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Since 1994, the South African government has actively engaged in developing an entrepreneurship policy to counter the effects of Apartheid legacies. However, entrepreneurship has remained consistently low among Black South Africans. The aim of this study is therefore to identify and discuss the role of path dependence on entrepreneurial behaviour, considering the influence of the institutional context. Thirty qualitative interviews with township entrepreneurs were conducted, and three key themes emerged: mechanisms of division, low entrepreneurial culture, and low social trust. The findings support the present recommendation of context-specific policy development. Thus, Hofferbert’s (1974) funnel of causality is proposed as a tool to develop entrepreneurship policy within the context of South African townships.