Unpacking tourism SMMEs in South Africa: structure, support needs and policy response

Abstract

Small enterprise (SMME) support policy in post-apartheid South Africa has traditionally involved support initiatives in the form of ‘generic’ packages that overlook the specificities of particular sectors. In this article the specific issues concerning SMME development in tourism are investigated. Against a backcloth of a review of international scholarship on tourism small firms, the article presents findings from recent empirical investigations into the progress and problems of tourism SMME development in South Africa. Within the international scholarship and policy debates on tourism, it is argued that the South African experience is particularly distinctive in two respects: (1) the support of particular groups of tourism SMMEs linked to objectives of transformation and (2) the introduction of dedicated tourism-specific support programmes for SMME development.

¹Professor of Human Geography, School of Geography, Archaeology and Environmental Studies, University of the Witwatersrand, Johannesburg. An earlier version of this paper was prepared for Trade and Industrial Policy Strategies. Thanks are due to Mrs W Job of the Cartographic Unit, University of the Witwatersrand for preparation of the accompanying figure. Certain of the empirical material reported here was undertaken as part of research currently supported by the South Africa Netherlands Research Programme on Alternatives in Development.

1. Introduction

Support for the development of small, medium and micro-enterprises (SMMEs)2 has been a continuous theme in national government policy and planning in South Africa since the 1994 democratic transition (Berry et al., 2002; DTI, 2004). One of the key issues that has been raised in terms of the analysis of support programmes for small enterprise support programmes in South Africa is that often support initiatives have been in the form of ‘generic’ packages that overlook the specificities of particular sectors (Rogerson, 2004a). Although it is recognised that the SMME economy in South Africa is extraordinarily diverse and composed of different groups of enterprises which require different kinds of support intervention, currently there exists only limited research on the specific support needs and constraints that challenge SMME development in particular sectors of the economy. Indeed, by far the majority of existing writings in South Africa debate the SMME economy in a sectorally undifferentiated manner (DTI, 2004).

Tourism has been identified as potentially one of the key economic drivers for post-apartheid South Africa in several investigations (WTTC, 2002, 2003; DEAT, 2003, 2004; Rogerson & Visser, 2004). Moreover, it is significant that tourism represents one of South Africa's priority economic sectors as identified by the Department of Trade and Industry (DTI). Indeed, a recent analysis disclosed that for the period 1998–2002 tourism is the only sector that shows both positive growth in employment and contribution to GDP (Monitor, 2004). In 2004 the South African travel and tourism economy's contribution to GDP (including induced and indirect effects) was estimated at R93,6 billion or 7,4 per cent of total (DTI, 2005). Since the publication of the 1996 Tourism White Paper there has been a strong and continued acknowledgment of the importance of promoting SMMEs in the South African tourism economy (RSA, 1996; DEAT, 2004). The special importance of SMME promotion in South Africa must be appreciated as part of wider national initiatives for the transformation of the ownership structure of this white-dominated sector of the economy and of the associated promotion of Black Economic Empowerment (BEE) objectives (TBCSA, 2002, 2003; Rogerson, 2004b,c). Moreover, an important role is also identified for tourism SMMEs in the making of a more globally competitive tourism industry (Monitor, 2004).

Transformation of the industry is seen as an essential vehicle for enhancing product innovation and fostering a wider geographic spread of benefits from tourism (DTI, 2005). In this regard the release during 2005 of the Tourism BEE Charter and Scorecard represents a watershed in terms of renewed possibilities for promotion of empowerment as a vital policy leverage for developing black-owned SMMEs in tourism (DEAT, 2005a). At the launch of the Tourism BEE Charter on 8 May 2005, the Minister of Environmental Affairs and Tourism stated appropriately that: ‘For too many decades tourism has been the symbol of everything that was wrong with South Africa – today we take the single most important step forward since 1994 in addressing that legacy, and ensuring that we break down the walls separating our communities from the benefits of tourism’ (Van Schalkwyk, 2005a). The targets set for enterprise development in the Tourism BEE Charter create a critical leveraging opportunity for support initiatives which are designed to open up access to tourism markets for emerging tourism companies as well as the expansion of various business linkage initiatives that provide additional business opportunities (DEAT, 2005a,b).

Notwithstanding the importance of SMME development in the contemporary South African economy, the situation remains that relatively little research has been undertaken on the issues and developmental challenges that confront tourism SMMEs (Visser & Rogerson, 2004). The aim in this article is to examine the specificities surrounding SMME development in the tourism sector of South Africa. Building upon the existing set of findings on tourism SMMEs, the article presents findings from a number of recent empirical investigations and reviews material concerning the progress and problems of tourism SMME development in South Africa. Within the international scholarship and policy debates on tourism, it is argued that the South African experience is particularly distinctive in two respects: (1) the support of particular groups of tourism SMMEs linked to objectives of transformation, and (2) the introduction of dedicated tourism-specific support programmes for SMME development.

The analysis unfolds through three sections of material.

• First, a review is undertaken of international writings and debates on small tourism firms. This analysis affords a wider context within which to view the South African experience and challenges of tourism SMME development.

• Secondly, the position and importance of developing tourism SMMEs in South Africa is examined.

• Finally, new research material is presented which analyses the major problems that face various types of tourism SMMEs in contemporary South Africa.

2. Researching tourism small firms

Over recent years a number of international scholars have stressed that it is appropriate to examine small tourism and hospitality firms as an analytical category distinct from small business enterprises as a whole (Thomas, 1998, 2000). In particular, the case for viewing small tourism firms as a distinctive focus for scholarly attention is anchored on the arguments of Burrows & Curran (1989) that there are serious methodological dangers in small business research that neglect sectoral contexts. With major observed differences in the behaviour and characteristics of small – as opposed to large – tourism enterprises, it is contended that ‘there are good reasons for treating small tourism firms as a distinct analytical category’ (Thomas, 2000: 351). Accordingly, it is asserted that there is a compelling case for ‘an assessment of small tourism firms that is separate from the study of small firms in general’ (Thomas, 2000: 348).

In the international context, many tourism scholars have begun to respond to this challenge of expanding our understanding of small tourism firms. Since the 1990s, Thomas (2004a: 1) argues there ‘has been a flourishing of interest in a variety of issues relating to small businesses in tourism’. As illustration, within the last year three edited collections have appeared concerning international research on small firms in tourism (Keller & Bieger, 2004; Morrison & Thomas, 2004; Thomas, 2004b). It must be acknowledged, however, that the bulk of existing scholarship is centred on issues around the role of small tourism firms in developed countries.

The existing literature contains work around several issues concerning the development and dynamics of small tourism firms, including:

• the role of information technologies (Buhalis, 2004; Matlay, 2004)

• impacts of globalisation (Smeral, 1998)

• policy towards small tourism firms (Buhalis & Cooper, 1998; Wanhill, 2000, 2004; Vanhove, 2004)

• networking and cooperation (Lynch, 2000; Tinsley & Lynch, 2001; Bieger, 2004; Bieger et al., 2004; Komppula, 2004a; Telisman-Kosuta & Ivandic, 2004)

• innovation in small firms (Ateljevic & Doorne, 2000; Ioannides, 2003; Hallenga-Brink & Brezet, 2005)

• the problems of rural tourism entrepreneurs (Lassila, 2000; Buhalis & Paraskevas, 2002; Komppula, 2004b; Lordkipanidze et al., 2005)

• responses to seasonality (Getz & Nilsson, 2004)

• the role of small firms in niche markets (Hall, 2004; Scott & Laws, 2004)

• factors affecting business performance (Lerner & Haber, 2001; Ateljevic & Doorne, 2004a; Morrison & Teixeira, 2004a,b; Getz & Carlsen, 2005; Getz & Petersen, 2005; Reichel & Haber, 2005)

• human resource development (Lee-Ross, 1999) and

• small firm contributions to local and regional economic development (Andriotis, 2002; Pechlaner & Tschurtschenthaler, 2003; Bastakis et al., 2004; Erkkila, 2004; Job et al., 2004; Keen, 2004).

The accommodation sector has been a particular focus for attention on the birth, development and dynamics of small tourism enterprises (Thomas, 2004b). An important finding from empirical research conducted both in the United Kingdom and New Zealand is that the majority of small tourism firms do not aspire to grow but instead are often motivated by ‘non-financial’ considerations (Ateljevic & Doorne, 2000, 2004a; Hall & Rusher, 2004). Many enterprises, such as bed and breakfasts in the family home or holiday cottages on a farm, represent examples of ‘marginal’ small businesses which are effectively an addition to a main income (Webster, 1998: 208). The significance of social, ‘lifestyle’ or non-economic factors in tourism entrepreneurship in developed countries is an important finding that is highlighted within several recent investigations (Williams et al., 1989; Shaw & Williams, 1990, 2004; Ateljevic & Doorne, 2000, 2003, 2004b; Hall & Rusher, 2004; Shaw, 2004; Getz & Petersen, 2005).

An important finding is that tourism small firms can be categorised broadly into groups of, on the one hand, ‘lifestyle enterprises’ that are set up to provide owner-managers with an acceptable income at comfort levels of activity and, on the other hand, of ‘entrepreneurial small businesses’ driven by the growth motives of the Schumpeterian type of entrepreneur (Buhalis & Paraskevas, 2002; Ateljevic & Doorne, 2003, 2004a; Shaw & Williams, 2004; Getz & Carlsen, 2005). Another critical finding is that despite the numerical dominance of tourism economies in most parts of the world, tourism small firms' ‘lack of strong lobbying voice within the matrix of stakeholders at the destination means that they tend to lose out to the stronger voices of large enterprises and political groups’ in tourism planning and policy circles (Buhalis & Cooper, 1998: 324). Finally, for South African researchers there are a number of specific parallel and interesting issues concerning Black Economic Empowerment that are raised in research into the opportunities and constraints affecting ‘indigenous’ or Aboriginal micro-enterprise formation in northern Australia (Buultjens et al., 2002; Fuller et al., 2005).

By contrast to this growing set of writings on small tourism firms in the North, the literature on small tourism firms in the South or developing world is relatively sparse. The most useful sets of contributions are those contained in the edited collections by Dahles & Bras (1999a), interrogating the role and activities of small entrepreneurs involved in the Indonesian tourism economy, and by Dahles & Keune (2002), concerning tourism entrepreneurship and small tourism enterprises in Latin America and the Caribbean. Another important set of contributions is the work produced by the World Tourism Organisation (WTO) on the possibilities of adapting micro-credit to the specific needs of small tourism firms in the developing world (Yunis, 2004; WTO, 2005).

Within a developing world context it has been argued that the common economic objectives of increased earnings, foreign exchange, investment, job opportunities and the minimisation of adverse social and cultural effects might be best achieved through the promotion of small tourism firms rather than large enterprises (Rodenburg, 1980). On the basis of research in Indonesia, Hampton (2003) avers that small tourism firms may be seen as a form of pro-poor tourism with important implications for local development. Despite such assertions, currently there exists only limited detailed empirical work on tourism entrepreneurship in the South, with some notable exceptions for Malaysia (Hamzah, 1997), India (Kokkranikal & Morrison, 2002), Indonesia (Dahles & Bras, 1999b; Dahles, 2000, 2001; Hampton, 2003), Ghana (Gartner, 1999, 2004), Melanesia (Douglas, 1997) and the British Virgin Islands (Petrovic & O'Neal, 2001). In Namibia, Shackley (1993) has tracked the emergence of guest farms as a new accommodation subsector in Namibia. Finally, at the lower end of tourism entrepreneurship, a number of investigations have appeared into the activities of a range of different forms of informal tourism enterprise, including beach masseurs, craft trading, street guiding and providers of informal accommodation (Wahnschafft, 1982; Crick, 1992; Timothy & Wall, 1997; Dahles, 1998; Dahles & Bras, 1999a,b; Hampton, 2003).

A core finding of research in the South is that often the growth of small firms in tourism economies is severely constrained by the power and competitive dominance enjoyed by large enterprises (Britton, 1982, 1987). Of the Indonesian experience, Dahles (2000: 162) observes that ‘small establishments find it hard to attract individual tourists and, because of the fragmentation of the industry, they are in a weak position vis-à-vis the large tour operators’. Accordingly, it is asserted that networks ‘have become the fundamental survival route of small tourism firms because of the benefits they offer in terms of cost advantages, marketing, information access and, ultimately, flexibility’ (Dahles, 2000: 162). In some cases, the most promising opportunities for small firms appear to exist not in mass tourism operations but instead in alternative forms of tourism, such as low-budget tourism, as exemplified by backpacking (Hampton, 1998, 2003). As many kinds of alternative tourism occur in peripheral regions, it has been recommended that local control and local small enterprise development in tourism in such areas be supported by the provision of special fiscal and monetary incentives to enable local entrepreneurs to own and operate small tourism establishments (Tosun, 2005). Another theme highlighted in research on small tourism firms in the developing world is the limited application of new technologies, which increasingly constrains enterprise development (Croes & Tesone, 2005).

Finally, a fresh perspective on tourism small firms in the South emerges from the important set of writings on pro-poor tourism which stress the importance of nurturing a policy environment for supporting small tourism enterprises as a potential basis for addressing poverty reduction (Ashley et al., 2000, 2001; Ashley & Roe, 2002; Bah & Goodwin, 2003).Recently, the pro-poor tourism movement has been a factor of growing influence in Southern Africa where its basic premise of ‘tilting’ tourism projects in such a way that the poor benefit has received endorsement from key national stakeholders in South Africa. In addition, a number of pilot pro-poor tourism interventions have been launched across Southern Africa (Pro-poor Tourism in Practice, 2005).

3. The position of tourism SMMEs in South African tourism

The tourism industry encompasses many different economic activities under one heading. In terms of economic analysis, the tourism sector is highly distinctive in that it is not a sector formally classified as such in terms of the International Standard Industrial Classifications (Smith, 1998). One important consequence of this situation is that there is often considerable uncertainty about the precise boundaries of the tourism economy, including what constitutes a ‘tourism SMME’. The definition of a ‘tourism SMME’, therefore, is open to debate, as it must relate to the boundaries of the tourism economy (Thomas, 2004b). Theoretically, the definition of ‘tourism SMME’ should include those SMME operations which fall within the scope of the travel and tourism economy as well as those operating within the travel and tourism industry. For example, a small laundry business that is dominated by servicing the needs of a large hotel, a specialist producer of furniture for game lodges or an exclusive producer of clothing geared for the tourism industry would fall within the widest definition of a tourism SMME. In practical terms, however, the analysis of tourism SMMEs is confined more narrowly to those particular enterprises operating within the bounds of the travel and tourism industry as such and including the three subsectors of:

• Accommodation (e.g. bed and breakfasts, guest houses, backpacker hostels)

• Hospitality and related services (e.g. restaurants, catering, attractions, arts and crafts) and

• the Travel Distribution System (e.g. tour operators, tour guides) (DEAT, 2005a).

The tourism sector of South Africa is well known for the limited or poor quality of available official data relating to its operations. It is not measured as a sector in its own right within national accounts (DTI, 2005). The paucity of information was highlighted once more at the opening address made by South Africa's Minister of Environmental Affairs and Tourism at the 2005 Annual Tourism Indaba in which it was stated that ‘For too long we have based our planning (for tourism) on incomplete data, and anecdotal evidence’ (Van Schalkwyk, 2005b).

It has been observed that South Africa's travel and tourism industry is highly concentrated and dominated by a small group of large, mostly locally owned, tourism organisations. In the tourism competitiveness growth strategy study, it was disclosed that six companies control some 60–70 per cent of the South African tourism industry (DTI, 2005). The Monitor investigation on the South African tourism industry describes the tourism cluster as comprising ‘a complex interaction of a large number of players, with a few large players and numerous SMMEs’ (2004: 44). In the accommodation subsector the leading enterprises are Sun International, Protea, City Lodge and Southern Sun. In travel distribution the importance of Tourvest, Rennies, Thompsons Travel, Avis or Imperial Car Rental, among others, must be highlighted. The control of the South African tourism industry by a few large players, it is argued, ‘demonstrates the consolidation that has been happening globally and locally in tourism over the past decade’ (DTI, 2005: 15).

Although large companies drive and economically dominate the South African tourism industry, it remains the case that – as in most countries of the world – the vast majority of South African tourism enterprises would fall into the category of SMMEs. As an economic sector, one of the most distinguishing features of tourism is the overwhelming pre-eminence of small-scale entrepreneurship: in the United Kingdom 99 per cent of enterprises in the travel and tourism industry would be classed as SMMEs and in Australia 95 per cent would be classed as small or micro-enterprises (Thomas, 2004a). Existing material from the developing world confirms a similar high level of participation by small tourism enterprises (Yunis, 2004; WTO, 2005). In South Africa, accurate data on the number of SMMEs in the local tourism economy is not available, particularly in respect of the emerging black-owned tourism enterprises, many of which are unregistered informal or micro-enterprises. One study in the Free State (Figure 1) showed that at least 97 per cent of formal enterprises in the province's travel and tour industry would be classed as SMMEs (Rogerson, 2005). On a wider level, the DTI has recently calculated that ‘there are more than 50 000 tourism businesses in the economy’ (DTI, 2005: 28); and, on the basis of that estimate, nationally the tourism SMME economy therefore must have at least 50 000 enterprises.

Figure 1: Location map

In its broadest outline, the South African travel and tourism industry can be conceptualised as a three-tiered hierarchy of enterprises:

1. At the top are the operations of the elite group of large enterprises, which are responsible for, inter alia, the country's major travel and tour agencies, transportation, hotels, casinos and conference centres.

The greatest proportion of this hierarchy, however, is represented by the activities of, at least, two different kinds of SMMEs:

1. The middle tier is composed of groups of established, predominantly white-owned SMMEs which operate a host of different establishments: travel and touring companies, restaurants, small hotels, self-catering accommodation and resorts, game farms, bed and breakfasts or backpacking hostels.

2. The lowest tier is represented by the emerging black-owned tourism economy, which is composed of formally registered micro-enterprises and a mass of informal tourism enterprises.

What is not fully clear (owing to the absence of reliable statistics) is the actual shape of this hierarchy as determined by numbers of established versus emerging enterprises. Although there is some evidence which suggests that a burst of emerging black-owned enterprises occurred in the post-1994 period, encouraged by potential opportunities offered by South Africa's hosting of mega-events such as the World Summit on Sustainable Development, it is clear that in many niches of the travel and tourism economy – such as the provision of small-scale accommodation – there is a continual numerical dominance by the established groups of white-owned SMMEs (DTI, 2005). For example, one estimate made for 2002 data concerning the ownership of the country's bed and breakfast economy concluded that less than five per cent of such establishments were black-owned at that time (Rogerson, 2004d). Recently, the continued high ‘birth rate’ for small accommodation establishments in the bed and breakfast market has been confirmed by research findings from East London (Nuntsu et al., 2004). Moreover, from a study of tourism SMMEs in the Free State it was estimated that emerging SMMEs represented at most seven per cent of the profile of tourism SMMEs in the province in 2004 (Rogerson, 2005).

In terms of South African small enterprise development, one distinguishing feature of tourism is that it represents an important focus for what is described as ‘lifestyle entrepreneurship’. For lifestyle entrepreneurs, economic motives in running their businesses are matched by ‘non-economic’, personal or environmental factors in encouraging the start-up of tourism small businesses, particularly in the operation of bed and breakfast accommodation or small guest houses (cf. Ateljevic & Doorne, 2000; Hall & Rusher, 2004; Getz & Carlsen, 2005; Getz & Petersen, 2005). The importance of lifestyle motivations is apparent in findings concerning the motivations of many white entrepreneurs running guest houses and other small-scale forms of accommodation in the Western Cape, the Midlands of KwaZulu-Natal and the Free State (Visser & Van Huyssteen, 1997, 1999; Mathfield, 2000; Rogerson, 2005). Typically, as in a developing tourism node such as Clarens in the Free State, the majority of entrepreneurs running small tourism businesses are well-capitalised individuals, retirees or new lifestyle seekers from Gauteng.

By contrast to these lifestyle entrepreneurs, there are other subgroups of tourism SMME entrepreneurs functioning in South Africa. In common with the international experience, there is an important group of both white and black tourism entrepreneurs who are driven by ‘opportunistic’ or ‘growth’ motivations for the development of tourism small businesses. Nevertheless, one must also recognise that the South African tourism SMME economy is populated by a growing number of ‘marginal’ or ‘survivalist’ entrepreneurs who are operating tourism SMMEs with little prospect of substantial income or employment expansion. Into this group of survivalist tourism entrepreneurs would fall the operations of many of the emergent travel and tour operators in areas such as Soweto, Alexandra or Khayelitsha and even a significant number of township bed and breakfast operators whose occupancy levels are meagre (Rogerson, 2004b,c; Nemasetoni, 2005; Nemasetoni & Rogerson, 2005). Outside urban areas, the general trend would be for the existence of a high proportion of survivalist tourism businesses operating especially in hospitality and related services (such as arts and crafts) and run by struggling entrepreneurs. In an area such as the rural Wild Coast the vast majority of tourism enterprises would be classed as ‘marginal’ and run by necessity entrepreneurs who operate their businesses at bare levels of survival (Ndabeni, 2005). The existence of an increasing pool of ‘marginal’ or ‘survivalist’ tourism SMME entrepreneurs is one of the most disturbing and distinctive aspects of South Africa's tourism economy.

As noted earlier, the transformation of the tourism industry has been identified as a priority for national government and formalised in the signing in June 2001 of a Charter of Empowerment and Transformation for the tourism industry. The goals of black economic empowerment in South African tourism are being achieved partly through equity shares granted in existing large travel and tourism enterprise, such as Southern Sun (TBCSA, 2003). In addition to the opening-up of opportunities through skills training and infrastructural provision in undeveloped areas of tourism potential, an important policy focus has been to develop new tourism products which link for example to opportunities that are opening with tourism product development in cultural tourism or township tourism (Rogerson, 2004c). In the search for meaningful transformation, however, greatest significance attaches to the promotion of black ownership through the support of new emerging small tourism enterprises, especially in the travel and tour sector and in the provision of accommodation (Rogerson, 2004b). Considerable leverage opportunities for the progress of transformation are opened up by the release of the 2005 Tourism BEE Charter and Scorecard (DEAT, 2005a,b).

4. Growth constraints on tourism SMMEs

Until recently, the literature on tourism entrepreneurship and small enterprises in South Africa was undeveloped. Nevertheless, as the national importance of promoting and upgrading SMMEs in tourism has been raised, a number of issues concerning tourism SMME development have begun to be researched (Visser & Van Huyssteen, 1997, 1999; Saayman & Saayman, 1998; Bourgouin, 2002; Kirsten & Rogerson, 2002; Nuntsu et al., 2004; Rogerson, 2004e; Saayman & Olivier, 2005) and debated (Visser & Rogerson, 2004; Thomas, 2005). This section draws together the results of some new empirical research on the growth constraints that impact on small firms in the South African tourism economy. At the outset, it must be made clear this research discloses that different sets of growth constraints impinge upon the development of different kinds of tourism SMMEs. In particular, there are certain differences between the growth constraints that affect established as opposed to emerging SMMEs in tourism.

4.1 Established SMMEs

The group of established SMMEs in tourism enjoy a number of critical advantages over their emerging counterparts. These advantages relate to the volume of their capital, on the one hand, and their advantages in accessing and processing relevant information about the tourism market on the other hand. Among the most important of these advantages are several factors which have also been recognised in developing countries where the most successful small-scale tourism entrepreneurs are often ‘non-locals’, as is the case in many parts of Latin America (Dahles & Keune, 2002) and Asia (Dahles & Bras, 1999a).

First, established SMME entrepreneurs enjoy an advantage in terms of access to capital (see Saayman & Olivier, 2005). Often the tourism SMME is linked to alternative sources of income to farming (agro-tourism or farm tourism) or other income-generating activities (Mathfield, 2000). In the case of retirement ‘lifestyle entrepreneurs’ these are often especially well-capitalised businesses through the asset base of the entrepreneur. Secondly, in addition to economic capital, these established entrepreneurs commonly enjoy high levels of social capital in terms of access to networks, sources of information and data to support their tourism business. In addition, the high levels of social capital are enhanced by these entrepreneurs' high levels of education, which result in high levels of managerial skill (Saayman & Olivier, 2005). Finally, there are advantages for established entrepreneurs in terms of their cultural capital as represented by their language proficiencies for dealing with various types of tourists (both domestic and international), general awareness of the tourism market (albeit not always acquired through formal training) and sound acquired knowledge of the ‘tastes’ and ‘experiences’ that are generally sought out by large segments of the tourism market (Dahles & Keune, 2002). To a large extent, the dominance by mainly white-owned SMMEs of the accommodation and travel and tour operator segments of the tourism sector in South Africa can be understood in terms of the above set of advantages (see Visser & Van Huyssteen, 1997, 1999; Visser, 2004; Visser & Barker, 2004).

In terms of the changing South African tourism economy, the growth constraints that face these established SMMEs in the South African tourism economy are relatively little researched as compared with an increasing body of work undertaken on the emerging SMME economy. During 2003, however, a survey was completed on the profile and issues confronting established tourism entrepreneurs in Free State. The survey, which was conducted in late 2003 to early 2004, involved interviews with a cross-section of 50 tourism SMME entrepreneurs throughout the Free State (Rogerson, 2005).

The findings of this study of Free State established SMME entrepreneurs disclosed a profile of tourism entrepreneurs and core issues that impact upon their growth. It was found that established SMMEs overwhelmingly dominate the local tourism market, for example, in terms of the provision of various forms of accommodation, conferencing, farm visits or game lodges. Overall, there is a high level of female involvement – either as sole or joint proprietors of SMME tourism enterprises. Tourism SMME entrepreneurship is largely the domain of middle-aged or retirement aged people; the majority of entrepreneurs were aged 50 or more years. The majority of these entrepreneurs had moved into tourism from prior work in other economic sectors. Indeed, lifestyle factors are important motivations for the start-up and operations of these tourism businesses, which often stem from a household decision to fulfil the desire to run a tourism business living in pleasant countryside surroundings.

Significantly, while many established tourism SMMEs have been in operation since before 1994, there has been a surge of new business development to take advantage of opportunities linked to the tourism boom of the post-1994 period. Typically, start-up business capital is overwhelmingly derived from own sources and access to capital is not considered a constraint by this group of entrepreneurs. At start-up, the core problem of these entrepreneurs was marketing their accommodation establishments and more generally ‘getting known’, in terms of their operations, to the market groups of primarily domestic business and leisure tourists. The positive recent performance of these Free State tourism businesses was reflected in the injection of new capital into many of them. During the previous year, 2002/3, nearly two thirds of entrepreneurs had invested new capital in the businesses via retained profits, mostly for the upgrading or addition of new existing facilities and, in some cases, the purchase of new property for development as a tourism product (Rogerson, 2005).

The constraints upon the growth of these established tourism businesses relate to several clusters of issues. First, as tourism is a marketing-intensive sector, the most significant concerns of established entrepreneurs relate to the volume and quality of tourism marketing at national and especially provincial levels. In particular, the survey interviewees stressed that the province was not reaching its potential for tourism because of the poor state of existing tourism marketing and the undermarketing of tourism products and attractions in the province (see also Visser & Kotze, 2004). Entrepreneurs widely condemned, inter alia, ‘the undermarketing’, ‘the lack of professionalism’, ‘the lack of organisation’ and ‘lack of imagination’ in provincial tourism marketing. Criticism was also directed at the state of many local tourism offices in Free State, which were perceived as ‘unfriendly’ or ‘lacking any muscle’. For smaller tourism SMME entrepreneurs, in particular those with only a few rooms in a bed and breakfast or small guest house, the disappointments concerning the poor state of official marketing were often felt most strongly because of the escalating costs of private marketing in certain guidebooks, such as the Portfolio of Country Places guides, or in Getaway magazine. Although inadequate or insufficient marketing was identified as the priority growth constraint, other issues were also highlighted as constraints on SMME development.

A second set of significant concerns was about the constraints posed upon business development by ‘excessive’ or ‘unnecessary’ regulations operated by national, provincial and local authorities which are negatively affecting the current state of tourism businesses. Among these regulatory issues the most prominent concerns relate to constraints upon businesses from signage restrictions and regulations (which in the Free State were formulated in the 1940s), labour regulations, and costs for zoning applications. A third set of concerns is about growth constraints caused by issues of infrastructural development for the tourism economy in terms of both human and physical infrastructure. Many entrepreneurs stress the importance of human resource development and the need for improved skills training programmes so that the tourism and the hospitality industry can gain momentum (Kaplan, 2004). Inadequate training facilities and inadequate trained labour were identified as potential blockages to future business development by Free State entrepreneurs. Further, the interviewed entrepreneurs flagged the long-term importance of maintaining, upgrading and strengthening the existing physical infrastructure for tourism in terms of roads, air linkages and basic provision for reliable electricity and water supplies.

Finally, established tourism entrepreneurs in the Free State study highlighted the difficulties of accessing support from available national government support programmes, in part because of their bureaucratic procedures and in part because of lack of information about potential sources of support (Rogerson, 2004e). The lack of information was often linked to the weakness of local authorities in general and their failure to understand the issues facing tourism development at a locality level. For the small number of SMME entrepreneurs who had sought to access financing through DTI programmes the results had been disappointing. Applicants complained that despite receiving acknowledgements from the DTI of their grant applications no further communications were ever received even after periods of up to 18–24 months. Other frustrated entrepreneurs bemoaned the ‘red tape’, excessive bureaucracy and paperwork involved in applying for national government support initiatives.

4.2 Emerging SMMEs

It must be appreciated that collectively the group of emerging SMMEs operates at a disadvantage with respect to both the enormous market power enjoyed by large tourism enterprises and the advantages of economic, social and cultural capital enjoyed by established SMMEs. The competition offered by established tourism businesses – both large and small – clearly functions as a core constraint upon the development of emerging businesses. This is well illustrated by new research findings on emerging entrepreneurs in the Gauteng travel and tour industry. Nemasetoni's (2005) interviews with 40 emerging travel and tour operators disclose the limits placed upon the growth of these enterprises by the dominance of large and established SMMEs in the travel and tour sector.

In rural areas the opportunities for successful tourism entrepreneurship are severely reduced by problems of infrastructural deficiencies for tourism development in terms of both human and physical resources. It is ironic that on the Wild Coast, an area of considerable potential for tourism growth, tourism entrepreneurs today face such an enormous weight of problems that much of emerging rural tourism entrepreneurship here operates at bare survival levels and approximates a situation of ‘forced’ or necessity entrepreneurship (Ndabeni, 2005). Indeed, the situation of rural tourism entrepreneurs offers the sharpest contrast to the findings about the growth constraints on established tourism SMMEs.

In terms of understanding the problems facing emerging urban SMME entrepreneurs, the most detailed material currently comes from a number of recent studies that have interrogated the problems facing emerging tourism SMMEs in the accommodation subsector, which currently is one of the priority targets for government transformation policies (Rogerson, 2004d). The findings disclose some similarities with the problems that face established SMMEs as well as several stark differences and, in general, a sharp divide between the issues confronting emerging urban-based and rural tourism entrepreneurs.

The recent research on emerging black-owned small-scale accommodation establishments shows that they are largely confined spatially to the apartheid-designated townships, with the largest clusters found in Soweto, Khayelitsha and Inanda (Rogerson, 2004d). This distinctive geography offers opportunities but at the same time imposes considerable limits on the growth of these establishments. These emerging SMMEs are confined by geography to the specialised niche of ‘township tourism’ and thus do not attract the wider mix of business and leisure tourists who visit the parallel accommodation establishments as operated by established SMME entrepreneurs. Features of similarity that are observed relate to the new surge of establishment growth post-1994, high levels of women entrepreneurship and a striking parallel in terms of a high proportion of entrepreneurs over the age of 50 years.

Lifestyle entrepreneurship is not a feature of the emerging SMME economy, in which economic motives for business operation are paramount. The education levels of emerging tourism SMME entrepreneurs are relatively high, with many having tertiary qualifications, and several former nurses and teachers are among their ranks. Unlike the situation observed among rural tourism entrepreneurs on the Wild Coast (Ndabeni, 2005), the majority of these tourism SMMEs were launched as a result of perceived market opportunities rather than as a result of a desperate search for survivalist incomes because of unemployment or retrenchment. The largest element of the surveyed entrepreneurs would be classed as ‘opportunistic’ in the sense of initiating their businesses in response to perceived market opportunities and the observed increased flow of visitors to townships (Rogerson, 2004d). Other factors which led to business start-ups were entrepreneurs' interest or involvement in catering (in this case mainly women), actual experience of travelling and of ‘being a tourist’, and prior experience of formal work in the tourism industry.

As most start-up finance was drawn from own funds, there is another observed parallel between these entrepreneurs and the group of established entrepreneurs in terms of marketing as the core problem at business start-up. In line with the national upturn in the tourism economy as a whole, many emerging township SMMEs offering bed and breakfast accommodation reported flows of repeat visitors due to enhanced enterprise marketing and improvement or upgrading in their premises. At the same time, there were increased complaints of ‘market saturation’ regarding the numbers of such establishments which opened especially around 2002 in order to capture potential visitor flows from the Johannesburg World Summit on Sustainable Development. The major constraint on their business development that was identified was the need to improve the marketing of their businesses individually and of townships as new spaces for tourism. The need for financial assistance to help upgrade accommodation facilities, particularly in response to the demands of discerning international tourists, is a second important growth constraint. Established SMMEs can finance upgrading of their premises from retained earnings, but this capacity currently does not exist for most emerging SMMEs (Rogerson, 2004e).

The lack of assistance with enhancing skills, in terms both of becoming aware of the tourism industry and of receiving advice and information about running a business, is a further key constraint on business development. Indeed, in common with the group of established SMMEs, the emerging tourism SMMEs complained of poor access to and outreach of national government support programmes, particularly concerning financing support for marketing, training and upgrading of premises (cf. Rogerson, 2004e).

Overall, it must be concluded that while emerging entrepreneurs have entered the tourism industry in increasing numbers, especially in activities such as bed and breakfasts, where barriers to entry are relatively low, they continue to face sets of ‘significant barriers to sustained growth’ (Monitor, 2004: 46). The major initiative designed to address these barriers was the establishment in 2000 of the Tourism Enterprise Programme (TEP). For its first four-year phase of operations the TEP initiative was targeted largely at job creation through the facilitation and support of business linkages. With funding support from DEAT the TEP programme is being scaled-up and widened to include the launch of tourism-specific training and a more holistic approach to SMME development that includes a drive to impact upon policy issues that limit the growth of tourism SMMEs (TEP, 2005a,b).

5. Concluding remarks

Internationally, the structure of the tourism industry, with its high proportion of small enterprises, necessitates that a distinctive academic and policy focus be given to tourism small firms or tourism SMMEs (Thomas, 2004a,b). Within the international scholarship of tourism, the South African experience is emerging as distinctive and in many respects innovative. It is distinctive particularly in linking tourism SMME development with the advancement of Black Economic Empowerment objectives. It is innovative in the significance accorded to policy support for small tourism firms, especially of emerging SMMEs, and in the establishment of dedicated tourism-specific support programmes for SMME development.

The support needs of SMMEs operating in the South African tourism economy have been shown to be far from homogeneous. The South African tourism SMME economy comprises a mix of growth-orientated tourism SMMEs, groups of lifestyle entrepreneurs and an expanding corpus of ‘marginal’ or survivalist tourism entrepreneurs. It is essential, therefore, that different forms of support interventions be developed and targeted at these different groups. Recent support programmes for tourism SMME development, both from national government and the private sector, are moving in the general direction away from the notion that ‘one size fits all’ in terms of business development support and financing.

Certainly, there are welcome signs that government support initiatives towards SMMEs in South Africa are beginning to acknowledge seriously the importance of sector specificity (DTI, 2004). As is the case with the institutionalisation of a set of dedicated support initiatives in the manufacturing sector (such as the Manufacturing Advice Centres), so too in tourism there exists a strong argument for the ‘separate development’ of a layer of support initiatives that are specific to the needs of tourism. The activities of the expanding Tourism Enterprise Programme represent concrete expression of the institutionalisation of sector-specific SMME support in South Africa. A monitoring and evaluation of the progress of these dedicated sector specific policy initiatives in South African tourism represents an issue of considerable importance in the international scholarship on tourism SMMEs.

Notes

¹Professor of Human Geography, School of Geography, Archaeology and Environmental Studies, University of the Witwatersrand, Johannesburg. An earlier version of this paper was prepared for Trade and Industrial Policy Strategies. Thanks are due to Mrs W Job of the Cartographic Unit, University of the Witwatersrand for preparation of the accompanying figure. Certain of the empirical material reported here was undertaken as part of research currently supported by the South Africa Netherlands Research Programme on Alternatives in Development.

²The language of small enterprise development is often ‘fuzzy’. In South Africa the official term that has been popularised since 1995 in discussions of small enterprise development is ‘SMMEs’ – ‘small, medium and micro-enterprises’, which includes informal sector enterprises. Internationally, across many countries (both developed and developing), the preferred term is SMEs – ‘small and medium enterprises’, a term that sometimes excludes informal and micro-enterprises.