CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 5.1 Introduction
5.6 To determine the changes required in factors that hinder township SMEs from growing
The research identified 17 factors that continue to have a bearing on business growth.
These are explained below, together with the suggested interventions required from the public sector or SMEs (indicated in bold).
(i) Lack of knowledge about business registration: training intervention required
Lack of knowledge on business registration is an entrepreneur skill gap and requires a training intervention. So far, the initiatives implemented have not been successful, and the polices established for SMEs have not been effective. The government, through its agencies, should intervene effectively by capacitating SMEs.
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(ii) Poor inventory control: training intervention required
Poor inventory control is a skill gap among entrepreneurs that requires a training intervention. The government should intervene by capacitating SMEs on systems of inventory control through its agencies.
(iii) Inadequate information and technology: financial intervention required
Adequate information and technology, as well as continuous upgrading of knowledge on new information and technology processes and equipment will ensure that SMEs take the right business decisions and use relevant information and technology.
(iv) Inadequate infrastructure: financial intervention required
A critical determinant of the success of SMEs is the provision of infrastructure to supply basic services such as water, electricity, transport and communication. Without these types of services, SMEs will not grow, and will remain inefficient and ineffective in their operations. The supply of basic infrastructure is the responsibility of the government.
(v) Lack of capital and guaranteed income: financial intervention required
SMEs must have a steady flow of income to increase their capital base. The proposed public sector demand-led SMEs growth strategy seeks to ensure this flow. This will ensure that SMEs remain in operation even during a difficult economic downturn.
(vi) Lack of experience: business decision/ action
Lack of business experience hampers SMEs making progress, because they are not able to read the business environment and take appropriate decisions. While they might have the will to run a business, their actions might be negative in terms of business growth. Entrepreneurs should take responsibility to improve their skills thorough practice, while the government can provide additional avenues to equip entrepreneurs. Unfortunately, experience cannot be bought or learnt.
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(vii) COVID-19 and its impact: financial intervention required
At its peak in April and May 2020, the COVID-19 pandemic led to the great shutdown, with many countries around the world implement a hard lockdown to limit the spread of the coronavirus. South Africa was no different, and this was devastating for SMEs.
South African SMEs also faced the challenge of fickle support from the government, because result of onerous requirements to access funding. The government should simplify its interventions and continue to support SMEs in the post-lockdown period.
(viii) Loadshedding: financial intervention required
The intermittent supply of electricity in South Africa has caused enormous problems for SMEs, particularly in recent years, as they struggle to maintain steady business operations. The knock-on effect is a decline in customers, as they became accustomed to not obtaining quality products and services during lockdown, given that SMEs do not have alternative sources of energy. SMEs should investigate an alternative energy supply, which can be done in a collaborative or clustered manner, because resolving the problem loadshedding will take a very long time.
(ix) Financial and non-financial resources: financial intervention required
SMEs find the lack of financial and non-financial resources debilitating to business operations. SMEs need money to acquire assets and trading stock, but similarly they need the government to pay for other non-financial interventions, such as training, that are critical to their growth.
(x) Client base/ consumer demand: business decision/ action
A steady flow of business for SMEs is only provided by customers who keep demand elevated. The public sector demand-led SMEs growth strategy seeks to cushion SMEs against a low client base by maintaining a constant demand for goods and services provided by SMEs.
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(xi) Taking out business insurance against crime: business decision/ action
SMEs find that incidents of crime set them back and require them to replace trading stock that if it is stolen. Taking out business insurance is a logical response by SMEs to ensure that stolen goods and damaged assets can be replaced timeously to ensure business continuity. More education on business insurance would be helpful for SMEs.
(xii) Attracting and keeping good employees: business decision/ action
Most often, running an SMEs requires more than just the owner to be present and knowledgeable: there should be other knowledgeable and trusted workers to ensure that business activity does not stall if the owner is absent. Most owners do not invest enough effort and money to hire or groom good employees. SMEs should dedicate time and effort to developing reliable employees.
(xiii) Improving business and management skills: training intervention required
Adequate business skills help SMEs to operate smoothly and stay on a relevant growth path. These skills are critical for SMEs to survive and grow. The government should use its agencies to equip entrepreneurs to uplift their business and management skills.
(xiv) Keeping accurate financial records: training intervention required
A key business activity is keeping financial records that show how the business is performing. A lack of accurate financial records has an impact on the ability to source funds and on other business decisions, such as liquidity management. Entrepreneurs must upskill themselves on how to keep accurate financial records.
(xv) Diversifying product offering: training intervention required
The lack of a diverse product offering limits sales and leads to missed trading opportunities for SMEs. This affects business growth and might even lead to business failure. Entrepreneurs need to know how to read the market to identify demand for new product. Training might assist in this regard.
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(xvi) Establishing a credit system to monitor debtors: training intervention required
Most SMEs cited their inability to collect from debtors as a factor that has a negative effect of their business. Entrepreneurs need support in procuring an appropriate credit system and training on how to use it. In the absence of proper credit system that facilitates collection of monies owed, it is futile to sell on credit.
(xvii) Understanding the trading location: training intervention required
A good trading location facilitates the flow of business custom, which contributes to growth. Most SMEs, but especially those in townships, use any available space to do business, as there are limited suitable locations in townships. Entrepreneurs should understand the shortcomings of their chosen business location and work to mitigate against these.
Overall, three types of changes are required to respond to the factors that hinder business growth, namely, training interventions, financial interventions and procurement. There is a need to capacitate SMEs to ensure they take relevant decisions and action to grow their businesses.
5.7 To establish the key elements of an effective public sector demand-led