9.2 Conclusion
9.2.6 Contribution of the study
9.2.6.1 Adaptation of the conceptual framework to the study
This research evaluated the influence of the supporting institutions’ interventions on the start-up and growth of SMMEs in Lesotho and South Africa. Based on the findings the conceptual framework is adapted below for Maseru (Figure 9.1) and Pietermaritzburg (Figure 9.2).
From the qualitative findings, it was found that the following services were provided to MSMEs’
owners at the start-up level in Lesotho: incubation services, training opportunities, access to business premises, capacity building (counselling, mentoring and coaching, developing business ideas, developing business plans), business advisory services, networking support, start-up
163 capital, simplified licensing procedures, and advocacy services. At the growth level, training opportunities, business advisory services, networking procedures, working capital, access to premises, simplified licensing procedures, and advocacy services were provided. The effectiveness of such interventions was evaluated based on the rate of MSMEs’ annual renewal of subscription to supporting institutions. Furthermore, such effectiveness is also evaluated through the MSMEs’ owners’ perceptions of supporting institutions’ influence towards graduating to the growth phase, MSMEs’ sustainable growth, the relevance of training received based on their current needs, ease of access to finance, and the satisfaction of MSMEs’ owners vis a vis the services provided by the supporting institutions.
The evaluation of the interventions is reported based on the quantitative findings from MSMEs’
owner-managers in Lesotho. It was found that only a few MSMEs’ owner-managers make use of supporting institutions’ services. In addition, the few that use the services are repeated beneficiaries of such services. Furthermore, MSMEs’ owner-managers indicated a positive influence from supporting institutions’ support on MSMEs’ graduation to the growth phase.
Although training received was relevant to the MSMEs’ start-up (p<0.05) and growth (p<0.05), most MSMEs’ owner-managers rely on self-learning at the start-up and growth phases (62.2%) rather than training provided by the supporting institutions.
Moreover, MSMEs’ owner-managers were generally satisfied (57.2%) with the services provided by the supporting institutions. The satisfied respondents also perceived the supporting institutions as reliable because they provide their services dependably (65.8%). Also they were confident in supporting institutions due to their competency and courtesy (54.6%). These respondents trusted the supporting institutions due to their courtesy and credibility (51.7%). These MSMEs’ owner- managers also alluded to the fact that they received individualised attention (51.7%) and supporting institutions were willing to help (51.3%).
On the other hand, MSMEs’ owner-managers also indicated some negative experiences from the institutions’ support. Needed funds are still not very accessible from the supporting institutions due to high interest rates (63.0%), collateral requirements (64.4%) and absence of leases (61.5%).
In addition, one of the requirements to receive support from the supporting institutions is to register formally with the Ministry of Trade. However, such registration may make MSMEs’
owners liable for tax payment if their annual turnover exceeds the prescribed threshold. In fact, income tax was perceived to be one of the barriers at the start-up (56.67%) and growth (60.00%) phases. Thus, MSMEs’ owners may not prefer to subscribe to any supporting institutions to avoid being taxed. Also, although supporting institutions may help businesses to find suitable rentable premises, the rental charges are still perceived to be high at both start-up and growth phases
164 (73.70% and 64.44% respectively). Although MSMEs’ owner-managers indicated that it is generally easy to license a business (91.11% - Table 7.5), the licensing procedures are still perceived as a hindrance to some of them (69.63%). Operating formally also means that they have to abide by the regulations which stipulate for instance, the minimum wages/salaries for employees. Abiding by such rules may compel them to increase the wages for skilled staff to comply. Although the majority of MSMEs’ owner-managers mentioned that supporting institutions provide services dependably (65.8%), still less than half of MSMEs’ owners indicated that the supporting institutions do not provide the services accurately (47.6%), and there is less prompt support (44.2%).
The positive quantitative findings that emanate from what is provided by the supporting institutions (qualitative findings) may result in increased profits, hiring more employees, moving to bigger premises, acquiring more assets, formal operation by businesses, and opening another business (Lesáková, 2012:93). These benefits increase the likelihood of more MSMEs graduating from the start-up to the growth phase and eventually becoming sustainable (Lesáková, 2012:93).
However, the negative perceptions may contribute to more MSMEs’ owners operating informally, hence, no growth of businesses, and early closure of businesses, as entrepreneurs may become reluctant to seek support from the supporting institutions.
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Figure 9. 1. Lesotho’s adapted conceptual framework
In SA, supporting institutions provide services such as capacity building, training opportunities, business advisory services, networking support, start-up capital, access to business premises, simplified licensing procedures, and administrative work. Unlike in Lesotho, in SA the interviewed participants from the supporting institutions did not indicate that they provide advocacy services. However, they do provide administrative work which was not mentioned by the supporting institutions from Lesotho. In terms of growth, the same services are provided in
SUPPORTING LITERATURE QUANTITATIVE FINDINGS
Positive outcomes
Repeated beneficiaries of supporting institutions services
Positive contribution to MSMEs growth Training relevant to the current needs of SMMEs
at start and growth phases. However, Most MSMEs rely on self learning rather than training
provided by the supporting institutions.
MSMEs’ perceptions of supporting institutions services:
Dependability Satisfaction
Confidence due to competency and courtesy Trust due to courtesy and credibility Individualised attention and willingness to help
QUALITATIVE FINDINGS
ASSISTANCE TO MSMEs START-UP Incubation services Training opportunities Access to business premises Capacity building (counselling,
mentoring & coaching, developing business ideas,
develop business plans) Business advisory services
Networking support Start-up capital Simplified licencing procedures
Advocacy services
ASSISTANCE TO MSMEs GROWTH
Training opportunities Business advisory services
Mentoring and coaching Networking support
Working capital Access to premises Simplified licencing procedures
Advocacy services
EVALUATION OF INTERVENTIONS
Annual renewal of MSMEs subscription to supporting
institutions
Graduation of business from start- up to growth phase Accessibility to finances Relevance of training provided
Satisfaction by MSMEs
Negative outcomes Inaccessible funds (high interest rates, collateral requirements, absence of lease)
Income taxes High rental charges Licensing procedures Wages for skilled staff MSMEs’ perceptions of supporting institutions
services:
Less accuracy Less prompt support
DECREASE IN NUMBER OF MSMEs AT THE START-UP AND GROWTH
Operate informally No growth Business closure INCREASE IN NUMBER OF
MSMEs AT THE START-UP AND GROWTH
Increase in profits Move to bigger premises
Acquire more assets Formal operations by
businesses
LESOTHO SUPPORTING INSTITUTIONS INTERVENTIONS
Policy implemented through various interventions (Stage 4 of the theoretical framework)
166 both countries, the only difference is that advocacy services are provided in Lesotho while in SA, the supporting institutions did not indicate that.
The criteria for the evaluation of interventions are the same for both countries although the outcomes from the evaluation differ. For instance, although the MSMEs’ owners and the SMMEs’ owners agree to a large extent that the received training was relevant to their needs, in Lesotho, most MSMEs’ owners rely on self-learning rather than training provided by the supporting institutions. Furthermore, unlike in SA, in terms of service satisfaction, support from institutions was assessed to be less accurate by the majority of MSMEs’ owners (47.6%), and less prompt (44.2%). While in SA, supporting institutions were perceived to be less empathetic (48.6%).
The adapted conceptual frameworks (Figures 9.1 and 9.2) may assist SMMEs’ owner-managers, especially in rural areas to be aware of the available assistance provided by the supporting institutions and also make useful utilisation of such assistance. The services provided by the supporting institutions, assist SMMEs’ owners to start and grow their businesses. The adapted conceptual frameworks may also assist government policy makers to evaluate the impact of policies guiding supporting institutions. Such evaluation should be based on how MSMEs’
owners or SMMEs’ owners respond to the supporting institutions’ services, and also how such services are perceived by the MSMEs/SMMEs’ owner-managers. Specifically, this entails how such services help SMMEs’ owners to start their businesses and to grow. Such policies should be geared towards deterring the negative outcomes/perception of MSMEs/SMMEs’ owner- managers vis a vis the services provided by the supporting institutions. For instance, accessibility to funding is still an issue in both Lesotho and SA. Thus, there is a need for strategies that can be incorporated in policy documents that will increase funding for SMMEs or prompt MSMEs/SMMEs to seek funding from supporting institutions.
More recommendations based on the outcomes of the study are provided in the Recommendations section 9.3.
167
Figure 9. 2. South Africa’s adapted conceptual framework
SUPPORTING LITERATURE
Positive outcomes
Repeated beneficiaries of supporting institutions services
General positive contribution to SMMEs growth Training relevant to the current needs of SMMEs
at start and growth of SMMEs MSMEs’ perceptions of supporting institutions
services:
Dependability
Trust due to credibility, competency and courtesy Prompt support
Willingness to help Accuracy of service provision Confidence due to competency and courtesy
Service satisfaction Individualised attention
QUALITATIVE FINDINGS
ASSISTANCE TO SMMEs START-UP Capacity building Training opportunities Business advisory services
Networking support Start-up capital Access to premises Simplified licencing procedures
Administration work
ASSISTANCE TO SMMEs GROWTH Training opportunities
Networking support Business advisory services
Mentoring and coaching Working capital Access to premises Simplified licencing procedures
EVALUATION OF INTERVENTIONS
Annual renewal of SMMEs subscription to supporting
institutions Graduation of business from start-
up to growth phase Accessibility to finances Relevance of training provided
Satisfaction by SMMEs
Negative outcomes Inaccessible funds (high interest rates, collateral requirements, absence of lease)
Income taxes High rental charges Licensing procedures Wages for skilled staff MSMEs’ perceptions of supporting institutions
services:
Less empathetic
DECREASE IN NUMBER OF SMMEs AT THE START-UP AND GROWTH
Operate informally No growth Business closure INCREASE IN NUMBER OF
SMMEs AT THE START-UP AND GROWTH
Increase in profits Move to bigger premises
Acquire more assets Formal operations by
businesses
SOUTH AFRICAN SUPPORTING INSTITUTIONS INTERVENTIONS Policy implemented through various interventions (Stage 4 of the theoretical framework)
168 The following section specifically highlights the contribution of the study to the body of knowledge.
9.2.6.2 Contribution to the body of knowledge
This mixed method study highlighted the different types of interventions provided by the supporting institutions and perceptions of the recipients (MSMEs and SMMEs’ owner-managers) towards the services provided to them. It has highlighted the types of interventions and the existing supporting institutions which could have been unknown to MSMEs/SMMEs’ owner- managers. Thus, the contribution of this research is that MSMEs/SMMEs’ owner-managers will be aware of these supporting institutions and available interventions, and can utilise them in their start-up and growth phases. Hence, it is anticipated that research papers emanating from this study will be beneficial for MSMEs/SMMEs’ owner-managers.
Furthermore, this research highlighted the challenges encountered by the supporting institutions when providing services to MSMEs/SMMEs’ owner-managers. In addition, this research highlighted the challenges related to MSMEs/SMMEs’ owner-managers’ perceptions of the services provided to them. Hence, supporting institutions together with other stakeholders could use these findings to devise strategies to attend to the challenges. The findings are also an opportunity for investors who will want to venture into designing business models that would address the challenges/barriers.
169
9.2.6.2.1. Recommended framework for services provision
SMMEs/MSMEs SUPPORTING
INSTITUTIONS
SMMEs satisfaction Accessibility to finances
Knowledge of supporting institutions
Interventions Need to be responsive to interventions by dealing away with the
constraints
Awareness of supporting institutions interventions
Need for ease of access to finances Provision of financial suppo
rt with the budget constraints Need to focus on areas of strength
Promptness, dependab
ility and accuracy of service provision Need to improve promptness, accuracy and empathy Training Buy in to the training programs
Provision of trDemand drivenaining : Stepwise approach and customised training
Figure 9.3. Recommended framework
The proposed recommended framework above is built from the findings and taking reference from Khalid’s (2001) Stages of the policy making process framework. According to Khalid’s framework the policy formulation process is as follows: stage 1: Problem identification, stage 2:
policy formulation, stage 3: passing of laws and regulations, stage 4: policy implementation, and stage 5: policy evaluation. Policies are implemented through various government interventions.
Thus this research focuses on stages 4 and stage 5 by looking at what interventions are implemented and assessing their impact on the start-up and growth of SMMEs. The findings based on the two country study’s research questions revealed that there are specific areas that need to be improved which then inform the proposed framework as discussed below.
Firstly, it was found that although MSMEs and SMMEs’ owner-managers were aware of the supporting institutions, still most of them did not make use of such institutions. Particularly, MSMEs/SMMEs’ access to finances from the supporting institutions is an important issue.
170 MSMEs/SMMEs’ owner-managers expressed constraints to accessing finances such as the procedures to be followed to access such funds. Hence, the framework proposes that policy makers look into the issue of dealing away with constraints to accessing institutions’ services within the following guiding perimeters: awareness of supporting institutions’ services at the start-up and growth phases, accessibility to training opportunities, ease of access to finance, and service satisfaction.
Firstly, it was found that entrepreneurs are aware of the available public and private supporting institutions and programmes they offer at start-up and growth phases. However, utilisation of these programmes is low. According to Chetty (2009:266), low rate of usage of support programmes or inaccessibility of such programmes, consequently contribute to SMMEs not being sustainable. The utilisation of the programmes could be low because entrepreneurs do not trust the supporting institutions. There is a need for entrepreneurs to be responsive to and participate in the available interventions and deal away with issues of mistrust.
Secondly, MSMEs/SMMEs’ owners need to buy into the training opportunities that are offered by supporting institutions. Through well-trained trainers, the supporting institutions provide demand-driven training at both start-up and growth phases. However, entrepreneurs do not use this support to the maximum. If entrepreneurs buy in to the value of the training, they would benefit from relevant training that meet their current needs and acquire necessary skills essential for the sustainable growth of their business. According to Audet et al. (2007:4), it is essential to design training programmes according to different needs of SMMEs, not what the trainer assumes is needed by SMMEs. Maluleke (2013:57) alluded that training should be demand-driven and customised, not one-size fits all. It is also recommended that supporting institutions adapt a stepwise approach when designing training programmes (Iseal Alliance, 2011:8). It is assumed that, if the supporting institutions adopt a stepwise approach, for instance, advertising their training programmes and providing entrepreneurs with the relevant training, then entrepreneurs will be equipped with necessary skills, which will allow them to be able to successfully run their businesses, which will ultimately grow and contribute to the overall countries’ economic growth (Iseal Alliance, 2011:8).
Thirdly, it was found that supporting institutions provide funding opportunities within a restricted budget. In addition, MSMEs/SMMEs’ owners mentioned that they are constrained by collateral requirements and high interest rates. According to Renawat and Tiwari (2009:16), it is essential to support small business at their start-up stage as this is a very fragile stage for them. If at this stage SMMEs are supported financially, for instance, SMMEs could have an opportunity to grow sustainably (Lesáková, 2012:93). Furthermore, according to Mbedzi (2011:9), availability of a
171 number of financial institutions established country-wide greatly contribute to the start-up and growth of small business, as services are distributed to the entrepreneurs who are in need of such services. According to Mahembe (2011:11), policy-makers focus on the increment of the credit amount available for SMME sector, however, they are advised to focus more on how finances should be efficiently offered to meet the needs of the entrepreneurs. Furthermore, collateral requirements and high interest rates, could be eased to make it easier for entrepreneurs to access finances.
Lastly, promptness, accuracy and empathy are satisfaction factors that need to be emphasised on when providing services to MSMEs/SMMEs. The supporting institutions claimed that SMMEs’
owners are always satisfied with the services provided to them, this is based on the feedback the supporting institutions get from the customer satisfaction survey. However, entrepreneurs attested that supporting institutions are not accurate, they show less empathy and are not providing their services promptly. According to Wamuyu (2015:269), showing empathy to entrepreneurs at vulnerable time, create trust. Even if at some areas supporting institutions are unable to satisfy entrepreneurs, but because of what these institutions did at time of need, still makes SMMEs’
owners to have trust in the supporting institutions.