While South Africa presents unique challenges for small businesses in 2023, several other countries offer a thriving environment for startup businesses – including the Czech Republic, Finland, and Sweden.
According to the latest RMB/BER Business Confidence Index (BCI), which declined further from 38 in the fourth quarter of 2022 to 36 in the first quarter of 2023, confidence in South Africa’s business environment has not been in positive territory for the better part of a decade.
The main driver behind the huge drop in confidence is the persistent load shedding which has devastated businesses and economic operations over the period.
In response, many economists and financial firms have revised South Africa’s growth forecast downward for the near term – including the International Monetary Fund (IMF), which expects the country’s economic growth to remain stagnant at 0.1% in 2023.
Being characterised by slow growth and high unemployment, South Africa’s economic climate creates uncertainty and instability, which can be particularly challenging for startups that need a stable business environment to thrive.
However, plenty of other countries in 2023 offer a favourable economic environment for both businesses and employees.
This is according to the latest Global Startup Index, which highlighted the best and worst countries in which to launch a startup in 2023.
Starting with a seed list of 50 countries, the report used a weighted ranking to create the list based on the following metrics:
- GDP/GDP per capita;
- Business taxes;
- Economic GDP growth;
- Average monthly salary;
- The cost to start a business;
- Happiness score;
- Quality of life score; and
- Cost of living.
Best countries for startup businesses in 2023
The Czech Republic emerged as the best country to launch a startup in 2023.
With new business procedures costing just 1.1% of GNI (gross national income) per capita, it’s one of the least expensive places to start trading. Labour costs are also reasonable, with salaries averaging $1,800 (R32,963) per month, said the report.
Finland ranked as the second-best country for startups. Businesses are taxed a standard 20%, and registering a business (startup procedures) costs just 0.7% of GNI per capita, so costs are relatively low from this perspective.
The country is also home to the world’s happiest people, which has positive implications for business owners.
The report added that studies have shown that happy employees lead to better business outcomes, including increased productivity, improved work quality, and higher retention rates.
Sweden placed third, with the cost of launching a startup being just 0.5% of GNI per capita.
The nation boasts the highest GDP among the top five countries at $59,324 per capita. Coupled with its relatively low cost of living (R16,137 per month excluding rent), this suggests a large consumer base with disposable income that could support a local startup.
However, business tax in Sweden is slightly higher compared to the Czech Republic and Finland at 20.60%.
Following Sweden is Estonia (4th), Slovakia (5th), the United Kingdom (6th), the Netherlands (7th), Austria (8th), Demark (9th), and finally, Portugal placing 10th.
Surprisingly, the report noted that the United States ranked outside the top 10 and ranked as the 17th best country to launch a startup. In 2022, the capitalist market economy experienced a low GDP economic growth rate of 1.6% – the third lowest overall.
Though business tax rates differ by state, startups can expect to pay 25.8% on capital generated on average.
Despite this, the US remains a popular destination for entrepreneurs due to its large market, well-developed infrastructure, and supportive legal system for protecting intellectual property.
Worst countries for startup businesses in 2023
At the other end of the scale, the research also revealed the countries that offer the least favourable environment for startups and their employees.
The Philippines ranked as the most challenging country in which to launch a startup. The cost of launching a startup is the highest among all the countries analysed, totalling 23.3% of GNI per capita.
Moreover, the average salary is relatively low at $850 per month, and the quality of life score for employees is the lowest (81 out of a possible 240) among all the locations ranked, which could negatively impact productivity, employee engagement, and job satisfaction.
Egypt ranked in second place as the worst country to launch a startup thanks to its quality of life and happiness rankings, while India is third, South Korea is fourth – mainly due to its combination of high business taxes and high start-up procedures – and Vietnam is fifth.