Furthermore, an attempt was made to determine: whether the internal constraints or external factors pose a greater burden on growth; whether the policy focus should concentrate more on internal constraints or on external factors and determine the relationship between average growth (in terms of the number of employees) and the owner/manager's level of education and training, gender, ethnicity, business activity, legal status of the company and sources of start-up capital. There was found to be a significant difference between average growth and gender, legal status, business activity, source of start-up capital and the education level and education of the entrepreneur/owner.
Limitations
PAGE Table: 3.1 Costs of crime and security in relation to labor costs and added value 23 Table: 3.2 Costs of crime and security in millions of rand 23 Table: 4.1 Entrepreneurial level of South Africans according to their education 33 Table: 4.2 Education level of entrepreneurs compared to the South African population 34. Table: 6.5 Chi-square test statistics for internal factors 85 Table: 6.6 Chi-square test statistics for external factors 86.
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Research Question
Objectives
The SME is defined in terms of this study and a brief history and nature of the small business sector is provided. This study is primarily concerned with the quantitative definition (number of employees) of the small business sector.
THE INVESTMENT CLIMATE SURVEY
- Crime
Security estimated % cost of crime cost of security, Rand total sector mill.Rand mill.Rand. From the tables (3.1 and 3.2) presented above, the total cost of crime and security is approximately 6% of net value added, and the losses due to crime across all sectors are 2,272 million rand.
THE PIETERMARITZBURG PERSPECTIVE
The increase in demand for investment financing can be directly attributed to the performance of the local economy and the increase in profitability expectations (Coetzee, 2006: 7). The graph below (Figure 3.5) shows the robust increase in the level of economic activity in the local economy.
THE INTERNAL ENVIRONMENT .1 Business Age and Industry Sector
These tasks are found at all levels of management, regardless of the size of the business. The use of technology such as computers in business operations can also be a source of competitive advantage.
EXTERNAL ENVIRONMENT
- The Economy
Tasks such as desktop publishing, electronic communication with vendors and customers, and electronic banking are just some of the applications that small businesses use to control costs and improve service (Longernecker et al. About 30% of respondents to the investment climate survey rated crime as a large or very serious problem. Security costs account for about two-thirds of the costs of crime, while direct losses account for an additional third.
Firms in Durban faced the highest losses while firms in Johannesburg faced relatively modest losses (Investment Climate Survey. It is therefore evident that crime is a costly burden on the SME sector and would have a negative impact on firm growth. National Law on Small Business passed in 1996 helped to put in place many of the support structures that are now in place In 2004 the National Small Business Act 1996 (Act 102 of 1996) was amended to enable the amalgamation of the Enterprise Development Agency Ntsika and state production.
Supporting small business entrepreneurs throughout the business life cycle is imperative for growth and development.
Conclusion
The problem of this study is the effect of internal and external environmental factors on the growth of the small business in the Pietermaritzburg area. To determine using factor analysis which factors (classification) contribute to the company's growth. From this, the researcher will determine the impact of crime on the growth of the small business.
Factor analysis was carried out to determine whether the internal or external factors contribute more to the growth of the business. In Pietermaritzburg, 61% (figure 6.15) of the respondents see competition in the market to limit business growth. From (figure 6.16) approximately 22% of the respondents agree that a lack of financial understanding slows down the growth of the business.
Of the businesses surveyed, 57% felt that recruiting staff was a constraint on the growth of their businesses. Around a third of the respondents indicated that the skills development levy is a constraint on the growth of their business (figure: 6.17 above). More than 50% of respondents agreed that the cost of increased security was a barrier to business growth.
GROWTH OF THE BUSINESS
The second (larger) category represents a combination of transport, construction, travel and tourism, agriculture and financial sectors. The results show the fact that the number of employees by sector increases throughout the company's lifetime. The number of employees in manufacturing increased the most, by 20.0493, followed by 18.2202 employees in the main category (other).
The service sector registered an average growth of 13.2101 employees and the 'other' category representing the franchise businesses registered a growth of 9.9333 employees. Examination of workforce growth in relation to the entrepreneur's level of education clearly illustrates that the higher the level of education, the higher the growth of the company. Those who held a postgraduate university degree recorded an average growth of 21.2214 employees, in contrast to those with a high school education, who experienced an average growth of 15.5240 employees per year.
The results found in this study show that those respondents who received some form of training have an average growth of 15.9634 employees as opposed to an average growth of 13.2594 employees for those respondents who had no training.
CONSTRAINTS
- INTERNAL CONSTRAINTS .1 Finance
- EXTERNAL CONSTRAINTS
The results of this study show that 35.6% of the respondents felt that obtaining financing to fund their growth plans was a problem. Most of the respondents (45%) remained neutral and it is possible that they were reluctant to disclose their lack of financial understanding to the researcher. Of the respondents surveyed, only 31.9% indicated that their lack of management skills was a constraint on their growth plans.
Investments in training and development are, as mentioned earlier, essential for the growth of small businesses. These findings are in line with those of the ICS, where tax rates were rated as the fourth constraint to growth (Investment Climate Survey, 2004: 9). Some 42% of respondents indicated that crime was a 'very big problem' and 46% said it was a 'fairly big problem'.
The report shows that less than 12% of companies surveyed have used business support.
Conclusion
The analysis of the results of this study has shown that obtaining financing and managing cash flows were perceived as limiting the company's growth. The reviewed literature has shown that small businesses tolerate most laws and regulations. The conclusion from these results is therefore that the internal set of factors has a greater burden (48.953%) than the external factors (10.257%) on the company's growth.
As shown above, the internal factors account for the majority of the total variance explained in the model, and the researcher therefore concludes that small business policy should focus more on the internal conditions than external factors. The external factors account for only about 10% of the variation in the company's growth. A parsimonious regression model emerged that explained about 45% of the variation in average growth in the study.
By not analyzing the variables, it becomes clear that the educational level has an effect on business growth.
Conclusion
One of the most common causes of business failure is poor management (Hodgetts and Kuratko, 1995: 17). Start-up capital was identified in this study as one of the independent variables of the parsimonious regression model that contributed to average business growth. Business managers should understand that because of the size of small businesses, they can respond more quickly and at lower cost to adverse changes in the environment than large corporations.
The level of education of both the owner and the employees can accelerate the growth of the business. The fourth chapter highlighted the findings of the Small Business Project: Counting Bureaucratic Costs. Research into the investment climate has shown that labor law regulations have a limiting effect on company growth.
This study also found that regulations and laws limit business growth.
Introduction
Future research
The importance of the small and medium enterprises (SME) sector lies in its contribution to gross domestic product and its potential for job creation. With a view to uncovering possible limitations to the growth of SMEs, the researcher conducted this study in Pietermaritzburg. Using reliable and valid statistical methods, the determinants of business growth in terms of employment and the internal and external constraints on business growth in Pietermaritzburg were identified.
The parsimonious regression model explained about 45% of the growth in SME employment in the Pietermaritzburg region. The factor analyzes collectively explained about 60% of the internal and external constraints to business growth. Based on the results, recommendations are made to policy makers with an interest in SME development on how to address some of the constraints to ensure optimal development of small businesses in Pietermaritzburg.
These recommendations are also useful for the actual entrepreneurs and for business networks, such as the Chamber of Commerce and financial institutions.
An Investigation of Entrepreneurs' Perceptions of the Business Growth Environment in the Pietermaritzburg Region. Do you expect the growth of your business to require you to do any of the following? Do you expect to finance your business growth using internal finance or from external finance providers.
What would you consider to be the main obstacles to the growth of your business in general? Lack of management skills/ business expertise Which of the following do you consider to be a major obstacle to the growth of your business. In which of the following ways do you consider taxes to have a negative impact on your business?
How big a problem is crime in relation to your business and the area around you.
I YES I NO I
In terms of innovation and the behavior of your business, you are doing something unique that others cannot easily replicate or match. Do you think there is enough business support available in your local area for small businesses.
CONSENT FORM
