LIST OF ABBREVIATIONS
CHAPTER 2: LITERATURE REVIEW
2.2 Overview of SMMEs
2.2.3 SMMEs sustainability challenges that affect productivity
The SMMEs sector significantly contributes to the economies of many countries.
However, these enterprises face substantial challenges in their early years.
Specifically, studies indicate that within the first five years of operation, a staggering 90% of SMMEs experience failure or significant setbacks (Wolmarans and Meintjes, 2015). Lekhanya (2015) further supports this by noting that 9 out of 10 newly established SMMEs do not survive past a decade. The rate of continuation of SMMEs in Africa is extremely poor, with around five out of each seven new SMMEs closing their doors within the first year (Muriithi, 2017). Approximately 80% of SMMEs in Nigeria fail within the first five years (Gumel, 2017). This negates the economic
benefits of SMMEs and increases the barriers to their expansion (Akugri et al. 2015;
Karadag, 2016).
Failure is also an issue in South African SMMEs; according to Makopo et al. (2018) and Rogerson (2005), just 2,1% of newly founded SMMEs endure for the first three years of operation. As stated by Muriithi (2017), most SMMEs in South Africa do not survive beyond their first year of operation, and Motsepe and Fatoki (2017) estimate that 75% of emerging SMMEs in South Africa do not endure beyond an initial period of five years.
The failure of SMMEs can be attributed to various factors, and among the primary reasons is the impact of globalisation and regulatory challenges (Karadag, 2016).
Globalisation exposes SMMEs to a broader and more competitive market, compelling them to adopt more assertive and proactive business strategies to remain relevant and competitive (Arthur-Aidoo et al. 2015). By "aggressive strategies," it is implied that SMMEs often have to rapidly adapt, innovate, and sometimes take higher risks to secure their market position against larger, more established global players. However, due to their limited resources and scale, SMMEs can find themselves at a disadvantage in such a competitive landscape (Karadag, 2016).
The problems that SMMEs encounter differ by country and can include political, competitive and economic circumstances (Arthur-Aidoo et al. 2015). In sub-Saharan African nations like South Africa, various challenges prevent new SMMEs from succeeding (Motsepe and Fatoki, 2017). A lack of resources and managerial expertise, as well as corruption, subpar infrastructure and politics, make these problems worse (Akugri et al. 2015; Muriithi, 2017).
Internal business processes and SMMEs’ constrained financial resources, as well as external variables such as competition within the sector and from other organisations, all provide challenges. As a result, a competitive climate that includes major and multinational firms has been included to the external list of SMMEs concerns (Karanja et al. 2014; Paul et al. 2017).
South Africa’s SMMEs success rate of 2,1%(compared to the 7,6% global average) demonstrates the country's insufficient efforts to increase SMMEs sustainability and solve SMMEs’ problems (Worku et al. 2016). According to Motsepe and Fatoki (2017), SMMEs can perform better and survive with the aid of financial expertise, mentoring and educational programmes and orientations for entrepreneurs. Furthermore, information and training may assist SMMEs in better managing challenges (Arthur- Aidoo et al. 2015). According to Worku et al. (2016), such measures are the responsibility of the government.
Support-based institutions are essential to the survival of South African SMMEs (Gumel 2017; Worku et al. 2016). Traditional business approaches, such as these external support systems, undermine the competitive competencies of SMMEs, resulting in poor performance (Karanja et al. 2014; Motsepe and Fatoki, 2017).
According to Alrabeei and Kasi (2014), future studies on SMMEs should concentrate more on innovation and competitiveness than on financial resources. As a result, overcoming the difficulties confronting SMMEs necessitates a heavy emphasis on innovation management tactics. Modern SMMEs’ challenges should be addressed through innovative and information-based business procedures that enable adaptable and innovative responses to modifications in the commercial environment (Karadag, 2016; Katua, 2014).
The rapid pace of transformation in the business environment compels SMMEs to be innovative for their survival because it is essential in reducing competitive obstacles while improving their competitive edge and surviving (Cheng and Chen, 2017; Karim et al. 2021). As a result, in order to overcome challenges and become competitive firms, South African SMMEs must embrace innovation (Stummer and Kiesling, 2021).
Bongomin et al. (2018) state that one of the most important factors in the adoption of new technologies by SMMEs and the use of technology is the cost of implementation.
Numerous researchers agree that SMMEs with little working capital are more inclined to postpone innovation installation and to postpone utilising new advancements, particularly if execution expenses are perceived to be high (Domeher et al. 2017).
According to Urban and Ratsimanetrimanana (2019), the majority of SMMEs in most
African nations have trouble acquiring financial support to complement banking institutions’ technological objectives. As a result, the application and use of developing technologies are likely to be viewed as too expensive by SMMEs that cannot acquire financial support, which is problematic (Urban and Ratsimanetrimanana, 2019).
In the rapidly evolving technological landscape, SMMEs face significant challenges.
Indrawati et al. (2020) highlight that many SMMEs grapple with the adoption of new technologies due to a combination of limited technological expertise and financial constraints. Moreover, both end users and staff emphasize the importance of technological infrastructures as internal factors influencing their decisions to adopt or resist new technological implementations (Li and Li, 2020). Building on this, Li and Li (2020) argue that, given the complexities of the global economy, understanding these external factors is pivotal for shaping the direction of future research in this domain.