CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 5.1 Introduction
5.3 Summary of the research
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• SMEs should participate in seminars and exhibitions on information technology.
The vast majority of unemployed people in South Africa live in townships and rural areas, as indicated by several authors (Mkhize, Mthembu and Napier, 2023; Schenck et al., 2023). This raises the question as to whether and how business growth in townships has supported employment creation. But there is doubt that SMEs in South African townships create jobs to a significant level (Enaifoghe and Vezi-Magigaba, 2023; Maliwichi, Manenzhe-Ramarope and Strydom, 2023; Ziyane, Arogundade and Osei-Assibey, 2023). Ultimately, the government need to reduce unemployment to cyclical levels, that is, unemployment levels related to changes in business cycles. To date, government interventions have included providing financial and non-financial support to township businesses.
This study showed that all national economic strategies developed since 1994 in South Africa included an element of developing the township economies (Rogerson, 2010;
2013; Plagerson, 2023; Scheba and Turok, 2020). Similarly, the South African government has established specific institutions to implement direct lending programmes and to provide non-lending support services or grants. The finding of this study on this matter is that there has been limited success in developing sustainable township SMEs, and interventions and initiatives by the South African government have not fully targeted townships and rural areas.
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levels of SMEs procurement are not leading to growth of township businesses. Given the persistent unemployment levels in townships, the problem studied is that current public sector growth interventions for SMEs do not seem to be yielding the desired growth and employment effect. The key questions in the study were:
• How have township-specific factors that hinder small and medium enterprises from posting sustainable growth rates evolved over the past decade?
The answers to this question indicated that all nine factors identified by previous research as being critical to advancing business growth are still prevalent and have not been resolved. (See Table 5-1.) Additionally, the research highlighted seven key factors that continue to hinder business growth in townships: poor inventory control;
inadequate infrastructure; lack of capital and guaranteed income; lack of experience;
COVID-19 and its impacts; loadshedding; improper financial and non-financial resources; insufficient client base or consumer demand.
Table 5-1: Evolution of factors that hinder business growth
Literature review This research*
Interventions to advance business growth 1. The government should intensify
information sharing.
2. SMEs owners and managers should learn business and management skills.
3. SMEs should keep financial records.
4. SMEs should diversify their product offering.
5. SMEs should establish a credit system to monitor debt sales and collections.
6. SMEs should attract and keep good employees.
7. SMEs should take out insurance against crime.
8. SMEs should understand their trading location, access to transport and municipal by-laws.
9. SMEs should participate in seminars and exhibitions on information technology.
Factors that hinder business growth
(i) Lack of knowledge about business registration.
(1)
(ii) Poor inventory control.
(iii) Inadequate information and technology. (9) (iv) Inadequate infrastructure.
(v) Lack of capital and guaranteed income.
(vi) Lack of experience.
(vii) COVID-19 and its impacts.
(viii) Loadshedding.
Factors that have a bearing on business operations and, as a result, on growth
(i) Financial and non-financial resources.
(ii) Client base/ consumer demand.
Factors that would support faster business growth
(i) Taking out business insurance against crime.
(7)
(ii) Attracting and keeping good employees. (6) (iii) Improving business and management skills. (2) (iv) Keeping accurate financial records. (3)
(v) Diversifying product offering. (4)
(vi) Establishing a credit system to monitor debtors.
(5)
(vii) Understanding the trading location. (8)
*Figures in parenthesis indicate unchanged factors from previous research, as per the literature review.
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Indications are that the factors identified over a period of more than a decade as interventions required to advance SMEs growth have not been attended to. There has not been a dedicated approach by the government or SMEs themselves to resolve these matters. This research shows that, instead, additional issues have been added to the existing list of matters that hinder business growth. This research provides insight into why factors identified more than a decade ago are still prevalent. It shows that the two basic issues that have a significant bearing on business operations are:
challenges with financial and non-financial resources: a low client base or consumer demand. This means that without a sound resource base and a steady flow of trade activity, the financial means to enrol into capacity building programmes, improve business operating systems and shield operations against adverse events becomes extremely difficult, if not impossible. This is especially true if no dedicated public sector support programme is in place.
• What tailor-made, responsive, public sector, demand-driven measures can be implemented to support township small and medium enterprises to grow?
The answers to this question show that the public sector must align its interventions to the 17 prominent factors that hinder the growth of township businesses. The public sector response can be categized into three measures that cover the 17 factors, namely, training, financing and procurement. (See Table 5-2.)
Table 5-2: Key strategy elements
Strategic elements for government response Issues addressed 1. Training – develop a training package to be
administered centrally.
(i) business registration
(ii) business and management skills, including: inventory control; information and technology; business insurance; recruitment;
financial records; diversifying products; credit systems; trading location
2. Financing – consolidate the SMEs support budget and administer it through designated public/ private financial institutions.
(iii) financial and non-financial resources for:
infrastructure; capital; COVID-19 recovery;
energy supply 3. Procurement – target township businesses
to deliver part of public sector demand.
(iv) expanding client base/ consumer demand
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Training covers capacitating SMEs regarding business registration and on both business and management skills. Fit-for-purpose packages need to be developed in line with the educational level of entrepreneurs to ensure they receive maximum benefit. Critical topics that have been identified as hampering business growth and that should be included are: understanding inventory control; improving information and technology skills; understanding business insurance; recruitment issues;
understanding financial record keeping; strategies for diversifying products; learning about credit systems; and key issues related to determining a trading location.
The financing aspect deals with supporting SMEs with direct financing or indirectly through non-financial resources to ensure their businesses move ahead. A number of private and public institutions exist to support SMEs and they need to work from a central objective. Key aspects of this strategic element are ensuring that SMEs have the infrastructure they need, the capital they require, support to recover from the COVID-19 pandemic and a way to cushion themselves from the raging loadshedding problem.
The third strategic element is procurement. It entails using public procurement to target township businesses and so improve demand for the products and services provided by these SMEs. Improving procurement form SMEs will immediately deal with the low customer base. Public procurement is at the heart of the suggested public sector, demand-led strategy to support SMEs growth. Procurement might also enhance chance of self-upliftment element in which SMEs can improve their own business experience.
The aim of the study was to assess the factors that affect the growth of township SMEs.
The findings on each objective are discussed below.