The dismantling of Apartheid and the establishment of a democratically elected government in the 1990s resulted in unprecedented changes in the political, economic and social arenas. This study makes intelligible how and why ethnic entrepreneurs use networking to acquire and organise capital, within the specific socio-economic and institutional context of South Africa as an emerging country in a state of transition. The sample consisted of 325 African, Indian and European entrepreneurs from the KwaZulu-Natal province of South Africa. A variety of multivariate data analysis techniques were utilised in the study. Significant differences between the three groups were identified on various networking variables, and their perception of the institutional environment. The research adapts a mixed embeddedness approach which recognises that the local structures of a local economy and legal institutional factors influence the creation and existence of ethnic enterprises. This study also heeds the call to conduct entrepreneurial research in the emerging world, particularly in the African context, and recommendations are presented for supporting entrepreneurship development in South Africa.