Of enterprise richness in South African towns

In two recent publications in the South African Journal of Science, we explored the enterprise richness, defined as the number of different enterprise types, of South African towns:

Enterprise richness as an important characteristic of South African towns; and
The enduring and spatial nature of the enterprise richness of South African towns

Remarkable and enduring regularities were observed between the number of enterprise types and the total number of enterprises in towns.

Picture 1Log-log relationships which endured over 70 years were recorded and these relationships raise important issues about the nature of entrepreneurship and its dynamics in different-sized South African towns. The figure shows such a relationship that covers a range of villages with fewer than 10 enterprises to towns with 350 enterprises.

The relationship is a power law and in essence it states that for each doubling of the number of enterprises in a town, the number of enterprise types will increase by a constant ratio, in this case 70%. The opposite is also true: for each halving of the number of enterprises in a town, the number of enterprise types will decrease by a constant ratio, in this case by 59%.

Picture 2

The equation describes the ‘entrepreneurial spaces’ of towns and allows calculation of increases (or decreases) of two enterprise types in towns as they grow (or regress):

  1. Increases in enterprise types that had not before been present, and
  2. increases in enterprise types that are already present in a town.

In fact, one can calculate what fraction of the entrepreneurial space of towns will be occupied by existing enterprise types or by new enterprise types (see graph above).

Increases in the size of towns (measured by their total enterprise numbers) always require the founding of enterprise types that have not been present before, which calls for more ‘new entrepreneurship’, but also increases in enterprise types that have already been present in the town. This calls for more existing entrepreneurship.

In villages and small towns with fewer than about 120 enterprises, new entrepreneurship is more important than existing entrepreneurship and in very small villages or towns the requirement for entrepreneurs who can ‘see’ business opportunities of types that are not yet present, may approach 70 to 90%. And this places a heavy burden on public and private organisations that want to revitalize small rural South African towns by way of supporting would-be entrepreneurs. These entrepreneurs would probably have no or little experience of how to conceptualise totally new business opportunities and would tend to fall back on their own observations and experiences, which mostly would lead to ‘more of the same’. And even in large towns there is always a need for the founding of business types that have not been present before, and this could be at a level of 20 to 30% of enterprise growth.

Local economic development (LED) training, planning and support should heed these realities.

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