Ethnic entrepreneurship must be understood in its social, cultural and historical context (Waldinger, Aldrich and Ward, 1990). Most up-to-date research on ethnic entrepreneurs has, however, been carried out in an American and European context (Light, 1972, 1998, 2002; Welsch, 1998; Butler and Greene, 1997; Doen et al., 1998; Masurel et al., 2001; Butler and Herring, 2002; Menzies et al., 2003; Fregetto, 2004). Even if exemptions do exist, our understanding about new economies is still in its infancy. The South African context is such an example, being a young ten year-old new democracy and involved in a transition period as a consequence of the political changes in the mid Nineties. In order to construct a better theoretical understanding of the phenomenon of ethnic entrepreneurship in this setting, there is a need to investigate this phenomenon from different angles wherein cultural embeddedness is highly relevant.

In this chapter we will focus on ethnic entrepreneurship in the South African context and more specifically in the geographic area of the Western Cape. Drawing on theories about culture as integration, differentiation and fragmentation and from conversations with representatives of support agencies and black and coloured entrepreneurs, the purpose of this chapter is to illustrate the paradox that supporting and promoting Black economic empowerment might lead in a direction that creates a lock-in effect for previously disadvantaged groups. We argue that culture is a fragmented phenomenon and needs to be treated and understood as such. Viewing culture embeddedness as fragmented will have practical implications for the public rhetoric that is so much in vogue in South Africa. It is important to be aware of the consequences in order to avoid the creation and shaping of new taken-for-granted cultures that do not encompass the possibility of cultural dynamics, promoting entrepreneurship.

The chapter falls into five parts: First and second parts provide a background and an introduction to ethnic entrepreneurship in South Africa. In part three, a theoretical background of culture as integration, differentiation and fragmentation follows that will be fruitful in order to argue our case. The fourth part describes the support agencies and the entrepreneurs that are active in the rhetoric of Black economic empowerment and provides some empirical evidence. In the fifth part we discuss how the support of one specific culture might lead to a lock-in-effect and work against the very nature of the meaning of entrepreneurship