Support for rural small businesses in Limpopo Province, South Africa

Abstract

The present study aimed to raise awareness of the need for and availability of support for rural small, medium and micro enterprises (SMMEs) in Limpopo Province, South Africa. A survey of 600 SMMEs from all six Limpopo municipal districts was conducted to determine the profile of these businesses, to assess what support systems they needed and which ones they used, and to make recommendations for stakeholder support. A response rate of 89 per cent was obtained. Of the sampled SMMEs, 84 per cent were owner-managed, 70 per cent had one to three staff members, and 71 per cent had been in existence for at least 6 years. Nearly 80 per cent of the respondents perceived finance to be inaccessible. The study suggests there is a need for regular surveys and audits of the SMME industry, in order to ensure better support.

Keywords:

• Rural small businesses
• business support
• entrepreneurial support

1. INTRODUCTION

Part of the government's drive to build the economy of rural South Africa is to encourage the development of small enterprises in these areas; that is, enterprises driven by an individual as a business, or cooperative enterprises (Small Enterprise Development Agency [SEDA], 2007). This drive is similar to those of other nations where small and medium enterprises are increasingly seen as being central to the future economic development of rural areas (North & Smallbone, 2000; United Nations Conference on Trade and Development, 2003:3).

The main challenges facing many developing economies are unemployment and poverty. South Africa's unemployment rate rose from 6.7 per cent in 1960 to 10.6 per cent in 1983, to 33.7 per cent in 1995, and to 45 per cent in 2001 (Mahadea, 2003:3). Although small, medium and micro enterprises (SMMEs) in South Africa account for 62.2 per cent of all businesses, they contribute only 36.1 per cent to the Gross Domestic Product (GDP) and 55.9 per cent to the total private-sector employment (Magalas, as quoted by Nieman, 2006:13–14).

Our country is characterised by high rural–urban influxes of young people and professional practitioners to cities such as Johannesburg, Cape Town and Pretoria, seeking survival and livelihood (Kroon, 1998:36). Since these people are economically active, they deprive their rural communities of skills and talent that could uplift these communities. The objectives of government and non-governmental organisations, including the World Bank, have been to reverse rural–urban migration and sustain rural development (Epstein, 2003:447, 448, 458). Rural entrepreneurs are trying hard to succeed against the odds. Many of the rural areas concerned are characterised by sparse populations, remoteness, poor infrastructure, little or no access to vibrant markets, and many similar negative factors that impede rural economic development.

2. PROBLEM STATEMENT

Two of the most significant problems currently facing South Africa are unemployment (45 per cent) and rural poverty (71 per cent), which have direct effects on other social ills such as crime and AIDS (Aliber, 2002:2). To tackle these problems, some rural dwellers start their own small business enterprises in an attempt to earn a living. A number of these SMMEs, however, end up failing (Jackson & Alberts, 1998; Advanced Marketing Consultants, 2004). Some causes of failure are limited resources, inexperience in running and managing one's own enterprise, poor cash management and weak marketing efforts (Badenhorst et al., 1997:90; Barrie, 2003; Bizhelp24, 2004; Advanced Marketing Consultants, 2004). This paper argues that a lack of appropriate support is the main reason for the high failure rate of SMMEs in South Africa (Levy, 1996:11; Netswera, 2001:31).

The following questions are worth asking about SMME support in the rural areas:

• Are there support services for small businesses in the rural areas?

• Do rural entrepreneurs require support in running their businesses?

• Are small businesses aware of the available support services?

• Do rural entrepreneurs make use of these SMME support services?

• What do small businesses think of their SMME support services?

Limpopo Province was chosen as the study area for this research because it has the highest rural population (89 per cent) and an unemployment rate of 46 per cent (Statistics South Africa, 2000).

3. MAIN AIMS AND OBJECTIVES OF THE STUDY

The main aims of the study were to raise awareness of what SMMEs do in the rural areas of South Africa and to solicit small business and entrepreneurial support to strengthen SMME activities.

The study objectives were to:

• profile rural small businesses,

• assess the need for and availability of small business support, and

• make recommendations to SMME stakeholders to support rural small businesses.

4. DEFINITIONS

4.1 Definition of small business

The South African National Small Business Enabling Act (Act 102 of 1996) defines a small business as:

a separate and distinct business entity, including cooperative enterprises and non-governmental organisations, managed by one owner or more which, including its branches or subsidiaries, if any, is predominantly carried on in any sector or subsector of the economy … and which can be classified as a micro-, a very small, a small or a medium enterprise … (Republic of South Africa [RSA], 1996:2)

The White Paper on National Strategy for the Development and Promotion of Small Business in South Africa (Department of Trade and Industry [DTI], 1995) explains SMMEs in four categories that are summarised in Table 1. Each of these categories has 11 subsectors, such as agriculture, mining, manufacturing, construction, retailing and transport.

Table 1: Average breakdown of SMMEs according to size or class

Size or class	Total full-time equivalent of paid employees	Total annual turnover	Total gross asset value
Medium	<200	<R25.00 million	<R8.00 million
Small	<50	<R10.00 million	<R3.00 million
Very small	<10	<R2.50 million	<R0.70 million
Micro	<5	<R0.50 million	<R0.10 million

4.2 Definitions of entrepreneurial support and business support

Although entrepreneurship and small business are closely related (Co et al., 2006:9), they are two different phenomena. They have in common elements such as creativity and innovation, opportunity-seeking, risk-taking and motivation to succeed. Bates et al. (2005:46) explain that entrepreneurship has to do with creating and building something of value from practically nothing in the midst of uncertainty and risk, and having the determination to succeed against all odds. Entrepreneurial support should therefore bring out the best of these characteristics in an entrepreneur.

Business management, however, is about the nature of the enterprise and how it is established and managed. To establish and manage a business, one requires abilities and skills as well as finances (Bates et al., 2005:2). Business support therefore focuses mainly on elements of business establishment and management such as business advice and information, training, and financial assistance (Bridge et al., 1998), and business networks and mentoring schemes (Cabinet Office Performance and Innovation Unit, 2000). Business advice and information incorporate generic business start-up advice and support, business planning advice, development support, and consultancy and advice on business plans and business promotion (National Rural Education and Training Strategy Group, 1996; Lowe & Talbot, 2000; Smallbone et al., 2000; Bennett et al., 2001). Training ranges from generic skills training to business planning courses and management training (National Rural Education and Training Strategy Group, 1996). Financial assistance can consist of advice on raising finance, provision of grants and funding, financial planning and management (Curran, 2000; Smallbone et al., 2000).

The survival and thriving of small businesses depends on both entrepreneurial abilities and SMME support.

5. GENERAL PERSPECTIVES ON RURAL SMME SUPPORT

Governments and researchers around the world are focusing their attention on rural development and the promotion of small businesses in rural communities (Cabinet Office Performance and Innovation Unit, 2000; New Straits Times, 2000; North & Smallbone, 2000; Warren-Smith & Jackson, 2003:370; Weatherspoon & Reardon, 2003). South Africa is equally promoting the growth and development of rural small businesses (SEDA, 2007). There are, however, many constraints that hinder this growth and development in many countries, one being lack of access to business support and advice (Hodge, 1999; Department for the Environment, Transport and the Regions, 2000; Mawson, 2000). Entrepreneurs' lack of awareness of the value of business support (Curran, 2000; Rae et al., 2000), or problems in accessing providers, since many of these are located in urban areas (DTZ Pieda Consulting, 1999), may be reasons for the lower level of SMME support in rural areas.

This situation is not different in South Africa. Von Broembsen (2003:3) mentions some objectives that underpin SMMEs development strategies, such as to support SMME development with the express purpose of alleviating poverty, to reduce poverty through employment creation, and to create a vehicle for economic growth; and Tim (2007) suggests that more businesses from rural areas must help small businesses since business support is concentrated in the provinces of the Western Cape and Gauteng.

6. SMALL BUSINESS SUPPORT IN SOUTH AFRICA

The South African government has initiated wide-ranging support for SMMEs since 1994 (DTI, 1995; RSA, 1996, 1998, 2000, 2002). These pieces of legislation support SMMEs in addressing the low skills levels, the inaccessibility of markets, processes related to procurement, and the unfavourable legal environment in the mining sector.

Government-initiated structures that aim to continue contributing to the development and promotion of small businesses include SEDA, Khula Enterprise Finance and the Umsobomvu Youth Fund. SEDA was established in December 2004 to support the development of small business throughout South Africa by offering non-financial services to local service providers that work directly with SMMEs in the various provinces and their regions (Bates et al., 2005:87; SEDA, 2007). Khula Enterprise Finance, an initiative of the DTI, aims to improve access to finance for the SMME sector. This is an alternative source of finance to support small business enterprises, especially those in disadvantaged communities. The Umsobomvu Youth Fund was created in January 2001. Its task is to promote entrepreneurship, job creation, skills development and skills transfer among South Africans between the ages of 18 and 35 years. It is dedicated to investing in ways of creating opportunities for young people to acquire good skills, find job opportunities or even start their own successful businesses (Umsobomvu Youth Fund, 2006).

Apart from government and semi-government institutions that support SMMEs, there are also NGOs, donors and private-sector organisations that also support SMMEs (Education & Training Unit, 2007). In the private sector, for example, Old Mutual is also committed to helping develop rural areas, where millions of people are poverty-stricken, through its partnership with and support for the Rural Economic Development Initiative – a unique programme that focuses on the holistic development of communities through local economic development, education, and health and welfare interventions (Old Mutual South Africa, 2002). This programme also assists with the establishment of new businesses.

More than a decade after the dawn of democracy in South Africa, some of the SMME constraints are still a major problem for the development and promotion of small business. Key findings of the study by Rogerson (2004) on the impact of the South African government's SMME programmes (Ten-Year Review) reveal, among other things, the weak state of official data for understanding impact evaluation, the fact that the SMME economy makes only a weak contribution to employment creation because most SMMEs do not grow, and the fact that existing government programmes have largely been biased towards the groups of small and medium enterprises and to a large extent bypassed micro enterprises and the informal economy.

7. SMALL BUSINESS SUPPORT IN LIMPOPO PROVINCE

Limpopo Province is by far the most rural province in the country, with 86.7 per cent of its population living in the rural areas in 2001. This figure is an indication that Limpopo's economy is relatively non-industrial, with its two primary sectors – agriculture and mining – accounting for the major share of the province's gross geographical product (Aliber et al., 2005). This province has had an unemployment rate of 46 per cent (Statistics South Africa, 2000), the lowest literacy levels (73.6 per cent) and the lowest Human Development Index and household income (55.8 per cent of the workforce earn less than R6500 per annum) (Ladzani, 2001:239).

This negative scenario is sufficient reason for SMME support to be intensified in the province. The government structures that support SMMEs at the national level are cascaded to the provincial as well as regional levels. Other structures that support the development of SMMEs in the province include the Limpopo Economic Development Enterprise and Trade & Investment Limpopo. Limpopo Economic Development Enterprise's mission is to develop and promote a suitable SMME sector by providing and facilitating business and investment opportunities (Limpopo Economic Development Enterprise, 2006). Trade & Investment Limpopo is the leading business development network for Limpopo companies seeking to expand operations locally and into Africa and other foreign markets (Trade & Investment Limpopo, 2006).

8. METHODOLOGY AND SAMPLE REALISATION

The study area was Limpopo Province. Limpopo is situated at the northeastern corner of South Africa and shares borders with Botswana and Mozambique. It forms a link between South Africa and countries further afield in sub-Saharan Africa (see Figure 1). The study population comprised small businesses in all six municipal districts of the province.

Figure 1 Spatial distribution of administrative district councils within the Limpopo Province

A survey methodology was used for sampling and data collection in this study (Mouton, 2001). To obtain some level of sample representation, a stratified sampling method was used, which meant sampling on the basis of geographic spread, using the six municipal districts as strata (Babbie & Mouton, 2001). From these municipal districts, a sample of 600 respondents was sampled using the random selection method backed up by a participative criterion, which is also referred to as purposeful sampling (Cresswell, 1994). To be selected for participation, SMMEs were required to have been formally registered and to have been in existence beyond 3 years (Welman & Kruger, 2001). A total of 100 questionnaires was administered in each stratum.

The research questionnaire was piloted among 10 SMMEs in the village of Mankweng around the University of Limpopo during the 2-day fieldworker training workshop. The final questionnaire was revised and incorporated feedback from both the fieldworkers and the piloted SMMEs. The final questionnaire was subdivided into three sections for collecting profile or biographical data, data on the availability of an SMME support system, and data on access to such a system. The data were presented in a five-point Likert scale format (Babbie & Mouton, 2001). Data collection for the survey took the form of face-to-face interviews of the SMME managers conducted by the fieldworkers, which enabled clarification and feedback beyond just the answers to the questions provided (Welman & Kruger, 2001).

9. LIMITATIONS OF THE STUDY

Firstly, 29 per cent of the SMMEs in the study sample were unregistered, although the requirements for participation were registration and a business age of 3 years and above. These businesses were included because the fact that they had been operating for more than 3 years was an indication of business success. Secondly, the study focused mainly on business support rather than entrepreneurial support. Entrepreneurial factors such as creativity and innovation, risk-taking and motivation to succeed are central to the success of small businesses. It is therefore recommended that a further study be conducted that investigates the role of entrepreneurial support in the success or failure of small businesses.

10. RESPONSE RATE

In total, 534 questionnaires were successfully administered out of the 600 intended, giving a response rate of 89 per cent. Because the total SMME population in Limpopo Province is unknown, an infinite population size was used to calculate the margin of error: ME = (√P×Q) / (n×SD).1 Taking refusals and spoiled questionnaires into account, a maximum margin of error of 1.36 (p = 0.5) at a standard deviation of 1.96 per cent was realised. Figure 2 shows the realised sample size from each stratum.

Figure 2 Municipal district/region (n = 534)

11. PROFILE OF SAMPLED SMMES

The age profile range of the SMME managers interviewed was: younger than 25 years (3 per cent), 26–30 years (10 per cent), 31–35 years (15 per cent), 36–40 years (16 per cent), 41–45 years (15 per cent), and 46 years and older (41 per cent). The gender composition was 79 per cent males and 21 per cent females, and the academic qualifications were Standard 5 (16.9 per cent), Standards 6–8 (29 per cent), matriculation certificates (25.4 per cent), post-matriculation certificates (10.2 per cent), diplomas (11.1 per cent), degrees (3.4 per cent) and postgraduate degrees (3 per cent). The racial composition was 1 per cent white, 2 per cent Indian and 97 per cent black. The ethnic composition of the black-owned SMMEs included Pedi (46 per cent), Tsonga (30 per cent) and Venda (18 per cent), which are the main ethnic groups in Limpopo Province (n = 531).

The findings of this study indicate that 84 per cent of the surveyed SMMEs were owner-managed, 8 per cent were run by appointed managers, and the rest were run by family members. Ownership of these businesses was primarily sole proprietorship (70 per cent), followed by family businesses (16 per cent), partnerships (13 per cent) and close corporations (1 per cent). The subsectors into which the sampled SMMEs fell are summarised in Figure 3.

Figure 3 Subsectors of SMMEs interviewed

Registered (and therefore tax-paying) SMMEs amounted to 71 per cent, and the rest were unregistered businesses. Figure 4 shows the ages of the sampled SMMEs. The staff compositions at start-up were as follows: fewer than five staff members (84.4 per cent), 6–10 staff members (8.9 per cent), and 11–50 staff members (4.4 per cent). Existing staff membership, however, stood at one to three staff members (70.4 per cent), four to six staff members (22.1 per cent) and seven to nine staff members (7.5 per cent) (n = 443). Although 4.4 per cent had started with between 11 and 50 employees, there were no SMMEs with these numbers at the time of the interviews.

Figure 4 Age of business (n = 528)

Some of the reported motives for starting a business were: interest in owning a business (17.9 per cent), being unemployed (30.8 per cent), a need to support communities (22.7 per cent), and a dire need to eradicate poverty (28.6 per cent). Although unemployment seemed to be the main incentive for starting a business, 53.5 per cent of sampled SMMEs were started while their owner was employed and 46.5 per cent when their owner was unemployed (n = 525). Of all the businesses that responded, 84 per cent did not receive funding for start-up purposes, 9 per cent received loans, and 4 per cent were funded by family members and relatives (n = 522) (see Figure 5). Of the SMMEs that received funding, 48 per cent received this from the Land Bank, followed by development corporations (11 per cent), the Independent Development Corporation (5 per cent), and commercial banks (3 per cent). At start-up 49.9 per cent of the businesses had business plans, and at the time of the survey only 51.4 per cent had business plans (n = 515). Of those businesses that had business plans, 92 per cent had plans compiled by owner-managers, and only 8 per cent used consultants. Only 68.7 per cent of the owner-managers knew how to compile a budget. Of the businesses that compiled budgets, 84.8 per cent did so monthly, 7.7 per cent quarterly, 2.5 per cent twice-yearly and 5 per cent yearly (n = 386).

Figure 5 Financier of start-up capital (n  = 522)

The range of assets of the businesses interviewed was: less than R50 000 (39.2 per cent), R50 001–R500 000 (41.9 per cent), R500 001–R1 million (9.1 per cent), R1 million–R5 million (9.5 per cent), and more than R5 million (0.5 per cent) (n = 528). The range of monthly business turnover was: less than R10 000 (60.5 per cent), R10 000–R20 000 (18.4 per cent), R20 001–R30 000 (8.6 per cent), R30 001–R40 000 (2.3 per cent), R40 001–R50 000 (1.1 per cent), R50 001–R60 000 (0.6 per cent), R60 001–R70 000 (0.4 per cent), R80 001–R90 000 (0.4 per cent), R90 001–R100 000 (0.8 per cent), and more than R100 000 (7 per cent) (n  =  526).

Infrastructure and equipment included availability of telephones (79 per cent), electricity (84.6 per cent), fax machines (4.7 per cent), personal computers (4.7 per cent), email (1.5 per cent), Internet addresses (1.3 per cent), printers (3.7 per cent), running water (42.7 per cent) and flushing toilets (12.7 per cent) (n = 452). Markets served by the businesses were local (83 per cent), provincial (8.4 per cent), both local and provincial (1.7 per cent), international (0.4 per cent), and both national and international (6.5 per cent) (n = 523).

12. AVAILABILITY AND ACCESSIBILITY OF SMME SUPPORT SYSTEMS

Business support received after start-up included finance (72.7 per cent), training (17.8 per cent), tendering and procurement (6 per cent), marketing information (3.2 per cent) and business counselling (0.3 per cent) (n = 348). Utilised support from consultants was mainly in financial management (12.6 per cent), marketing management (14.7 per cent), operations management (15.2 per cent), administrative management (14 per cent), purchasing management (14.4 per cent), human resources management (13.8 per cent), and public relations (14.8 per cent).

SMMEs that had experienced financial problems in the past made up 62.4 per cent (n = 534). Some reasons for the SMMEs' bad financial state and experiences were default payments by debtors (31.6 per cent) and theft of organisational resources and products (14.9 per cent).

Owner-managers who had undergone training in general management comprised 13.1 per cent, and in financial management 86.9 per cent (n = 518). The type of training undergone by employees included customer relations (4.8 per cent) and merchandising (95.2 per cent) (n = 482), while on-the-job employee training was a preferred mode of training (58.8 per cent) (n = 475).

Product advertising was perceived to be a costly method of attracting customers by 75.9 per cent of the interviewed businesses – only 13.5 per cent disagreed (n = 518). Respondents were asked about the kinds of support they perceived to be available or accessible, and their impressions are presented in Table 2.

Table 2: Perception of the different SMME support systems

Small business support requirements/systems	Agree	Disagree
Training for skills development
On-the-job training is an effective form of training for my type of business	(374) 69.5	(71) 13.5
I would be able to manage my business better with some training	(435) 83.8	(39) 7.5
Hands-on training is readily available for staff development	(160) 31.3	(205) 40.2
Training for staff development is easily accessible	(115) 22.3	(299) 57.9
There are known organisations where training for my business is provided	(155) 29.6	(175) 33.5
Managerial training is easily accessible	(99) 19.1	(319) 61.7
Financial assistance
Financial providers insist on greater control of the business activities	(232) 44.1	(154) 29.3
There are not many financial support options available to small businesses	(410) 77.9	(61) 11.6
Banking sector is unwilling to give loans to small businesses	(310) 58.9	(72) 13.7
Finance is the biggest problem facing small businesses	(456) 87.2	(39) 7.5
Private institutions such as building societies are prepared to assist small businesses financially	(109) 20.9	(184) 35.2
I would sacrifice my independence to obtain financial assistance	(210) 40.8	(248) 48.2
Government is not doing enough to help small businesses financially	(394) 75.7	(64) 12.1
Government support
Government policies are favourable to small business development	(98) 18.9	(292) 56.3
Government-sponsored organisations such as DBSA and Business Partners are prepared to assist small businesses	(139) 26.5	(126) 24
Partnerships and subcontracts
Big businesses are always ready to share valuable information with SMMEs	(160) 30.6	(240) 45.9
Big business is prepared to start partnerships with SMMEs	(152) 29.1	(218) 41.7
Subcontracting of SMMEs by big business improves skills of SMME employees	(319) 60.9	(74) 14.1
Forming partnerships with big businesses improves business relations	(412) 78.2	(41) 7.8
Other forms of support
Business counselling can be obtained at low cost	(70) 13.5	(321) 61.5
Business advice is easily available	(114) 21.9	(301) 57.8
Product advertising is a costly method of attracting customers	(393) 75.9	(70) 13.5
Note: Data presented as n (%).

Finance and training for skills development were ranked as the two most important support system requirements by 75.9 per cent and 73.1 per cent of respondents, respectively.

13. SMME SUPPORT MECHANISMS

SMMEs in South Africa contribute 25 per cent to the GDP and 38 per cent to employment (Netswera, 2001). With more support, this sector could contribute more to the national GDP and employment, considering that SMMEs in similar developing countries such as Brazil, India and Mexico contribute 60.8 per cent, 40.0 per cent and 43.3 per cent to the GDP and 66.8 per cent, 80.0 per cent and 77.7 per cent to employment, respectively (Organisation for Economic Co-operation and Development, 1997; United Nations Conference on Trade and Development, 2003). The government has therefore started creating an enabling environment by putting the right policies and support institutions in place, among them SEDA and Khula Enterprise Finance, to enable SMMEs to thrive (DTI, 1995:12). Khula's long-term job creation objectives were to provide broader access to finance for small businesses, as opposed to the micro-survivalist category (Carana Corporation, 1999:42). Although the Carana Report revealed that Khula's activities were disproportionately concentrated in the micro-survivalist sector through its retail financial intermediaries, its finding was that this subsector in the rural areas received very little funding support.

Because access to finance is perceived to be critical to success, the private banking sector has received continued criticism for its inflexibility as regards helping the development of the SMMEs (Levy, 1996). Government-sponsored financial institutions such as the Development Bank of Southern Africa (DBSA), although helpful, provide limited support to the SMME industry and its diverse needs (Macleod, 1995; Ladzani, 2001). It is important to note that 58.9 per cent of respondents in this survey believed that the commercial banking sector was still unwilling to provide financial support even though finance was the biggest problem facing more than 87 per cent of the respondents. For lack of financial support, many SMME owners started their businesses without any external funding (84 per cent), and only a few (9 per cent) received loans. Only 3 per cent of the 9 per cent funding was from commercial banks.

Findings by Netswera reveal the existing support systems to be more effectively accessible if complemented by a publicity strategy (2001:6). Lack of knowledge of the available support systems could be a factor hindering accessibility in terms of, among other things, language and proximity of support institutions, especially for the rural entrepreneurs, for whom most institutions are remotely situated. The lack of support received thus far has been attributed to the lack of access to information about such support systems.

The findings revealed that only 3 per cent of the businesses received marketing support, 6 per cent tendering and procurement support, and 18 per cent training support. Although many small business owners believe that training is important, few undertake training prior to starting their businesses. This is supported by Barclays Bank (1998), which reported that 73 per cent of small business owners believed that training was important to their business success, although less than one-third had undertaken training prior to starting their business, while 30 per cent had been trained over the previous 3 years.

Poor support can be attributed to the type of ownership and size of business. Most of the businesses interviewed were owner-managed (84 per cent) and had a staff complement of between one and three members (70.40 per cent). This scenario prevents most owner-managers from leaving their enterprises to seek training, advice, marketing, and tendering and procurement information. Most owner-managers are free from their business duties only outside of working hours, by which time SMME support service providers of training, and financial institutions specifically, are closed.

The total assets of most of the interviewed SMMEs (90.1 per cent) were R1 million and below, with the remainder (9.9 per cent) being above R1 million. Only 0.4 per cent had assets worth more than R5 million. Taking into consideration that the staff complement of all interviewed businesses fell below 10 employees (70.4 per cent had one to three staff members, 22.1 per cent had four to six staff members, and 0.5 per cent had seven to nine staff members), all of the SMMEs interviewed are therefore classified as micro and very small businesses. Their inability to develop into small businesses is a cause for concern considering that 70.9 per cent of the respondents had been running their businesses for more than 6 years. Taking cognisance of the fact that micro and very small businesses do not pay tax, this also implies a loss of revenue to the government and non-accounting of their contribution to the national GDP.

14. CONCLUSION AND RECOMMENDATIONS

With the average age of sampled small businesses being 3 years and the average staff complement three employees, it can therefore be concluded that SMMEs in the province are not really growing considering that the success of SMMEs is measured in terms of the growth in number of employees, turnover and assets. Since the majority of the sampled SMMEs are sole proprietors (70 per cent), access to support systems is weakened considering the tendering and subcontracting requirements for diversity in terms of ownership, gender, race and age groups. It is important that SMME owners receive information and training on the importance of diversity of ownership – a task that can easily be fulfilled by the business chamber where available.

Non-affiliation to a business chamber among the SMMEs is an impediment to development and coordinated support lobbying. Also worrisome is that only 6.7 per cent of the sampled SMMEs belonged to a business chamber. It is important that, especially for the development of rural micro enterprises, SMMEs jointly organise to lobby for support and implement joint projects where necessary. When small businesses act jointly rather than function in isolation, they could garner more support and share their experiences.

Although numerous SMME support institutions are in place, including the various support mechanisms and programmes, such information is relatively unknown to the emerging rural entrepreneurs. It is thus important for government and other support agencies such as Khula and SEDA to move from an institutional set-up philosophy towards capacitation, support campaigns and outreach programmes.

According to Aliber (2002:2) and Stavrinides (2002:66), of the more than 20 million poor South Africans, the rural poor make up 71 per cent. The high incidence of poverty in rural areas is due to the fact that rural people lack access to most of the economic infrastructure that is essential to their livelihood. Since the country's main problems of unemployment and poverty are essentially rural problems, and considering that the majority of the SMMEs in the rural areas are micro and very small businesses, support systems should be designed for and targeted at these subsectors. However, since some micro and very small businesses are not registered, efforts should be aimed at formalising the sector and leveraging both training and financial support systems.

Despite the legislated SMME definitions, and scanty success factors, there seems to be a need for ongoing surveys and audits of the SMME industry. The lack of information in the sector makes it difficult to plan the industry's national support systems and provide a continuous account of the contributions the industry makes towards employment and the GDP. Because this information is lacking, it is often difficult to know the SMMEs' numbers, their successes and failures annually, or the successes and failures of the available support systems.

Notes

¹ME = margin of error, P = population size, Q = 1 – P, n = sample size, and SD = standard deviation.