at every level of governance.
As Journalists for Good Governance mobilises its members, the coming months are likely to see heightened media attention on grassroots administration — from council budgets and service delivery to the enforcement of public information laws and digital transparency initiatives.

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Good Politics Or Just Power? Two Years After The Elections

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Good Politics Or Just Power? Two Years After The Elections

 

Two years after the last general election, Nigerians are justified in asking a direct question: is our democracy stronger today than it was then? Democracy is not measured by how many offices a party controls or how loudly politicians speak. It is measured by integrity, accountability, and the lived experience of the people. Good Politics demands more than victory at the polls; it demands moral leadership and visible progress in the lives of citizens.

The debate over amendments to the Electoral Act should have provided an opportunity to deepen transparency and strengthen public confidence. Instead, hesitation to fully embrace reforms that safeguard credible vote transmission and accountability has fueled doubt. In a nation where electoral credibility remains fragile, any reluctance to reinforce safeguards sends the wrong signal. Good Politics stands firmly for processes that are open, fair, and beyond suspicion.

The party in power commands significant authority across the federation. With control of the presidency, many state governments, a strong presence in the National Assembly, and influence at local levels, there should be no anxiety about reforms that ensure free and fair elections. Confidence in leadership is demonstrated not by dominance, but by a willingness to subject power to scrutiny. Politics rooted in the omoluabi ethos embraces fairness, transparency, and responsibility, even when inconvenient.

This is the standard long associated with Awolowo, whose politics emphasized discipline, social welfare, education, and institutional strength. His vision was not merely about holding office, but about transforming society through principled governance. Good Politics follows that tradition. It rejects manipulation, arrogance, and the concentration of power without accountability. It insists that authority must serve the people, not itself.

Beyond electoral reforms, democracy must deliver tangible relief. Across the country, households struggle with rising prices and shrinking purchasing power. Small businesses are burdened by escalating costs. Young people search for opportunities that remain scarce. When economic hardship deepens, democracy feels abstract. Good Politics recognizes that political legitimacy is reinforced when citizens can see and feel the benefits of governance.

The concentration of power within a single political structure should translate into coordinated reform and measurable development. When it does not, questions naturally arise. Democracy weakens when dominance replaces performance. It weakens when loyalty to party eclipses loyalty to principle. The omoluabi tradition teaches that character defines leadership. Without character, authority becomes hollow.

A healthy democracy requires credible elections and compassionate governance. It requires leaders who understand that politics is a moral enterprise. Two years into this administration, many Nigerians remain uncertain about the direction of both our democratic processes and their daily welfare. If democracy is to endure, it must reflect Good Politics: fairness in competition, integrity in conduct, and compassion in governance. Anything less falls short of the standard that our history and our values demand.

 

 

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GEN CHRISTOPHER GWABIN MUSA SUPPORT INITIATIVE COMMENDS STATE-FEDERAL COLLABORATION IN ZAMFARA

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GEN CHRISTOPHER GWABIN MUSA SUPPORT INITIATIVE COMMENDS STATE-FEDERAL COLLABORATION IN ZAMFARA

 

The Gen Christopher Gwabin Musa Support Initiative (GCGMSI) has commended the Zamfara State Government for its decisive contribution to security operations through the donation of newly acquired armoured personnel carriers (APCs), surveillance drones, and other critical operational equipment to troops and security agencies in the state.

 

This commendation was contained in a statement signed by the Convener of the GCGMSI, Ibrahim Dahiru Danfulani, Sadaukin Garkuwan Keffi/Betara Biu, and made available to the press.

 

The equipment was formally commissioned on Wednesday, February 18, by the Grand Patron of the GCGMSI and Minister of Defence, General Christopher Gwabin Musa, OFR (rtd.), in a ceremony at the Government House, Gusau. The event was attended by senior military officers, heads of security agencies, and top officials of the Zamfara State Government.

 

The GCGMSI, in its statement, hailed the donation as a “transformative and timely intervention” that aligns perfectly with its core objective of advocating for and supporting tangible measures that enhance the operational capacity and welfare of Nigeria’s security forces. The Initiative praised Governor Dauda Lawal’s administration for moving beyond rhetoric to actionable, material support, describing the move as a “blueprint for state-level collaboration in national security.”

 

“The provision of these assets by the Zamfara State Government is a testament to visionary leadership and a profound commitment to the peace and stability of its people,” the GCGMSI statement read. “It represents the exact kind of synergistic partnership between state and federal authorities that the GCGMSI champions. This initiative will significantly close operational gaps, boost the confidence of our gallant troops, and send a strong message to criminal elements.”

 

Speaking at the commissioning, General Musa emphasized that sustained collaboration is indispensable in confronting the nation’s evolving security challenges. He specifically commended Governor Lawal for his proactive support.

 

“Governor Dauda Lawal has demonstrated exemplary leadership and an unwavering dedication to the security of Zamfara State,” the Defence Minister stated. “The provision of these armoured vehicles, surveillance drones, and other operational equipment will undoubtedly boost the morale and operational effectiveness of our troops and other security agencies on the ground. This is a commendable effort that should be emulated by others.”

 

The newly commissioned assets, which include multiple APCs and advanced surveillance drones, are expected to dramatically enhance the mobility, protection, intelligence-gathering, and rapid response capabilities of security forces, particularly in the state’s remote and difficult terrains where anti-banditry operations are ongoing.

 

In his remarks, Governor Lawal reiterated his administration’s steadfast commitment to being a reliable partner in the security architecture. He urged security agencies to deploy the new resources responsibly and effectively to safeguard lives and property.

 

The Federal Government, through the Ministry of Defence, reaffirmed its commitment to continuing and deepening such partnerships with state governments across the nation to strengthen coordination and resource allocation in the collective fight against insecurity.

 

The GCGMSI concluded its statement by urging other state governments to take a cue from Zamfara’s “bold and pragmatic” approach, affirming that such concrete support is vital for achieving lasting peace and security across Nigeria.

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