Tlhomola S J ebook

Perceptions of Small, Medium, Micro Enterprise Entrepreneur

regarding Factors Contributing to Failure: A Case of Tshwane

Metropolitan Municipality

S J Tlhomola

Department of Management and EntrepreneurshipTshwane University of Technology

EM RankhumiseTshwane University of Technology

BJ van NiekerkTshwane University of Technology

ABSTRACT

Central to the current South Africa topical issues, the development and support of small, medium and micro enterprises is high on the agenda. This paper examines the perception of small, medium and micro enterprises (SMMEs) owners regarding the factors that lead to the failure of SMMEs The study followed a quantitative approach. Assumed factors leading to their failure are characterised by lack of funding, managerial skills, training as well as government support. This study is based on sample survey consisting of 111 existing SMME owners. Empirical evidence shows that indeed, many entrepreneurs are encountering pitfalls when pursuing their business endeavours. This is evident from the fact that they still require intensive training and support on how to run their businesses to ensure sustainability. Some of the factors that came up strongly are unwillingness of banks to provide funding, management skills as well as support from the government. It was also found that the SMME owners have the capability of decreasing unemployment in the country as a result of number of people they employ. Among the factors that contribute to the failure is crime. The participants are of the opinion that something needs to be done to address crime. The paper concludes that even though entrepreneurs are trying their best to pursue their endeavours; there are challenges that need to be addressed so that they could execute their businesses effectively and efficiently. Lastly, government support measures should be designed to make the business environment more conducive to operate and such measures should be conspicuous.

Key words: Entrepreneurs, entrepreneurship, small, macro and medium enterprises

(SMMEs), barriers to success, South Africa

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INTRODUCTION

Small, medium and micro enterprise (SMME) development was identified by the new

government as a priority in creating jobs to solve the high unemployment rate (Nieman,

2001:445). A report by the Department of Trade and Industry indicates that this sector

accounts for almost 75 percent of all employment in South Africa and contributes

approximately 28 percent to Gross Domestic Product (Wadala, 2005:1). SMMEs play a

particularly important role in a country’s economy, because of their number and

because of its large share of the workforce involved. The government has for many

years carried out variety of programmes to support these enterprises, although not a

great deal of these programmes is known by SMMEs. In South Africa, SMMEs lag well

behind in terms of know-how, skill levels, capital investment to support their activities,

and access and ability to take advantage of modern technologies. As in most countries

they find it difficult to obtain financing. Apart from the lack of funding, SMMEs appear to

suffer from a lack of information and efficient production technologies, scant use of

management and control systems, inability to access consulting services and other

related deficiencies.

Therefore the need for this study is to set an action plan for SMMEs to increase their

efficiency, to sustain themselves and guard against factors contributing to failure. In

order to carry out this plan, there is a need to understand the SMMEs operations and

the role they play in the global economy. Furthermore, it is of particular importance to

understand the factors contributing to the failure of SMMEs since it is suggested that a

large percentage of SMMEs most fail within the first five years of their operation.

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A high level of entrepreneurial activity in any country has the propensity to make a direct

and positive impact on the elevation of unemployment and related concerns (Antonites

and VanVuuren, 2005). But according to GEM (2004) report, South Africa is still lagging

behind as compared to other developing countries in entrepreneurial activities. In this

case one could defend the situation to lack of support by the apartheid government

towards small enterprises. Despite the economic importance of this sector, there were

laws in the past that prohibited the continuous advancement of this sector especially in

the black society thereby resulting in the low level of entrepreneurial activities in South

Africa.

During the apartheid era, which came to an end in 1994, social engineering resulted in a

gross imbalance in socio-economic status between black and white. The exclusively

white government engineered laws first through colonialism, and subsequently

apartheid, to monopolize the economic resources of the country. Not only were black

people specifically excluded from economic participation, but they were also denied the

right to economic and intellectual growth through various destabilization mechanisms. In

1950 the Group Areas Act prohibited black, Coloured and Indian people from operating

a business outside their designated area. Blacks were forcibly persuaded to stop trading

in locations that existed on the outskirts of white towns and cities. Post apartheid, to

eradicate this situation, the South African government, through the White Paper on

National Strategy for the Promotion and Development of Small Business, identified

SMMEs as the priority in creating jobs to solve the high unemployment conditions and

to redistribute wealth (Department of Trade and Industry, 1995). There is evidence that

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in South Africa the national unemployment level is currently estimated at 28.4%

(Statistics SA, 2004:1). Therefore after the democratic elections in 1994, the

government, through the Department of Trade and Industry (DTI), launched the first

attempt in South Africa to address SMME development as a matter of priority to

alleviate unemployment and create economic confidence. The National Small Business

Act of 1996, paved the way for the launch of a range of entirely new institutions within

the DTI group, including Ntsika Enterprise Promotion Agency, and Khula Enterprise

Finance. Ntsika, which has now been merged under the Small Enterprise Development

Agency (SEDA), was a government agency whose mission was to render an efficient

and effective promotion and support service to SMMEs in order to contribute towards

an equitable economic growth in South Africa. Ntsika provided wholesale non-financial

support service for SMME promotion and development” (Ntsika, 2002).

THEORETICAL PERSPECTIVE ON SMMES

Many reasons are given for business failure, inter alia with, lack of managerial planning

skills, ineffective working capital management, inability to manage the competitive

environment and growth over-expansion(Rankhumise, 2009; Netswera and Ladzani,

2009). Timmons (1994:10) refers to a study conducted in the United States among

small businesses to determine failure rate. It was found that 23.7% of new businesses

dissolved within two years of being started, while 51.7% of businesses dissolved within

four years and 62.7% within six years. The major reasons were found to be the

following: 47.5% failed for economic reasons, 38.4% failed as a result of financial

trouble (including excessive debt, extremely high operating expenses, and insufficient

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working capital), 7.1% failed because of neglect by the owner (including poor work

habits, business conflicts and family problems), 3.4% failed because of inexperience

and 3.6% failed for various other reasons, such as disaster and fraud.

From the literature and studies conducted, the following issues emerged to be posing

challenges to the SMME owners:

Fraud/white collar crime

Given the important socio economic role performed by small, medium and micro

enterprises, it is important to look at negative consequences of fraud on their

businesses. Despite their important contribution to the socio economic development of

South Africa , many SMMEs are exposed to the high cost of the fraud wave currently

engulfing corporate South Africa (Viviers and Venter, 2008:51).

Lack of financial support for entrepreneurs

Access to finance is typically a major problem for entrepreneurs without a track record

or without any form of guarantee. The extent to which the financial system understands

and supports the people starting and growing new businesses is therefore a critical

factor influencing entrepreneurship (Rankhumise, 2010:9).

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Lack of entrepreneurship training and education

Entrepreneurship training and education acts as a facilitator for entrepreneurial

activities, with the main focus on stimulating entrepreneurial activity and performance.

The importance of entrepreneurship education and training is well established. From an

economic perspective, education is seen as a critical factor in promoting long term

employment and economic growth ( Sweeney, 1998).

Access to appropriate technology

During the past, due to sanctions, companies were frozen into their relatively

competitive position by South African isolation from international research and

development. Because of changes in the political climate, South Africa necessarily has

to steal a march on competitors by upgrading and improving technology to meet the

challenge of change. Successful entrepreneurs will have to be technology oriented and

willing to adapt to a changing environment. In a changing environment, innovation is a

key survival strategy.

Access to markets

Access to markets contributes significantly to the survival of an enterprise. It is a critical

component of a competitive economy. The government has an important role to play by

ensuring that a conducive regulatory environment prevails for entrepreneurs.

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Mismanagement of resources

It is common practice in businesses for managers or owners to reward themselves with

huge amounts of money before realizing the prospects of the business. This aspect is

prevalent especially in young enterprises. It is the responsibility of business owners and

managers to avoid using assets of the business for personal use at the expense of the

business (Van Aardt, Van Aardt, Bezuidenhout and Mumba, 2008:249; Rankhumise:

2010:8).

Lack of management skills

One of the most significant reasons for the failure of SMMEs is their inadequate

application of essential business and management practices (Alasadi and Abdelrahim,

2007). Therefore training for small business owners/managers as well as their

subordinates allows them to acquire the necessary skills to ensure the survival and

success of their business.

Poor cash management and financial control

Familiarity with Generally Accepted Accounting Practice (GAAP) is a prerequisite. A

well-qualified accountant should be employed to carry on this task. He or she should

have proper knowledge to control cash as liquidity is the key to the success of any

business

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Employees theft

Feasible internal controls should be put in place to reduce theft. It is the duty of the

manager to distribute responsibilities accordingly to minimize misappropriation of funds.

This effort can be maintained by reconciling the bank and cash on a regular basis.

Stringent controls and measures need be employed to alleviate any kind of theft that is

likely to put the business in danger.

High taxes

At national level, the primary factor facing the entrepreneur is high taxation. At present

the tax rate stands at 29% for small businesses. Taxation reduces the cash available to

the firm for reinvestment.

Based on the articulated background and literature discussed, this paper is therefore

aims to explore some perceptions about the factors are perceived to be contributory to

the failure of SMME entrepreneurs in the Tshwane Metropolitan Municipality. The rest of

this paper covers the research design, results and discussion of findings, limitations and

conclusions as well as recommendations.

RESEARCH DESIGN AND METHOD

Method

A quantitative research design was used for the purpose of this study. According to

McMillan and Schumacher (2001:205), quantitative research is one of the research

designs which relies heavily on numbers in reporting results, sampling and provisions of

estimated instruments, reliability and validity. Since the goal for this study was to

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explore on perceptions of the existing SMME entrepreneurs, a survey was deemed

appropriate. A consideration was made of the responses of the existing SMMEs as

imperative to understand the factors that could lead to failure. Therefore in this specific

study, the results are presented using simple descriptive statistics.

Participants

For the purpose of this study, the target population comprised of existing SMME

entrepreneurs from Tshwane central business district, Soshanguve, Mamelodi, Ga-

Rankuwa, Attridgeville and Centurion. The reason for not focusing on the failed

entrepreneurs is due to the fact they may not be reachable and for those who are

available may not be willing to share their bad experience with the researchers. A list of

SMMEs was obtained from the Tshwane Metropolitan Municipality and a simple random

sampling was used to select the participants.

Data collection

Data were collected through a structured questionnaire with five point likert scale with

responses ranging from strongly agree to strongly disagree. The questionnaire

consisted of two section inter alia with information on biographical details of the

participants and questions or statements relating to the SMME failure.

A 25 item questionnaire was developed based on key concepts from literature review

on small, medium and micro enterprises. An inclusion was made on the questions that

elicit entrepreneurs’ responses to the factors that are perceived to be contributing to the

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failure of SMMEs. Prior to data collection, the questionnaire was submitted to an

independent researcher who was not part of the research for inputs and suggestions.

The researchers and the independent researcher reached a consensus that the

questionnaire covered the literature and fit the sample even though it could have been

exciting if the failed entrepreneurs as primary participants were involved in this specific

study. After the comments were made, a pilot study was conducted among ten (10)

existing entrepreneurs to examine clarity and meaningfulness of the items. The three(3)

researchers reviewed the responses to the instrument and also asked them about the

relevance and clarity of the questions included in the questionnaire. Feedback from the

pilot study was incorporated into the questionnaire that was used to gather data for this

research.

Procedure

The researcher (who was a Master student) personally administered 120

questionnaires among the existing SMME entrepreneurs. Prospective participants were

informed that the purpose of the study was to identify factors that they perceive to be

contributing to the failure of SMMEs. They were further informed that the completion of

the questionnaire would take 20 minutes of their time.

The following ethical issues were articulated and explained to participants: Firstly,

informed consent was obtained from the participants by way of information leaflet

outlining the purpose of the study. Secondly, the participants were further informed of

their rights that they had a right to participate or not in the study. Thirdly, participants

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were informed that anonymity will be maintained as no personal identifiers were used in

the research.

RELIABILITY ANALYSIS

Cronbach’s alpha was used to test the internal consistency of the questionnaire

(Research instrument) as indicated below.

Figure 5.13 Reliability statistics

Reliability statistics

Cronbach's

alpha

Cronbach's alpha based on

standardized items No. of items

.735 .768 25

The questionnaire was tested for its reliability by using Cronbach’s alpha. The findings

were found to be acceptable after being tested by applying Cronbach’s alpha. The

Cronbach alpha value for this research was 0.735, which reflects an acceptable

directive. This directive is supported by Fowler (2002), who explains the Cronbach’s

alpha value for all the items has to be well above the commonly acceptable value of

0.70. Clark and Watson (1995:315) also state that 0.70 is used as a directive, and

Bartholomew, Antonia and Marcia (2000:298) are of the same view, namely that

between 0.80 and 0.60 is also acceptable.

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RESULTS AND DISCUSSION

As previously articulated cf method, the data were analyzed using descriptive statistics.

In this instance, the five point likert scale was merged in order to get a simpler

interpretation of the results. The results are presented in frequencies and percentages.

Sample realization

The sample in the research consisted of 63.1% males and 36.9% females. The

respondents’ language group were, English (37.6%), Afrikaans (17.9%), Sotho (8.6%),

Tswana (8.6%), Zulu (7.9%), Swati (5.5%), Pedi (5.2%), Xhosa (5.2%), Venda (1.7%),

Ndebele (1.4%) and Tsonga (0.3%). Other languages were computed separately from

local languages and amounted to 9.9%. In terms of the racial classification it emerged

that 57.7% of the sample represented blacks and 32.4% whites. Coloured and Asian

respondents represented a small percentage of the sample (5.4% and 4.5%,

respectively).

The analysis is based on responses from 111 out of the 120 questionnaires that were

administered to entrepreneurs, yielding a response rate of 92.5%. The results of this

study are presented in table 1 and 2 respectively. The discussion are then made after

each table.

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Table 1: The statements regarding factors leading to failure and success of SMME

sector

Statements Agree No comment Disagree Total %

1. Small businesses has the

ability to decrease

unemployment.

100% 100%

2. Education increases the

chances of long-term survival.

100% 100%

3. The use of appropriate

technology is behind a

successful SMME sector.

94.6% 5.4% 100%

4. Collateral is a problem for

many of the disadvantaged

entrepreneurs.

82.9% 15.3% 1.8% 100%

5. Banks and other financial

institutions are willing to

finance SMMEs.

13.5% 20.7% 65.8% 100%

6. Business owners should

avoid using assets of the

business for personal use.

76.6% 7.2% 16.2% 100%

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7. Most businesses collapse

due to poor product marketing

65.8% 18.9% 15.3% 100%

8. Entrepreneurship should be

taught as early as primary

school in order to improve

entrepreneurial activities in

South Africa.

73.0% 22.5% 4.5% 100%

9. Use of consultants before

and when the business is

running is necessary.

89.2% 9.9% .9% 100%

10. Banks are reluctant to

finance SMMEs because of

the high risk involved.

89.2% 9.9% .9% 100%

11. Crime affects businesses

negatively as a whole.

99.1% 09% 100%

12. Current interest rates affect

small business more than big

established firms.

80.0% 17.3% 2.7% 100%

13. Taxes imposed by the

government on SMME sector

are reasonable.

40.5% 26.1% 33.3% 100%

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Of all the participants (100%) in the research, believe that SMMEs have the ability of

decrease unemployment in the society. This confirm what Rankhumise (2009) and

Netswera and Ladzani (2009) had found that SMMEs have the ability to create

employment and as such address unemployment. This is in line with Government

commitment to improve SMMEs environment for them to help absorb skilled and

unskilled labour. Unemployment is an epidemic which needs to be eradicated at all cost

with proper mechanisms available.

Once more, all respondents (100%) believe education is a key success factor for

survival. This correlates with GEM (2004) survey findings that dramatic improvements in

the quality of education are needed and an appropriate entrepreneurship education

needs to be offered at schools in all levels, therefore education plays a pivotal role in

the survival of the business and as such SMME owners should be exposed to various

educational programmes to enable them to acquire knowledge in their respective

endeavors.

From the findings it emerged that most of the respondents believe that collateral

security is still a concern for the previously disadvantaged entrepreneurs. This however,

is a result of the imbalances caused by skewed policies of the past where preferences

were given to certain people and the results correlate positively with what Samitos and

Kenourgio (2005:34) unraveled that banks seek for a positive track record and

collateral, which generally firms do not have and this situation creates some challenges

for the SMME sector.

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The findings reveal that 82.9% of the respondents are of the opinion that collateral still

remains a problem in acquiring finance hence banks are not willing to assist the SMME

owner. The most prominent reason for failing to grant credit applications is lack of

collateral. The reality is that many South Africans do not have assets to cede to the

bank due to high levels of poverty and unemployment as well as the imbalances of the

past (Rwigema and Venter 2004:410).

As regards to the use of business assets, the respondents (76.6%) agree that business

assets should not be utilized for personal gain. These findings confirm what van Aardt et

al (2008:248) that business owners and managers should avoid using assets of the

business for personal use at the expense of the business. Since every asset of the

business is important towards the profit, economic principle needs to be applied at all

costs

It is an apparent issue that when businesses are not properly marketing their products,

it is likely for such business to perform poorly. It is therefore imperative for the SMMEs

to improve the way they market their products as reflected in the responses where most

of the respondents(65.8%) agree that many businesses collapse because of poor

product marketing. These findings confirm what Gbadamosi (2006:4) found on SMMEs’

limited marketing capacity that the economic power of many of these SMMEs is small,

hence they mostly serve their localities - local markets and environment, and that there

is a need for marketing orientations and market expansion.

The majority (99.1%) of the respondents believe that crime is not in the best interest of

businesses. This confirms what Van Aardt et.al found (2008:250that theft and fraud by

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and the following shared the same sentiments (Rankhumise, 2010); BAC, 2006: 1;

Clover and Darroch, 2005:248) that crime could affects business directly, with the theft of

property and money, and this could reduce business confidence, loss of investment,

emigration and the steady erosion of the foundations upon which the economy is built.

This is type of activities are affecting the businesses negatively and as such SMMEs are

compelled to strengthen their security measures. The findings confirm what Van Aardt

et al. (2008:250) and Venter and Viviers (2008:51) found that theft and fraud by senior

staff are common practice and hamper the profitability of small businesses.

Of the SMMEs owners surveyed, 40.5% believe that it takes too much time and too

many resources to sort out their fiscal affairs. The time taken in keeping the records and

the paperwork involved in completing tax returns are excessive. The respondents

further stated that paying tax impacts adversely on the cash flow of the business

because the money could be used for business investments. They also cited high

operating costs, high taxes, lack of access to finance and employee costs as some of

the key factors affecting them most. The government needs to exempt small businesses

from high taxes. As President Zuma said in his State of the Nation speech (2009) that:

“the inclusive government will loosen the laws and implement a tax relief strategy for

small and medium enterprises”. Actions to be taken in this case are:

Tax assessment by the government

Business people should familiarize themselves with tax regulations

Entrepreneurs should pay tax in time to ease the burden.

Furthermore, owners of SMME have also expressed the view that government

legislated Value Added Tax (VAT) imposes a disproportionate burden on smaller

businesses. This burden is attributed to the complexity of VAT registration and

administration, and to cash flow stress - interest is lost prior to receipt of VAT refunds,

and VAT is paid at the point of invoice rather than the point of receipt (Bannock, 2002).

It emerged from the findings that most of the respondents (80%) agreed that interest

rates have a negative effect on small businesses compared to big firms. The effect is

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that SMMEs should have an of addressing such a challenge by increasing their

commodity prices and in turn customers may not support the businesses anymore. This

could mean that the income may as well drop.

Table 1 : Entrepreneurial support

1. Small businesses need

government intervention to

support for them to grow.

93.7% 2.7% 3.6% 100%

2. The government is

encouraging people to start

their own businesses.

64.9% 16.2% 18.9% 100%

3. Entrepreneurs are provided

with training programmes.

28.8.% 24.3% 46.8% 100%

4. Many entrepreneurs know of

the DTI’s services.

26.1% 39.6% 34.2% 100%

5. Lack of support from the DTI

impacts on the success of

SMMEs.

89.2% 9.9% .9% 100%

From the above table, it is noted that the respondents are of the opinion that the

government is encouraging people to start their businesses. This however, is line with

government’s intentions for the promotion of small businesses due to the fact that they

have the ability to address unemployment.

From the findings, it emerged that a significant 89.2% agree that without proper support

from the Department of Trade and Industry the SMME sector will not be sustainable.

The findings correlate with a study by Miehlbradt and McVay (2003) who found that

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there is an increased acknowledgement that public sector organisations have not

proved to be effective providers of Business Development Services (BDS) to SMMEs.

This is as a result of the fact that most of the SMMEs are not aware of the support

services provided by the Department of Trade and Industry.

The majority of respondents at 93.7% believe that it is in the best interest of the

government to support SMMEs to enable them to grow their businesses, few of the

respondents however had different opinions. 2.7% were uncertain and 3.6% indicated

that they disagree. Schussler (2009:3) believes that the DTI and its subsidiaries need to

understand small business.

In terms of providing training to entrepreneurs, this appears to be a challenge because

most (64%) of the entrepreneurs indicated that no training was ever provided to them.

Lack of training may hamper the efforts of the entrepreneurs to pursue their businesses.

Since, it is the intention of the government to see SMMEs growing and becoming

sustainable, training becomes essential element that needs to be applied to assist these

sector.

INFERENTIAL ANALYSIS

The chi-square test tabulates a variable into categories and computes statistics. It

compares the observed and expected frequencies in each category to test either that all

categories contain the same proportion of values or that each category contains a user-

specified proportion of values. The inferential analyses are presented to determine

whether there are any significant differences between various statements and variables.

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Figure 5.9 Cross-tabulation of gender and crime

Chi-square tests

Value df

Asymp. Sig. (2-

sided)

Pearson chi square 9.007a 2 .011

Likelihood ratio 9.793 2 .007

Linear-by-linear association 4.554 1 .033

No. of valid cases 111

a. 2 cells (33.3%) have expected count less than 5. The minimum expected count

is .37.

The figure above depicts the chi-square results for cross-tabulation between gender and

crime. The results yielded 0.011, which is highly significant. This in essence means that

in terms of responses gender plays a pivotal part when it comes to perceptions about

the effect of crime in small businesses. Crime is seen as an important element in the

business irrespective of gender classification. From general point of view,

businesswomen are perceived to be exposed to crime more than their male

counterparts. Therefore the results significantly indicate that more women are affected

by crime than men.

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Figure 5.10 Race groups’ perceptions of SMMEs decreasing unemployment

Chi-square tests

Value df

Asymp. Sig. (2-

sided)



Linear-by-linear association .792 1 .373


a. 4 cells (50.0%) have expected count less than 5. The minimum expected count is

2.12.

From the figure above, the chi-square test results yielded 0.035, which reflects

significant differences and suggests that respondents from various race groups had

different perceptions of whether small businesses decrease unemployment. The results

thus imply that there is a significant relationship on the perceptions of different racial

groups and unemployment.

Figure 5.11 Perception of entrepreneurship education

Chi-square tests

Value df

Asymp. Sig. (2-

sided)






is .14.

Figure 5.11 shows the respondents’ perception of entrepreneurship education to

improve entrepreneurial activities in South Africa. The chi-square results yielded 0.037

which shows a significant difference, which in general indicates the perception of the

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responses from people with various qualifications. The results indicate that highly

educated SMMEs owners perceive that entrepreneurship education is not necessary

whilst less educated owners believe that education play a pivotal role in the pursuance

of the businesses. Therefore it is assumed that there is a significant relationship

between higher level of education and entrepreneurship education.

Figure 5.12 Perception of bank reluctance to finance SMMEs

From the above figure the significance of the test is proven. The chi-square test results

yielded 0.022, which indicate significant difference and suggests that respondents with

various educational levels have different perceptions of the banks’ reluctance to finance

SMMEs because of the assumptions of high risk involved in this sector. In essence

there is a significant relationship in perception between various educational levels and

the bank reluctance to finance SMMEs therefore reluctance by banks to finance SMMEs

is a crucial factor. Respondents with lower level of education perceive banks as more

reluctant to finance them.

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Chi-square tests

Value df

Asymp. Sig. (2-

sided)






is .05.

LIMITATIONS OF THE STUDY

Since every research has its own limitations, this research was not an exception. There

were important limitations in this study that have a bearing on the results. First, the

population of the study was only in the Tshwane Metropolitan Municipality, therefore,

the researchers could not claim generalization of the results. Secondly, since the

method indicated that participation was voluntary, it could be that there may have been

some differences to the factors leading to SMME entrepreneurs with those who did not

choose to complete the questionnaires. Finally, another study is could be important on a

broader scale preferably in the nine provinces of South Africa with the view of

clarification and explore further the findings of this specific study.

CONCLUSION AND RECOMMENDATIONS

The discussion in this paper articulates the sentiments from the SMMEs entrepreneurs

regarding the factors that are perceived to be contributing to the failure of businesses.

Since existing entrepreneurs were involved in the research, their experiences and

perceptions could be of assistance to avoid failure at their own businesses. It emerged

that there are shortcomings that are seen to be barriers and as such affect the

businesses negatively. The findings on which this paper is based suggest that the

existing success factors and barriers include, among others:

The SMMEs has the capacity to decrease unemployment in the country based

on the number of people they employ.

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Education plays a pivotal role in the success of the businesses and this means

that if these entrepreneurs are provided with necessary education and training, it

is likely that they will succeed in their endeavours.

Lack of collateral security is hampering the success of SMME sector in the

sense that if the banks are not interested in providing funding applicants without

security, how would this sector expand their operations.

Another factor that hampers the success of SMMEs is poor or non marketing of

the products which make difficult for the products to be known or even to remind

clients that such a product still exists.

The unwillingness of the banks to grant loans to SMMEs is also seen as one of

the factors that are contributing to the failure of this sector.

Quite often the entrepreneurs are using the business assets for their personal

use and this normally affect the profitability of the business.

Crime is a concern for all the entrepreneurs and as such additional expenses are

incurred by way of sourcing security companies to take charge of security matter

for a fee.

The other concern to reflect on is that the SMMEs are not getting support from

the government. This matter require further investigation in the sense that most

of the entrepreneurs surveyed are not aware of the support the government is

providing.

Tax impose on SMME is regarded as a burden. The burden as such is not about

compliance, but rather the process of registering and making some returns of

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such taxes. This requires the services of consultants meaning that a fee should

be paid.

RECOMMENDATIONS

The establishment of a pool of robust SMME’s programmes and aid should be

one of the highest priorities in South Africa in providing support to this sector.

Tertiary institutions should seriously encourage entrepreneurship and self

employment career opportunities in all academic discipline being taught.

A partnership should be formed between departments such as national

treasury ,and economic development to bring about the sustainable growth of

small medium and micro enterprises.

Financial institutions should have a simpler way of assisting SMME owners

considering the difficulties they encounter as a result of lack collateral security.

It is recommended that SMME owners be exposed to training programmes

building capacity in terms of business skills.

The government should reduce the regulatory burden on small businesses.

In conclusion, the discussion in this paper provides valuable information on which

SMMEs owners could develop their strategies regarding the best way of addressing the

identified challenges. By doing so, it could be possible for the SMMEs to make strides in

their respective businesses. Failure of SMMEs sector could be a blow for the

government as they regard them as a source for employment, hence their ability to

address unemployment in the country. It is necessary for the government to provide

support so that these businesses are succeeding in their respective endeavours.

REFERENCES

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