Small Business Development, Entrepreneurship …

1 SmallBusinessDevelopment,Entrepreneurshi pandExpandingtheBusinessSectorinaDevelop ingEconomy:TheCaseofSouthAfrica JohnLuizUniversityoftheWitwatersrandABST RACT:Adynamicsmallbusinesssectorcanmakea nimportantcontribution,notonlyinemployme ntcreation,butalsoinlesseningconcentrati oninSouthAfrica , ortatintegratingthissectorintotheframwor koftheeconomyasawhole. , ,morerecentlyithasbeendemonstratedthatsm all-scaleenterpriseshaveavalidclaimtogre aterimportanceandstrategieshavebeendevel opedworld-widetoexpandandintegratethisse ctor(Steel,1993).Thispaperinvestigatesho wtheSouthAfricanprivatesectorviewssmall, mediumandmicro-enterprises(SMMEs)andwhet heritismakingaseriouse , , ,forinstance(Steel,1993:39).

2 TodevelopaconduciveframeworkforSMME stothrivein,thegovernmentmayhavetocorrec tsuchdistortionsand . (1999:111-112)andHarper(1984)maintaintha ttheseincludeSmallBusinessDevelopment2pr opositionsthat: Smallenterprises, ,haveshownaremarkablecapacitytoabsorblab our. SMME sareusuallylocallyownedandcontrolled,and canstrengthentheextendedfamilyandotherso cialsystemsandculturaltraditions. IndigenouspeopleinSouthAfricahavebeenpre ventedfromplayingtheirdueroleintheeconom y, ,requiringvariousformsofassistance. TheproductsofSMME stendtooriginatefromindigenouscrafttradi -tions,andtheyarealsomorelikelytosatisfy theneedsofpoorpeoplethanaretheproductsof largeenterprisesandforeigntechnology.

3 , ,withlesse cientcommunications,localdi erencesintastearefarmorepronounced,andon lysmallenterprisescaneconomicallycaterfo rthem. SMME ssatisfylocalneedsnotonlybymakingdi erentiatedproducts, Localtechnologyismorelikelytouselocallyp roducedrawmaterialandequipment, cient,thereismeritinpromotinglocalsmallu nitsusinglocalmaterialstosatisfylocalnee ds. ,despitegenerallylowerwagesandpoorerwork ingconditions(seeHarper,1984:13).SmallBu sinessDevelopment3 SMME sprovideemploymentto,andsometimesexploit theentrepre-neurialtalentsof, , (sewing,knitting,foodpreparationetc)serv easavaluablesourceofincomeandpersonaldev elopment,aswellasoutsidecontacts,fortheo therwiseunemployed.

4 SMME stendtouselesscapital,ascarceresource, ,whichisevenscarcer. Fortheeconomyasawhole,Harper(1984:16)arg uesthat: smallbusinessesarelikelytobemoreresilien ttodepression,andtoo erasteadierlevelofemploymentthanlargeone s;theiractivitiesandlocationsarediverse, theydependonawidevarietyofsourcesandtype sofrawmaterial,andtheirowners,ifonlyfort hewantofanyalternative, Comparativestudiesoflargeandsmallbusines ses,carriedoutincoun-triesatallstagesofd evelopment, ,andrequirelesscapitalperunitofoutput,th andolargeones(Harper,1984:16).Smallbusin essestypicallycomplainthatshortageofcapi talistheirmajorproblemandthatthisimpacts theirabilitytoinvestinaparticularasset,w hetheritberawmaterial,equipment, (Harper,1984:26).

5 InSouthAfrica, ,disadvantagesofscale,andlackofskillandi nitiativeinmarketing; ,theestablishmentofNtsikaEnterpriseSmall BusinessDevelopment4 PromotionAgencybygovernment,whichseeksto addressaccesstomarkets,training,technolo gy,information, (1993:41)pointsoutthatinsomeAsiancountri es( ) , ,suchasIndia spolicyofreservingcertainproductsforsmal lenterprises,maybecounterproductiveifthe yprotectexpensive, ,yearsofcapitalcontrolsmadeitdi , :micro,whichincludessurvivalistenterpris es;verysmall; Small ; (1997) , , , , ,therewereanestimated591,000self-employe dandemployerswithaturnoverlessthantheVAT limitofR150, ,000oftheseenterprisesshouldbeconsidered assurvivalist, ,000enterprisesaremicro-enterprises,ofwh ichapproximately137, , ,31%mi-cro(withnoemployees), (1-4employees), , , , ,thedistributionofprivatesectoremploymen trevealsanentirelydi , , , ,micro(1-4employees) ,micro(noemployees) ,andsurvivalist3% , (1997:28)warnsthat thecurrentstateofeconomicparticipationof blackentrepre-neursisofgreatconcern.

6 , ,64%ofmicro-enterprises(noemployees),40% ofmicro-enterprises(1-4em-ployees),andon ly29% (1997:28)statesthatthere doesnotappeartobeanymeaningful weaning ofsuccessfulblackentrepreneursfromlowtoh ighenterpriselevels .AmajorWorldBanksurvey(2000)ofSMMEsinJoh annesburgrevealsseveralinterestingfactsw ithnationalrelevancewhichinformsthisstud y: ThemostimportantconstraintsfacedbySMME sareinsu cientde-mand(primaryconstraint),costofca pital,crime,andinfrastructure. Ofconcernisthefactthatalmost60% ,SMME srespondedasfollowsinorderofimportance:i ncreaseindemand,increasedbusinessvisibil ity,fallintheinterestrates,governmentpro motionofSMMEs,morecontractsfromgovernmen tandlargebusinesses,fallinrealwage,incre asedexports,cheaperimports, cientdemandwasagaintheprimaryreasongiven fortheirlackofexpansion, Policystability,lowerinterestrates,educa tionandtraining,promotionofSMME sinpublicservices, exiblewages,andbusinessinformationwereci ted,inthatorder, ,themainmethodsofassistanceweresafetyand security,infrastructure,ethicallocalo cials,publictransport,theimprovedattitud eoflocalo cials,andinvestmentsupport.

7 SMME smadeextensiveuseoftemporaryworkerswith9 0%citing ex-ibilitytoexpandorcontractastheirprima rymotivationforthis. SMME sengagedinmanufacturing,ITandtourismcomp lainedaboutthedi Governmentprocurementseemedtohaveaveryli mitedimpactwithjustover10% :1. SMME shadverylittleknowledgeofDTI(Departmento fTradeandIn-dustry) , (1994)arguesthatlimitationscurrentlyexis tasregardsthisapproachinSouthAfrica: thecorporatesectorisnotreallyinterestedi noutsourcingnotwith-standingknowledgeofi nternationalexperience; linksthatdoexistaremerely cosmetic tolookpoliticallycorrect; ,norealevidenceofmonopson-isticrelations hipswasevident(withthepossibleexceptiono fthestate, ).

8 How-ever, (SMEI) , ,theSMEIfa-cilitatedbusinesstransactions withavalueofR200millionfor185emergingbus inessesemploying3298people(Sikhakane,199 7:8).TheSMEI consistsofaboutahalfdozenconsultantswhos courAnglo/DeBeers scentralised1 AngloAmericanisSouthAfrica , ,whereinbusinessischaracterisedbycomplex ,yete ,whichinturnarekeptleanande cient(Sikhakane,1997:8). , :TheSMEI takesanequitystakeofnotmorethan20%,expec tingtobeboughtoutbytheentrepreneurwithin twotothreeyearsbasedonanindependentaudit or , ,namelythroughdividends,throughthesaleof theirsharesonacommercialbasis, , , :theinvestmentarminnewbusiness,facili-Sm allBusinessDevelopment9tationinbusinesse sinwhichitwillnotbecomedirectlyinvolvedv iain-vestmentbutwillprovideassistanceand advice,andcontractingandpur- , , , ,whichmaintains120kilometresofrailwaylin esforAmcoal;ElandBricks,whichproduces200 ,000brickspermonthforhousingconstruction and30,000to40,000specialisedundergrounds upportbricks.

9 CezaConveyorServices,whichmaintainsandre pairsthekilometresofconveyorbeltsconnect ingAmcoal sBay;DuswanServices,whichrecoverslifting tacklefromminescrapheaps, ;andReefFoodServices,formedwithacapitalo fR89,000in1990andwithareturnofinexcessof R80millionfortheyearendingMarch1997(Sikh akane,1997:9-18).Evaluation:TheAnglo/DeB eersSMEI isgenerallyasuccessstorywhichshowsthepot entialforestablishinglinksbetweenbigands mallbusiness, ,withinvestmentstotallingR1billion,hasre sultedinAnglo/DeBeerssheddinganumberofth eirnon-coreactivities( ) ,however, , :a)areluctancetocontributestart-upcash(n otSmallBusinessDevelopment10necessarilyv erymuchinabsolutetermsbutanamounttheentr epreneurwouldbeloathtolose);b)anunproven abilityandaptitudeforhardwork;c)arecordo fdishonesty;and;d)unrealisticexpectation sofquickwealth(Sikhakane,1997:12).

10 (UK).In1991 Xerox,inanattempttoincreaseitsmarketshar e, , ,11concessionairesweresignedup, ,Xeroxwaslookingforentrepreneurswithvisi on,anappropriatestrategy, ,avastproductrange,Xeroxback-up, (withlessthan100employees). , , , (totalstart-upcostisanticipatedatR100, ).Xeroxalsoprovidesacomprehensiveandcont inuoustrainingprogrammeonvariousfacetsof thebusiness:Xeroxprocesses,producttraini ng, , (XFM) , (withadistinctblackfocus),althoughthisdo escarryanormalbusinessriskforthesta . (whichexceededR10billionfor1997). :ConstructionandprocurementCompanyXchose toremainanonymousasitreliesongovernmentf or90% ,currentlyemployingupto250people, ,mostofitsworkcamefromsubcontractingfrom largercompanies, ,however, , innovative (whomaintains60%control),hehasaddedthree femalefamilymembers, (whowereandarehisemployees)havenorealsay intherunningofthebusiness, favourable (onwhichthiscompanywasnotthelowestbidder ),thebidrequiredthattheysubcontract30-35 % ,includingbrick-laying,plastering,carpen try,plumbing,painting, , , ,governmenthasbeenslowinpayingforworkdon e( ).