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)
Pearson chi square 8.605a 3 .035
Likelihood ratio 10.607 3 .014
Linear-by-linear association .792 1 .373
No. of valid cases 111
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)
Pearson chi square 33.869a 21 .037
Likelihood ratio 32.543 21 .052
Linear-by-linear association .830 1 .362
No. of valid cases 111
a. 25 cells (78.1%) have expected count less than 5. The minimum expected count
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)
Pearson chi square 35.971a 21 .022
Likelihood ratio 28.103 21 .137
Linear-by-linear association .000 1 .999
No. of valid cases 111
a. 22 cells (68.8%) have expected count less than 5. The minimum expected count
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.
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