Risk factors of failure in start-up textile enterprises

Abstract

Despite various attempts made to curb the import of textile and clothing products from China, the demand for Chinese textile products and garments in Tshwane is quite high. Start-up enterprises operating in the textile industry of Gauteng Province in South Africa depend extensively on merchandise imported from China. The research was based on a five-yearlong study conducted by Marivate [2014. “The Impact of Entrepreneurial Skills on the Viability and Long-term Survival of Small Businesses: A case of the City of Tshwane, South Africa. European.” Journal of Business, Economics and Accountancy 2 (2): 53–72] by collecting data from a cohort of 312 textile enterprises operating in the City of Tshwane. The aim of study was to construct a survival probability model for the enterprises in the study as a means of identifying the most significant risk factor for failure in start-up textile enterprises. A semi-parametric survival model was used for identifying key risk factors for failure. The study found that about 51% of start-up businesses were viable at the end of the study period. The key determinants of survival and profitability were the ability to order merchandise in bulk on credit from wholesale Chinese suppliers, access to a trusted trading partner in China, ‘Guanxi’, and the attendance of at least one training session on entrepreneurial skills. Based on findings obtained from the study, there is no basis for recommending the elimination of low-wage employment in the textile and clothing industry of Tshwane.

Keywords:

• textile enterprises
• semi-parametric model
• long-term survival
• hazard ratio