The phenomenon of the South African necessity entrepreneur

Economic growth and necessity entrepreneurship are closely and positively linked (Frederick, 2004); and this study explores the phenomenon of the South African necessity entrepreneur. The necessity entrepreneur is someone who never considers starting or owning a business until there is no other option (Kroll, 2003). This paper examines South African necessity entrepreneurs (NE) in light of propositions cited in the literature that NE is associated with three factors: positively with economic growth (real GDP growth rate), positively with unemployment (unemployment rate), and negative with a generous welfare system (expenditures on social security). The study of these factors are cited in three propositions: P1: There is a positive association between unemployment and NE. P2: There is a negative association between expenditures on social security necessity entrepreneurship. P3: There is a positive association between NE and economic growth. South Africa's moderately high levels of NE (albeit low relative to other developed countries) coupled with high unemployment rates and low social security expenditure are complimentary to assumptions in proposals 1 and 2. There is also a distinct positive relationship between NE and economic growth. Research findings accept Proposals 1, 2 and 3 (in the South African context only). As a prior it is also proposed that many of these entrepreneurs have unique psychological needs, such as lack of self-esteem and fear of family's survival, due to never being prepared for entrepreneurship. The relationship between NE and education is also highlighted. Policy implications are recommended towards increasing entrepreneurial behaviour, particularly amongst young adults.