My supervisor for all his support and guidance throughout, especially for the trust he had in me from the beginning of the project. This study was undertaken to explore the challenges faced by SMEs in the Manzini region of Swaziland.
Introduction
Motivation for the Study
The results of this study will provide the required information that will enable stakeholders to promote the development of SMEs in Swaziland. Service providers will be informed about the expectations of SMEs and therefore be able to provide products and facilities that will benefit the SMEs.
Focus of the Study
Problem Statement
Research Questions
Objectives
Limitations of the Study
There was no available database containing all SMEs in Manzini and therefore no sampling frame was available and therefore it could not be ensured that all categories of SMEs were included in the sample. There was not enough time for the researcher to exhaust all the issues that had been identified in the interview form, as the respondents had limited time to spend in an interview.
Outline of the Study
Summary
Introduction
This study aims to identify the challenges faced by SMEs in Manzini, with the aim of identifying the critical factors that influence the success or failure of these companies. There is a lack of literature and research on the challenges faced by SMEs in developing countries, especially Swaziland.
Entrepreneurship
Entrepreneurship as a driving force behind small business
Nieman and Nieuwenhuizen (2010) state that a small business is one that is owned and operated independently and is not a major player in its industry. For small business owners, growth does not necessarily have to be a primary objective, as is the case with entrepreneurial ventures.
Entrepreneurship as a catalyst for economic activity
Nieman and Nieuwenhuizen (2010) argue that entrepreneurship is strongly linked to small, medium and micro enterprises and that the majority of entrepreneurial activity takes place in these enterprises. Entrepreneurship is a complex and chaotic activity with entrepreneurs operating in increasingly uncertain and sometimes negative environments.
Entrepreneurship addresses the problem of unemployment
SME Definition
SME Definition - Internationally
In the European Union a definition which entered into force in 2005 defines micro, small and medium enterprises as those with less than 250 employees, with an annual turnover that is less than or equal to 50 million euros and/or a balance yearly. total less than or equal to 43 million euros (Stokes, 2010). A medium-sized enterprise is one with a turnover of no more than £25.9 million, a total balance sheet of no more than £12.9 million and no more than 250 employees."
SME Definition in Swaziland
The Swazi economy and its key contributors
Production, which accounts for 28.3 percent of GDP, is concentrated in sugar-based value-added goods. Services contribute approximately 60 percent of GDP with public administration being the leading sector (FSE&CC, 2011).
The Importance of SMEs to the economy
The formal sector could not provide enough jobs, which led to the need to find ways to improve social and economic well-being. Smaller businesses are more flexible and can therefore quickly adapt to ever-changing market forces.
The Role of SMEs in Swaziland
By having more successful SMEs, more wealth generated in Swaziland will remain in the country. The aim was to develop a database of all small, micro and medium enterprises in the country.
Key Success factors of SMEs
Competitive Advantage
Goldman and Nieuwenhuizen define competitive advantage as “the ability of a business to do something better than its rivals. There are several strategies that can be used by a business to create its competitive advantage.
SME Challenges
Access to Finance
Additional uncertainty is introduced because SMEs have no or only a limited credit history. Business plans or proposals presented to investors are not suitable for presenting a convincing picture of the company's creditworthiness;.
Lack of Business Management Training
Creditors and investors consider SMEs as high-risk borrowers because they have high mortality rates and insufficient assets;. In most cases when an SME is able to obtain financing, the terms for the financing are not in line with the business model that the SMEs use to run their businesses, thus making it difficult to take advantage of the funding (Monks 2010).
High risk of Failure
In light of the high failure rate of new small enterprises, while they make a very important contribution to national economies, it is imperative that their challenges are analyzed in order to come up with strategies to overcome them. These include poor planning, high employee turnover, lack of customer relationship management, lack of relevant technology, poor location selection and low barriers to entry (Barnard, 2011).
Challenges faced by SMEs in Swaziland
The lack of collateral and security consistently disqualifies SMEs from the criteria set by financial institutions. In the rare cases that markets are secured, issues of timely supply and poor quality of the products or services lead to a lack of confidence from the intended market.
SME Development
Model of Entrepreneurship Development
- Entrepreneurial Orientation
- Supportive Environment
- Cooperative Environment
Nieman and Nieuwenhuizen (2010) have developed what they call 'a model for entrepreneurial development'. This model attempts to demonstrate the external variables that influence entrepreneurship in a particular country. Factors such as education, culture, family, role models, education, work experience and personal orientation are crucial for the process of entrepreneurial development (Nieman and Nieuwenhuizen, 2010).
Development of SMEs in Swaziland
- Small and Medium Enterprise Unit
- Swaziland Investment Promotion Authority
- The Small Enterprise Development Company
- Swaziland Development Finance Corporation
- The Federation of Swaziland Employers and Chamber of Commerce
The vision of the SME Unit is to be a vibrant player in the economic development of Swaziland through an enabling environment that encourages SME activities in creating productive rural households and other communities by creating home-based jobs and competitiveness in international markets. The SME Unit has the overall responsibility to coordinate the implementation of the SME Policy.
Summary
Introduction
Aim of the Study
Participants and Location of the Study
Research Approach
Quantitative Approach
In this approach, a large amount of data is collected and numbers are used to establish patterns that can be interpreted and analyzed statistically. Since quantitative data is in the form of numbers, this approach emphasizes quantification in the collection and analysis of data, and this is done by using statistical techniques.
Qualitative Approach
This is because hypothesis testing was not at the heart of the study, but rather a comprehensive understanding of the problem under investigation. This then prompted the researcher to use the qualitative approach to gain an in-depth understanding of the small business environment.
Sampling
Probability sampling
Non Probability Sampling
In this approach, the sample includes a certain group of people who are considered to possess the desired information. The researcher selects the sample elements based on the belief that they form an appropriate sample, even though they may not necessarily be representative of the target population (Hair Jr. et al., 2011).
Data Collection
Observation
Interviews
- Advantages of Interviews
- Disadvantages of Interviews
Open-ended questions take a lot of time to summarize and are not easy to analyze.
Developing of the instrument
- The interview schedule
Do you have a future plan to implement strategies that will make your business more successful. In some cases, the respondents would request that the interview be moved to a more convenient time where they would be able to participate more fully, since as small business owners they are always busy with the day-to-day operations of the business.
Pretesting and Validation
The interview schedule proved to be a useful tool, as in some cases the researcher sent it before the interview so that the respondents could prepare.
Analysis of the Data
Summary
Due to the qualitative nature of the research study, special attention was paid to the qualitative methods of data collection and analysis. The results obtained during the data collection and the discussion of the findings will be presented in the next chapter.
Introduction
Interview Dynamics
Demographic Information
- Gender
- Age of respondents
- Educational Background
- Prior Work Experience
- Business Sector
- Number of years of business
The researcher is of the opinion that most of the respondents' education level was sufficient for the type of business they owned. The findings indicate that an overwhelming majority of the respondents had no previous experience related to the business they run.
Challenges faced by the SMEs
- Financial Constraints
- Competition
- High Operating Costs
- Lack of Markets for products
- Other Challenges
Most respondents believe that there is a lack of access to financial resources to start or develop their business. Most respondents stated that they source their inputs or supplies from neighboring South Africa.
Success Factors
Respondents also mentioned that the business environment in Swaziland is conducive in terms of legislation and ease of starting a business. Discussions with respondents revealed that most of them were lifestyle entrepreneurs or survivalists.
SME Contribution
Record Keeping
When asked if they kept any records for their businesses, a majority of respondents said they did not keep proper accounting records. Since most of the respondents do not keep proper records of their income and expenses, it will be very difficult to estimate their contribution to the economy in monitor value.
SME Development
Feelings about government support towards SMEs
Findings from the interviews show that most of the respondents think that the government does not support SMEs. The general feeling among the respondents was that the government is not doing enough to promote the development of SMEs.
Intervention strategies that can be used to support SMEs
The bad feelings of the majority of the respondents about the lack of government support show that a lot still needs to be done if the small business sector is to develop. Respondents were of the opinion that implementing the above recommendations could revive the small business sector and improve the performance of SMEs.
Summary
In this study it was found that most small businesses do not keep proper records of their transactions. Most respondents are of the opinion that the government is not doing enough to support them.
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Introduction
The previous chapter presented the research findings and analyzed them in an attempt to achieve the objectives of this study. The researcher makes certain recommendations to the relevant stakeholders and various role players as identified in this study.
Conclusions drawn from this research
The study found that most participants do not attend formal training on how to run a business. The first challenge mentioned by the majority of respondents was the lack of access to financial resources.
Implications of this research
From the point of view of the respondents, the government is not seen to be doing much in supporting the development of SMEs. This study has highlighted that poor infrastructure is one of the factors that contribute to the failure of businesses.
Recommendations
- Recommendations to the government
- Recommendations to the owner-managers
- Recommendations to development agencies
These officials employed to manage the programs must be committed to the development and growth of SMEs. There must be cooperation with large companies and organizations so that they are involved in supporting the development of the SME sector, as part.
Recommendations for future studies
In the sample selected in this study, most of the respondents belonged to micro and small enterprises. Therefore, some findings may not be relevant for medium-sized companies.
Summary
Hlatshwako is an MBA student at the Postgraduate School of Business and Leadership of the University of KwaZulu Natal. Confidentiality and anonymity of records identifying you as a participant will be maintained by the Graduate School of Business and Leadership, UKZN.
