Beruflich Dokumente
Kultur Dokumente
IN BUSINESS MANAGEMENT
BY
SIVE MZANANDA
SOUTH AFRICA
NOVEMBER 2015
SUPERVISOR: MS E. C. RUNGANI
ABSTRACT
Small Medium and Micro Enterprises (SMMEs) within townships play a crucial role in
developing communities in order to reduce unemployment which is faced by the
globe. However, the problem that still haunts SMMEs is that there is still a gap in
education also lack of flexibility from entrepreneurs. For some new ventures to start
up find it difficult due to some of the barriers which are faced by SMMEs, as they can
be financially. This study investigated the barriers experienced by township SMMEs
in the Buffalo City Metropolitan Municipality. The primary objective of this study was
to determine the perceived barriers faced by SMMEs in townships. The secondary
objectives were to identifying the barriers SMMEs experiencing when establishing
their business, financial barriers experienced by SMMEs, to ascertain the barriers
SMMEs experience when managing their business and to determine the barriers
SMMEs experience when accessing markets for their business. Both primary and
secondary data was used in this study. This research study made use of quantitative
research design. A simple random method was used as the sampling method. A self-
administered questionnaire was used as a measuring instrument. The Statistical
Packaging for Social Science (SPSS) was used to analyse the data including
descriptive statistics. The research findings showed that Township SMMEs are
facing financial barriers, marketing constraints, lack of education and skills and
regulatory barriers. However, it is recommended that the government should
intervene and help these SMMEs.
i
DECLARATION
I, the undersigned, Sive Mzananda student number 201203230, hereby declare that
this dissertation is my own original work and that it has not been submitted, and will
not be presented at any other University for a similar or any other degree award.
………………………………………………..
Signature
………………………………………………
Date
ii
PLAGIARISM DECLARATION
I, Sive Mzananda student number 201203230, hereby declare that l am fully aware
of the University of Fort Hare’s policy on plagiarism and l have taken every
precaution to comply with the regulations.
................................................
Signature
………………………………………………
Date
iii
ETHICAL CLEARANCE DECLARATION
I, Sive Mzananda student number 201203230 hereby declare that l am fully aware of
the University of Fort Hare’s policy on research ethics and l have taken every
precaution to comply with the regulations.
...........................................
Signature
………………………………………………
Date
iv
ACKNOWLEDGEMENTS
I wish to express my heartfelt gratitude to the Almighty God and all those who
assisted me to complete this dissertation.
First of all, I would like to thank the Almighty God for his daily protection,
guidance and the strength he has given me to complete this work.
My supervisor, Miss Ellen Rungani and Mr. Chimucheka for their guidance
and support.
My grandfather Mr. W. Mzananda for his support, love and guidance
The whole family and friends for their love and support throughout the year.
Asisipho Yekelo for her support, love and care.
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DEDICATION
I dedicate this work to:
Almighty God for the strength he gave me to make the impossible possible.
My Grandmother and Grandfather for their support and love.
My mother Thembela Mzananda for her love.
My aunt, Nothemba, Nombulelo Mzananda and my uncle Mzoxolo Mzananda.
My young sisters, Siphesihle and Zenande Mzananda.
My cousins, Likho, Hlumelo, Zukisani Mzananda.
The girl who supported me throughout the year, Asisipho Yekelo.
All my friends.
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LIST OF TABLES
Table 4.1: Barriers perceived when establishing businesses
Table 4.4: Obstacles faced when accessing funds from financial institutions
Table 4.10: Barriers when accessing new markets and government provision
vii
LIST OF FIGURES
Figure 4.1: Gender
viii
TABLE OF CONTENTS
ABSTRACT …....………………………………………………………………………… i
DECLARATION…………………………………………………………………………. ii
ACKNOWLEGDEMENT……………………………………………………….………. v
DEDICATION …………………………………………………………………………… vi
CHAPTER ONE
ix
1.7.1.2 Psychological Entrepreneurship Theories ………………… ……………. 8
CHAPTER TWO
x
2.2. Contribution of SMME sector to the economy of South Africa ………………. 17
xi
2.7 CHAPTER TWO SUMMARY …………………………………………………….. 26
CHAPTER THREE
xii
3.7.1 Descriptive statistics …………………………………………………………. 39
CHAPTER FOUR
CHAPTER FIVE
xiii
5.5 AREAS FOR FURTHER RESEARCH …………………………………………. 75
BIBLIOGRAPHY ………………………………………………………………………… 76
APPENDIX A: QUESTIONNAIRE
xiv
xv
CHAPTER 1
1
1.1 INTRODUCTION AND BACKGROUND TO THE RESEARCH
As many small, medium and micro-enterprises (SMMEs) are growing or improving
across the globe, they contribute most importantly in providing new jobs, especially
for people who are unemployed (Ladzani and Van Vuuren, 2002:2). Fin Mark Trust
(2006) also reasoned that these SMMEs are important to destitution mitigation,
salary fairness, work and reasonable financial development in South Africa. The
small medium and micro enterprises (SMMEs) and entrepreneurship became a key
focus of many research studies in recent years because they operate only for 1 or 2
years after that they are gone and most of the entrepreneurs are lacking education,
training and skills to manage their own businesses also to maintain external
competition (Herrington, Kew and Kew, 2009:13; Chimucheka, 2012:2).
Entrepreneurs in the entire universe are causing strong emotion on revolution that is
revitalising economies as (Toit, Erasmus and Strydom, 2010:43), emphasised that
the establishment of emerging businesses and the magnification of surviving ones
are responsible for most of the products and accommodations that change the lives
of people within our societies. It is paramount not to overstate the desire of township
entrepreneurs to withstand their businesses. The South African government has
acknowledged that small businesses diminish the levels of high unemployment rates
which is seen as the major problem that the government is facing (Tustin 2001;
Ladzain & van Vuuren, 2002; GEM, 2006). An holistic picture in the entrepreneurial
society is that a successful small firm starts as entrepreneurial and then transforms
in exploiting the formula that underlies its success and the market it has found
(Bjerke, 2007:20:21).
National Credit Regulator (NCR) in 2011 indicated that, there are still numerous
challenges that face the SMMEs as they contribute to economic growth, as South
2
Africa is not the only country which is affected or face these challenges and these
challenges makes it difficult for entrepreneurial growth. The GEM (2010) reported
that SA small businesses withal still grieve the pain of low management skills as a
result of the past as many of them were previously disadvantaged and they are not
well educated and trained. This shows how the rate of SMMEs that do survive is so
low in South Africa when it is compared to other countries. Although the government
is endeavouring to promote SMMEs there are still challenges.
Although SMMEs receive much attention from the government there are still
challenges which they experience in establishing, sustaining, maintaining and
growing these enterprises. Chimucheka (2013:4) argued that, the challenges that
SMMEs are facing in the Eastern Cape region include that, most people are not
educated and they do not have skills. They also have limited access to financial
resources which it makes it to be hard for sustainable growth. The purpose of this
investigation is to outline and unpack the momentous issues of the perceived
barriers that are experienced by SMMEs in the Buffalo City Municipality.
3
Cape and South Africa at large the unemployment rate is high and the establishment
of SMMEs will help in reducing these challenges that are perceived by the nation.
(Marnewick, 2008) expressed on his study that these SMMEs within townships plays
a crucial role in developing communities in order to reduce unemployment which is
faced by the globe. However, the problem that still haunts SMMEs is that there is still
a gap in education also lack of flexibility from entrepreneurs. As it is consequential
for entrepreneurs to benefit themselves and find ways to improve the organisation of
their businesses, and the skills of their employees. For some new ventures to start
up find it difficult due to some of the barriers which are faced by SMMEs, as they can
be financially. Thus, it is important to investigate and provide solutions to these
barriers faced by SMMEs in townships. It is important to identify these barriers that
make it difficult for SMMEs to sustain growth.
What are the barriers that SMMEs in Buffalo City Metro Municipality
experience in establishing, sustaining, maintaining and growing enterprises?
4
What are the possible solutions to these barriers?
H2: There are significant barriers SMMEs experience when establishing their
businesses
H0: There are no significant barriers that SMMEs experience when accessing
markets for their businesses
H4: There are significant barriers that SMMEs experience when accessing markets
for their businesses
5
1.7 LITERATURE REVIEW
Many studies have been conducted focusing on SMMEs in townships. Maphalla et.al
(2010) identified some major barriers to entrepreneurship in Mamelodi. These
barriers include:
However, apart from this perceived barriers identified it additionally emerged that
lack of entrepreneurial orientation can lead to entrepreneurial activity at a later stage.
Mandisa Mpahlwa in 2006, on the report he was presenting that by that time small
business sector comprised (2 million) small businesses representing 98 per cent of
the total number of firms within South Africa. When analysing the legacy of
apartheid, Mpahlwa (ibid) identified the following salient obstacles that can be drawn
from apartheid, also quoted by Sanchez (2008) which are:
6
Black people were restricted by the Bantu Education system to explore
opportunities for the acquisition of skills and entrepreneurial orientation,
which could have encouraged the youth to adapt an entrepreneurship
culture.
The legacy of these boundaries affected the magnification of the SMME sector in the
townships and stifled those that dared start by depriving them of any fortification.
Bond (2000) went further on calling it a theory of uneven development, which draws
from Marx’s capital concentrations of wealth for capitalism and poverty and
oppression of workers.
Failures that some SMMEs have due to access markets in the area of Eastern Cape
can be attributed to industry competition, which is tenacious by what was expounded
by Porter as the five competitive forces that shape every industry.
7
Substitute: Substitute product or services can limit another industry’s
revenue potential. Put a ceiling on prices the enterprise can charge
without decreasing sales.
New entry: It lower the industries profits as prices will be kept down to
make entry less attractive as enterprises have to spend more to keep
their customers.
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1.8 RESEARCH METHODOLOGY
Research methodology can be defined as the general research strategy that plans
and structure the way in which research is to be undertaken and, among other things
to identify ways to be utilized.
The type of research that was used in this study was a quantitative research method.
Quantitative methods of research have proper sampling that then allows for the
measurement of many subject reactions to a set of questions, (SEEP-AIMS 2000). In
this method the results can then be compared and also analysed statistically. The
number of respondents in this approach is quite high.
The simple random method will be used as the sampling method. The population of
the study will be the total of all the registered SMMEs in Buffalo City Metro
Municipality. The sample size was drawn from a population of 130 registered
9
SMMEs in the Buffalo City Metropolitan Municipality (King Williams Town and
Dimbaza). The sample that was drawn the targeted population was 60 SMMEs.
Statistical software named RAOSOFT sample size calculator is the one that was
occupied.
In order to perfect the primary research objective of the study, a self- administered
questionnaire was developed to accumulate primary data from SMME owners
around Buffalo City Metropolitan Municipality area. A questionnaire is described by
Roberts-Lombard (2002:202) as a set of questions formalised to obtain data from
respondents. According to McDaniel and Gates (2001), questions that are open-
ended tend to be subsidiary when the researcher is unsure of the replication.
10
1.10 ETHICAL CONSIDERATIONS
Ethics are very important when carrying out any type of research. This research is
done ethically and legally. The researcher made sure that the participants are
informed of the research before they get involved and also outline to the participants
what the research is about and then ask for their consent to take part. The
researcher has a moral responsibility to protect participants from any harm. The data
provided by the participants was kept with strict confidentiality. Confidentiality means
that the respondent’s identity will only be known to the researcher but protected from
the public exposure. The researcher was obliged not to compromise the respondents
but to keep the data collected at the highest level of confidentiality (Kolb, 2008:13).
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1.12.2 Chapter Two: An overview of Small Medium and Micro Enterprises in
South Africa and perceived barriers that SMMEs experience in townships
Chapter two provides a comprehensive literature study on the definition of SMMEs
and an overview in South Africa and global perspective. The importance and
contributions of SMMEs in the economy will be discussed in this chapter as well as
perceived barriers experienced by SMMEs in South Africa.
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CHAPTER2
LITERATURE REVIEW
13
2.1 INTRODUCTION
This chapter reviews the literature that currently exists with regard to perceived
barriers experienced by township SMMEs in South Africa. According to Fink (2010)
proposed that research literature review, is the analysis and examination of
completed and recorded work from different researchers in a particular field of
interest.
This chapter will firstly explore the nature of SMMEs and a broad definition of
entrepreneurship and discusses the contribution and importance of the SMMEs.
According to the study prepared for National Credit Regulator (2011), some various
experts from different fields (economists, business experts and policy makers)
agreed that SMEs increase the amount of goods and services produced within a
particular country. A vigorous SMME sector adds value to the economy through
investment, GDP, poverty alleviation and creating more job opportunities. However,
there are barriers which are experienced by SMMEs regardless of the positive
contributions to the economy. These barriers include financial barriers, economic
barriers and government regulations.
In addition this chapter also attempt to provide solutions that currently exist to
address these barriers.
14
2.1.2 DEFINITION OF SMMEs
According to (Storey, 1994; Aigbavboa & Thwala, 2014:772), there is no well-known
explanation for small firms. The major concern in most countries including South
Africa is the matter of what institutes a small or medium enterprise. In numerous
studies different definitions are given to this category of business (Mahembe,
2011:24). The definition given by the European Commission (2003) focuses on the
number of employees being employed and turnover made by enterprise. Falkena
et.al and Standard Bank defines SMEs as enterprises that has R150 000 to R5
million per annum turnover.
15
measures that should be used to group businesses into categories of four, (Gauteng
SMME Policy Framework, 2009-2014:2). Table 2.1 below summarises SMMEs
definitions of different categories in South Africa.
Medium less than 100 to 200 Less than R4 000 000 Less than R2 000 000
workers, reliant on to R50 000 000 to R18 000 000 reliant
industry annual turnover reliant on industry
on industry
Small less than 50 workers Less than R2 000 000 Less than R2 000 000
to R25 000 000 to R4.5 000 000 reliant
annual turnover reliant on industry
on industry
Very Small less than 10-20 Less than R200 000 Less than R150 000 to
workers reliant on to R500 000 annual R500 000 reliant on
industry turnover reliant on industry
industry
Micro Less than 5 workers Less than R150 000 Less than R100 000
annual turnover
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Ntsika (2001:13); Njiro, Mazwai, & Urban (2010) the informal business comprise
survivalist enterprises activities on pre-entrepreneurial level. It includes street sellers,
vendors and survival farmers; usually people unable to find paid jobs. Njiro et.al
(2010:8); Mahembe (2011:25) states that micro enterprises lack formality in terms of
registration for business licences and taxation limit of R150 000 per year. An
example of micro enterprise is a spaza shop. However, several micro-enterprises
sustain so much growth in a long run. Their earning levels differ widely, which
depends on a specific sector, also on the relevant support and the success of
business (DTI, 1995:8). In terms of the number of employees they employ 5 or less.
With very small enterprises, according to Mahembe (2011:25) these are enterprises
that employ less than 10 workers that are being paid, excluding huge sectors (such
as, construction sector, electricity sector, manufacturing sector and mining sector),
where the employment figure is more than 10 workers. They usually have access to
technology and function in the formal market (Mahlanza, 2011:6). In terms of small
enterprises they are traditionally recognised before very small enterprises and
display more complex business ethics (Falkena et.al). As for medium enterprises
includes businesses in mining, manufacturing and construction sectors with the
maximum number of employees between 100 – 200 people (Falkena et.al; DTI,
1995).
17
woman to start their own businesses (Mahlanza, 2011:24. The following section
discusses other contributions made by SMMEs to the economy.
18
2.2.3 SMME contribution to Poverty alleviation
Since the end of apartheid era poverty reduction has been seen as one of the key
issues facing South Africa (Agupusi, 2007:2). The author further acknowledged that
57% of South Africans were living below the minimum level of income believed to be
adequate in a particular country (poverty line) which constituted 95% of blacks.
Chimucheka (2013:785) noted that poverty occurs globally. Therefore, it is merely
the level of poverty that differs. SMMEs played a crucial role as they ensured that
those who were previously disadvantaged could be employed by these businesses
and get the support from the government to start their own businesses to reduce
poverty and unemployment. These SMMEs create jobs so that people can get a
source of income to meet the standard of living for them. According to Agupusi
(2007:8) other contribution of SMMEs is to improve the much-needed infrastructure
and service in the community.
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2.4 BARRIERS EXPERIENCED BY SMMEs IN SOUTH AFRICA
Abor & Quartey (2010) cited that despite all the contributions made by SMMEs to
create jobs and accelerate growth in emerging countries. There are a number of
barriers that shake their ability to maintain sustainable growth. There are barriers
that are experienced by SMMEs and they include financial barriers, economic
barriers, Regulation barriers, Marketing constraints, lack of training and
development. Chimucheka (2012:3) referenced in his study from an article of
EntreNews (2004:1) that the main challenge that is facing most of the countries
including South Africa is the virtue on how to motivate individuals to become
successful entrepreneurs and how to equip them with suitable skills for them to
explore those opportunities in front of them into successful ventures.
20
effect on SMMEs as the survey conducted worldwide by OECD (2004) showed that it
affect the growth of SMMEs more than large enterprises. Exchange rates fluctuate
on day-to-day basis (Sibanda, 2014). When the rand is relatively weak, more focus
on niche market, but lack of capital prohibits these local SMMEs (Maphalla, 2010).
21
2.4.5 Lack of education, training and skills
Training and development in a workforce is an important aspect as it improves
business performance. The amount of competition within businesses is growing in
every industry, as lack of training and development leads to the difference between
maintaining success, and ultimate failure. Lack of education, training and skills can
attribute to establishment, maintaining and growing failure of SMMEs around
townships. Management skills, human resource skills, financial and marketing skills
are crucial for SMMEs in South Africa which they lack currently. According to
Chimucheka (2013:787) education and training benefit SMMEs to maintain success
and also develop management competencies. The author continues by saying that
lack of education and skills contribute to the failure of SMMEs when establishing new
ventures and low levels of entrepreneurial creation in South Africa. Owners and
managers of SMMEs also need to be trained with right skills and knowledge to be
able to start their own businesses that will survive for long time as Fatoki and Garwe
(2010:711) mentioned that lack of education and training is seen as one of the main
motive for high failures for new ventures.
Previous studies have shown that limited access to financial resources is seen as
the leading barrier perceived by SMMEs in order to maintain success or growing the
enterprises. Theoretical empirical literature review based on the Finance Gap Theory
and the Psychological Entrepreneurship Theory will be discussed on the following
page.
22
2.5 THEORATICAL FRAMEWORK
23
2.5.1.1 Demand side perspective
The issue of SMME access to finance has been the core factor for many academic
researches (Ramlee & Berma, 2013:116). The authors continue to point out that one
of the major challenges opposing SMEs is lack of funds, especially when they are
established and to maintain growth (Ramlee & Berma, 2013). According to Harsmar
& Chalmers (2014:17) demand side raises the need for businesses and interest in
the external funding. Berger & Udell (1998); Petersen & Rajan (1994), state that a
mutual theoretical argument for finance gap is information asymmetry leading to
credit limitations on the part of bank lenders. The definition given by Baldock &
Whittam, 2008:19) describe asymmetric information as an insufficient information
that is provided by entrepreneurs on the proposals they present to bank offices as
they will not have ‘perfect’ information about the person who applies for loan.
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2.5.2.1.1 Need for achievement
According to McClelland’s Motivation Theory (1961) as cited by Sibanda (2014:21)
stresses that money does not influence entrepreneurs with high need for
achievement even external incentives. Furthermore, McClelland states that the
theory of need for achievement is used mainly in social negotiations and setting
motivational factors of specific people. It is been said by Suter & Bwisa (2013:107)
achievement need drive the entrepreneurs to be successful. According to Shaver &
Scott (1991); Suter & Bwisa, (2013) the need for achievement leads to creativity
within business enterprises. McClelland (1965) further verbalizes that culture and
socialization has an influence in determining the degree of desideratum for
achievement. The desiderata are learned through socialization and not established
biologically.
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2.6 APPLICABILITY OF THE THEORIES
26
environment. As they overcome those barriers that they experience or perceive
when establishing their businesses and growing them.
2.7 SUMMARY
The chapter was reviewing literature on SMMEs and discussed about barriers that
are perceived or experienced by SMMEs. This chapter produced a broad definition
of entrepreneurship, SMMEs definition and the international perspective of SMMEs.
The importance and the contributions of SMMEs to the economy of South Africa
were also discussed. The second part was the theories that provided an
understanding why the SMMEs perceive or experience barriers. The theories
discussed include the finance gap theory and psychological entrepreneurship theory.
The next chapter (chapter 3) will be the methodology of this research study. It will
provide an analysis manner in which this study will be carried out, this include:
research design, population and sample size, data collection instruments and
procedures, data analysis, validity and reliability as well as ethical consideration.
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CHAPTER 3
METHODOLOGY
3.1 INTRODUCTION
Research methodology is defined as the study of technique by which knowledge is
gained. Its purpose is to outline the way in which research is to be undertaken
(Rajasekar, Philominathan & Chinnathambi, 2013:5). The purpose of this study is to
investigate the barriers that are experienced by township SMMEs in the Buffalo City
Metropolitan Municipality (King Williams Town and Dimbaza).
This chapter discusses the research design, the physical area where the research is
carried out, the population and sample, the instrument used to collect data,
28
procedures of data analysis, including validity and reliability of the instrument and
ethical consideration.
29
3.3.2 The key research questions are as follows:
• What are the barriers that SMMEs in Buffalo City Metro Municipality
experience in establishing, sustaining, maintaining and growing
enterprises?
H0: There are no significant barriers SMMEs experience when establishing their
businesses
H2: There are significant barriers SMMEs experience when establishing their
businesses
H0: There are no significant barriers that SMMEs experience when accessing
markets for their businesses
H4: There are significant barriers that SMMEs experience when accessing markets
for their businesses
These research objectives, questions and hypotheses are deduced from the topic,
so as to critically analyse the barriers perceived or experienced by township SMMEs
in the Buffalo City Metropolitan Municipality. The survey conducted in line with the
objectives outlined in this research.
30
3.4.1 Study Area
This study was carried out, in the Buffalo City Metropolitan Municipality, in the
Eastern Cape region, South Africa. King Williams Town and Dimbaza are the two
towns where data will be collected. The area is 200 km radius from the University of
Fort Hare Alice main campus.
3.4.2 POPULATION
According to David (2012:74), population is a collection of all explanations of a
random variable under the research is trying to draw conclusion in practice. De Vos,
Strydom, Fouche & Delport (2005:193); Maphalla (2010:69) define population as a
set of entities in which all measurement of interest to the investigator are
represented. Population is simply described by Zikmund (2003:369), as a broad
group of persons that have identical set of characteristics that are relevant to the
research. The researcher made use of all registered and unregistered SMMEs in the
BCMM.
3.4.3 SAMPLING
Cooper and Schindler (2006:441); Chikumbu (2012:39) states that, sampling is a
process of selecting some elements of the target population from the entire
population. Sampling frame is a list of all the units in a population, the actual sample
will be drawn from that list as described by David (2012:74). According to Birks and
Malhotra (2006:351) sample is much more favourable in terms of budget and time
limits compared to census. It saves time and the cost of sampling errors is low.
31
in which it entails zero selection probability and also unknown before the sample is
drawn as described by Chinyamurindi (2014).
The researcher made use of the simple random sampling to select the respondents
from the population.
32
2012:35). However, it will rest on the landscape of the targeted population or data to
be collected. The Raosoft simple size calculator will be valid to calculate the sample
size.
The sample size was drawn from a population of 130 registered SMMEs in the
Buffalo City Metropolitan Municipality (King Williams Town and Dimbaza). The
sample size of SMMEs drawn from the targeted population was 60.
33
There are four basic types of measurement option that are identified by Mutezo
(2005:61). These basic types of measurement include:
Nominal scales: This is known as the lowest level of measurement, it has the
least matching to the number system (Craziano and Raulin, 1998:71). There
is no difference measured among the objects and people (Elliot, 2015:11). For
example, the province numbers (Gauteng 1, Western Cape 2, Northern Cape
3), assigned number for gender (Female1, Male2).
Ordinal scale: The larger number for the object is truly larger in some sort of
amount (Elliot, 2015:11). This represents ranking or ordering information.
Elliot (2015:11) further acknowledged that there is no exactly measured
difference between the objects. For example, class test results (1 st= 90%,
2nd= 82%, 3rd= 65%) there is no neutral difference between these results.
Thus, the marks between the results are not equal.
This study made use of one instrument, as it is aimed for the population targeted: All
SMMEs around the area of Buffalo City Metropolitan Municipality. This measurement
instrument will take the format of a questionnaire. Shukla (2008:86) defines a
questionnaire as a dignified set of questions for gathering data needed by the
researcher from respondents. It is been said that a questionnaire is a structured
method for collecting primary data which consist of a sequence number of questions,
written or that a respondent answers verbally.
34
Needed information must be interpreted into a set of questions that the
respondent can and be willing to answer,
Unstructured questions
They are also known as open ended questions which respondents answer them in
their own words (Birks and Malhotra, 2006:335)
Martins, Loubster and Van Wyk (1999:229); Matikiti (2011:91) states that, open-
ended questions are usually used when the researcher is not quite sure of the
answers that he or she will obtain from the respondent. Malhotra and Birks
(2006:335), argue that open-ended questions enables respondent to express their
feelings, which can help the researcher to analyse the response to structured
questions. Matikiti (2011:89) feels that, the usage of open-ended questions makes
coding difficult as the ‘coding of responses is costly and time-consuming’.
Structured question
According to Birks and Malhotra (2006:335) state that planned questions, identify the
set of response alternatives and the response layout. A structured question could be;
closed-ended questions, multiple choice, dichotomous and Likert scale type
questions.
35
Closed-ended questions
Dichotomous questions
Likert scale is one of the extremely used scales in most studies which focus on
degree of agreement and disagreement (Shukla, 2008:77). Five-point Likert type
scale will be used, as they are adopted from Rensis Likert who developed the scale.
It ranges from strongly disagree to strongly agree.
This section made use of closed-ended questions to gather information such as age,
gender, home language, and education background. The questions in this section
36
are multiple choice questions, dichotomous questions where the respondent is
expected to elect one or more alternatives in some instances.
This section focuses on the years of business operations, the nature of industry
which the business operates, what type of goods or services they offer, the position
of the participant or the role in the business. Participants are also asked to identify
which type of barriers they experienced or perceived.
This section focuses on the financial barriers that the participant have experienced
when establishing their businesses. The obstacles that they perceive when
accessing funds from financial institutions.
This section focuses on the management of the business. The participants will be
asked about the skills they need to train their employees.
37
attitude and behaviours of interest with those who will be included in the target
population.
Validity refers to the extent at which the test should measure. Shukla (2008:82)
defines validity as a scale measuring what it is inevitable to measure. As Russel
(2011) states that, validity is the precision and trustworthiness of instruments, data
and findings in research. Validity refers to how truthful the research results are
(Babbie and Mouton, 2002:15). According to Moyo (2012:92) validity also denotes
whether an instrument used measures what is supposed to measure, given the
environment in which it is applied. In this study Pearson correlation will be adapted to
determine whether a sodality or relationship between the independent and
dependent variables existed. Babbie and Mouton (2002:15) identified four types of
validity. These are content or face validity, internal and external validity and
statistical validity.
Internal Validity
Internal validity refers to the confidence that is been placed in the cause and effect
relationship (Rungani, 2010:113). According to Babbie and Mouton (2001) internal
validity addresses the question of to what extent does the research design allows us
38
to say that the independent variable causes some changes in the dependent
variable.
39
descriptive factors that recapitulate a given data set, which can either be an
illustration of the entire population or a sample. The methods to measure and
describe the data set include measures of central tendency and measures of
variability or dispersion. According to Mikki Hebl, descriptive statistics are numbers
which are used to abridge and analyse the data. The author further acknowledges
that descriptive statistics are just descriptive; they do not contain generalising
elsewhere beyond the data at hand.
40
very important when carrying out any type of research. This research was done
ethically and legally. The researcher made sure that the participants are informed of
the research before they get involved and also outline to the participants what the
research is about and then ask for their consent to take part. The researcher has a
moral responsibility to protect participants from any harm. The data provided by the
participants was kept with strict confidentiality. Confidentiality means that the
respondent’s identity will only be known to the researcher but protected from the
public exposure. The researcher attained ethical clearance certificate from the
University of Fort Hare’s Research Ethics Committee.
3.10 SUMMARY
In this chapter research methodology, research design and approach, sampling and
population, data collection methods, data analysis and statistical techniques, validity
41
and reliability, ethical consideration and some limitation that were discovered in this
study. The chapter which is following will be dealing with research findings. The
research findings will be analysed data in the form of tables, charts and graphs.
42
CHAPTER 4
RESEARCH FINDINGS
4.1 INTRODUCTION
Chapter 3 described the research methodology (including research design, the
population and sampling method, the data collection instrument and data analysis
43
methods) that will be used in this research study. This chapter presents the analysis
and interpretation of the primary data that was collected to identify these barriers that
are perceived or experienced by township SMMEs in the Buffalo City Metropolitan
Municipality. The research findings are translated into integrated and meaningful
statistics and findings. According to Cooper and Schindler (2006:87) data analysis
refers to the translation of primary data into meaningful, useful and organised
information that can be easily understood and used for other studies. The data is
presented as it appears on the research instrument on a question by question basis.
For empirical analysis to be possible, the results of descriptive analysis are
presented first, and then the inferential statistics analysis will follow. The inferential
statistics is based on hypotheses that are generated from the objectives of the study.
The research results are discussed in the sections that follow.
This section will cover the personal information given by the respondents relating to
issues of gender, age, population group, highest educational level, years of
business. The respondents were asked to identify type of barriers they experienced
or perceived and whether it would be easy for them to start their own businesses, if
there are no barriers perceived when they establish their businesses.
Question 1: Gender
44
GENDER
Male Female
40%
60%
The above figure indicates that male entrepreneurs constitute 60% of the
respondents were female entrepreneurs constitute 40% which is remaining.
According to the Department of Trade and Industry (2005) report which stated that
female entrepreneurs represents 33% of existing businesses and are most affected
by SMME failure, which the findings of the research study is in line with the
percentage.
This question will provide the researcher with personal information in relation to the
age of the respondents. The information will be presented on the figure 4.2 below.
AGE
35%
30%
25%
20%
15% AGE
10%
5%
0%
18-25 26-33 34-41 42-49 50+
Figure 4.2 indicates that 20% of the respondents were in the range of (18-25years),
the range of (26-33years) comprise 30%, the range of (34-41years) comprise 23%,
45
the range of (42-49years) comprise 20% and 0.7% were over the age of 50 years.
The results were consistent with the international studies on gender and small
business. According to Coleman (2000) in his study indicates that women business
comprise one third of all small businesses as the remaining two third belongs to
men. Rungani (2009:164) concluded that the reason that women own fewer
businesses is because of lack of business knowledge which has a negative impact
when starting their own businesses.
This question provides the researcher with personal information in relation to the
population group the respondents belong. The information will be presented on the
figure 4.3.
POPULATION GROUP
White Coloured Black Asian Other
4% 0%
23%
53% 20%
4.1
The above figure 4.3 indicates that 23% belongs to White population group, 20%
belongs to Coloured population group, 53% belongs to Black population group, and
4% belongs to Asian population group. These findings show that the majority of the
respondents belong to Black population group as many townships are owned by this
population of blacks. Agupusi (2007:2) acknowledged that 57% of South Africans
were living below the minimum level of income believed to be adequate in a
particular country (poverty line) which constituted 95% of blacks in township areas.
46
This question focuses on the highest educational level of the respondents, as they
range from Grade R-11 to University level. The information will be presented on the
figure 4.4.
EDUCATIONAL LEVEL
University
Public FET
EDUCATIONAL LEVEL
Matric
Grade R-11
The above figure indicates that 26% belong to Grade R-11, Matric consist of 47%,
Public FET consist of 13% and 14%belongs to respondents who went to University.
These findings are consistent with the results of Shafeek (2006:101), as he stated
that more than 70% of the respondents on SMMEs in the Eastern Cape Province
had a post-secondary qualification (matric, FET and University). In a study that was
conducted by McCormick (2001), it shows that those respondents without matric
education will start micro businesses and those with matric, higher certificates,
diplomas and degrees will go for small or medium enterprises.
This question provides the researcher with personal information in relation to the
years that the business has been operating.
47
Years of operation
60%
40%
20%
0%
Years of operation
The graph above shows that 47% of the SMMEs have been operating between 0 to
3 years, 23% between 5-10 years, 17% between 10 – 15 years 13% between 15 -20
years of operation. These results were with the studies drawn by Borton and Gordon
(2000) and Rungani (2009:126); they concluded that most of the SMMEs face a lot
of challenges which delay their growth. They also stated that financial barriers make
it quite difficult for many SMMEs to expand and grow.
Question 6: Please specify the type of goods or services which you offer
This question will provide the researcher with personal information about type of
goods or services being offered by the respondents. The results will be depicted in
figure 4.6 below
48
20% of the respondents sold clothing items, 35% of the respondents sold fast foods,
30% of the respondents sold groceries, and 10% sold hardware and 5% sold other
goods and services.
This question focussed on managers and owners of SMMEs. This question will
provide the researcher with personal information about position or role of the
respondents. The results will be depicted in figure 4.7 below
Position in Business
Owner Manager Both Other
0%
30%
47%
23%
The figure above indicates that 30% of the respondents are owners of the SMMEs,
23% of the respondents are managers and 47% of the respondents belong to both
the owners and managers. Lee and Wong (2001:11) ascertain that, most of the
entrepreneurs want to be their own boss and work at their own pace without being
told. These findings show that most of the respondents are both managers and
owners as it reflects that they are their own bosses as this is in line with the study of
Lee and Wong.
49
This type of question will provide the researcher with barriers that are experienced
by the respondents. The results will be depicted in figure 4.8 below
100% 90%
90%
80%
70%
60% 50%
50% 43% 40%
40%
30%
20%
10%
0%
financial barriers Lack of marketing regulatory
education and constrains barriers
skills
barriers experienced
The above figure 4.8 shows that 90% of the respondents experienced financial
barriers as 50% of the respondents indicated that lack of education and skills is the
challenge they face, 43% of the respondents experienced marketing constraints and
40% of the respondents complained about regulatory barriers.
Question 9: Do you think it would be easy for individuals to start their own
businesses, if there are no barriers perceived when establishing their
businesses?
According to the above Table 4.1, none of the respondents strongly disagree and
disagree with the statement that it would be easy for individuals to start their own
50
businesses, if there are no barriers perceived when establishing their businesses, 12
(20%) of the respondents are being neutral, 22 (36.67%) of the respondents agree,
26 (43.33%) of the respondents strongly agree that it would be easy for
entrepreneurs to start their own businesses, if there are no barriers.
This section focuses on the financial barriers that most of the participants have
experienced. Importantly those obstacles which are experienced by owners or
managers of SMME when accessing funds from financial institutions. This section
also seeks to identify financial barriers experienced by SMMEs.
Question 10: Where did you get the capital to start your business?
51
The results indicate that 23 (38.33%) of the respondents were given start-up capital
by family members, 20 (33.33%) of the respondents used their own savings, 17
(28.33%) of the respondents obtained start-up capital from financial institutions.
None of the respondents were given by large companies or any other place. This
shows that majority of respondents had to use their own savings and family savings
to start their own businesses.
Question 11: Please indicate the problems which you have experienced in your
business (you can select more than one).
Other 0 0.00%
According to the above table 4.3, indicates that 41 (68.33%) of the respondents
experienced lack of start-up capital in respect of financial support, 18 (30.00%) of the
respondents experienced lack of establishing capital, 14 (23.33%) of the
respondents experienced lack of expansion capital and 4 (6.67%) of the respondents
experienced lack of credit facility from suppliers as one the problems in respect of
financial support.
52
Question 12: The following are believed to be key obstacles that you
experienced when accessing funds from financial institutions
Table 4.4: Obstacles faced when accessing funds from financial institutions
The results depicted on table 4.4, indicates that 8 (13.33%) of the respondents
strongly agree that lack of collateral is the key obstacle when accessing funds
financial institutions, 26 (43.33%) agree with the statement, 14 (23.33%) of the
respondents are being neutral, 10 (16.67%) disagree and 2 (3.33%) of the
respondents strongly disagree with the statement, as to lack of collateral is the key
obstacle for lack of funds from financial institutions. These findings are in line with
literature of this study as it noted by (Foxcroft, Wood, Kew, Herrington & Segal,
2000; Chimucheka, 2013:787). In South Africa three quarters (75%) of bank
application loans made by SMMEs are vetoed. However, most of these SMMEs lack
security for collateral.
The results shown in table 4.4, indicates that 4 (6.67%) of the respondents strongly
agree, 34 (56.67%) majority of the respondents agree, they believe that lack of
business skills is the key obstacle when accessing funds from financial institutions, 8
(13.33%) of the respondents are neutral, 14 (23.33%) disagree that lack of business
skills is the key obstacle when accessing funds from financial institutions. These
53
research findings of this study are in line with the findings of Muteza (2005) on
obstacles in the access to SMME finance in Tshwane where more than 49% of the
respondents agree that lack of business skills contribute to lack of finance for
SMMEs.
This section focuses on the management of the business. The owners or managers
are asked about the skills or training they require for their employees and if they do
get those necessary skills will it improve the performance of the business.
Yes No Total
Frequency 60 0 60
54
entreneurs need training
entreneurs need training
120%
100%
80%
60%
100%
40%
20%
0% 0%
Yes No
The above table 4.5 and figure, both indicates that all the respondents 60 (100.00%)
believe that entrepreneurs do need training.
Question 14: If you select yes, in question 13 above, please indicate in which
field the need for training exists
Frequency Percentage
55
Type of training
motivation skills entrepreneurial skill and training
business skills other skills
7%
32%
25%
36%
According to the above table 4.6 and figure 11, it is stated that 48 (80.00%) of the
respondents believe motivation skills need to be provided, 54 (90.00%) of the
respondents believe that entrepreneurial skills and training are necessary for
entrepreneurs, 38 (63.33%) of the respondents believe that there’s still a shortage of
business skills and 10 (16.67%) of the respondents believe that there are other skills
such as finance and marketing skills which entrepreneurs do need. The results are
consistent with the findings of Mutezo (2005), as all the respondents feel that training
for entrepreneurs is needed. Training and development in a workforce is an
important aspect as it improves business performance. The amount of competition
within businesses is growing in every industry, as lack of training and development
leads to the difference between maintaining success, and ultimate failure. Lack of
education, training and skills can attribute to establishment, maintaining and growing
failure of SMMEs around townships.
56
Do you think SMMEs 10 30 20 0 0
performance will improve if
government promote with staff 16.67% 50.00% 33.33% 0.00% 0.00%
training
Managerial skills improve the 4 36 20 0 0
performance of the business 6.67% 60.00% 33.33% (0.00%) (0.00%)
15.1 Entrepreneurs who lack human resource skill will not be able to manage
its staff
The results portrayed on table 4.7, indicates that 6 (10.00%) of the respondents
strongly agree that entrepreneurs with no human resource skill will not be in a
position to manage its staff, 36 (60.00%) of the respondents agree with the above
statement, that, entrepreneurs who lack human resource skills will be unable to
manage its staff, 14 (23.33%) of the respondents are neutral, 4 (6.67%) of the
respondents disagree and believe that entrepreneurs who lack human resource skill
will manage its staff, it has nothing to do with human skill when managing
employees.
The results illustrated on table 4.7, shows that 4 (6.67%) of the respondents strongly
agree with the above statement, the majority of the respondents 36 (60.00%) agree
that managerial skills improve the performance of the business, 20 (33.33%) are
being neutral.
57
This section focuses on the barriers perceived or experienced when accessing new
markets and the government support which is provided to these businesses. It also
focuses whether the entrepreneur is familiar with government programmes that
assist SMMEs.
Question 16: Are you aware of the government programmes that assist
SMMEs?
Yes No Total
Frequency 38 22 60
Awareness of government
programmes
Yes
37%
63%
It is illustrated on both table 4.8 and figure 12, that it appears that 38 (63.33%) of the
respondents are fully aware of the government programmes that assist and support
SMMEs and 22 (36.67%) of the respondents are not aware of the government
programmes that assist SMMEs.
Question 17: Have you ever heard of any of the following government
programmes that assist SMMEs
58
Ntsika Enterprises Finance Agency 26 34
(43.33%) (56.67%)
Khula Enterprise Finance Limited 16 44
(26.67%) (73.33%)
Department of Trade and Industry 30 30
(50.00%) (50.00%)
SEDA 40 20
(66.67%) (33.33%)
n= frequency or number of respondents, %= percentage
NEFA
60.00%
50.00%
40.00%
NEFA
30.00%
20.00%
10.00%
0.00%
Yes No
The above table 4.9 and figure 13, indicates that 26 (43.33%) of the respondents
have heard of Ntsika Enterprises Finance Agency and 34 (56.67%) of the
respondents never heard of Ntsika Enterprises Finance Agency.
Figure14: KEFL
59
KEFL
Yes No
27%
73%
The above table 4.9 and figure 14 shows that 16 (26.67%) of the respondents have
heard of Khula Enterprises Finance Limited and 44 (73.33%) of the respondents
never heard of Khula Enterprises Finance Limited.
DTI
Yes No
50%
50%
It is portrayed on table 4.9 and figure 15, that 30 (50.00%) of the respondents have
heard of Department of Trade and Industry, 30 (50.00%) of the respondents never
heard of Department of Trade and Industry.
60
SEDA
No
SEDA
Yes
The above table 4.9 and figure 16, indicates that 40 (66.67%) of the respondents are
quite familiar with Small Enterprises Development Agency, 20 (33.33%) of the
respondents never heard of Small Enterprises Development Agency.
Question 18: Indicate barriers experienced when assessing new markets and
government support
Table 4.10: Barriers when accessing new markets and government provision.
61
SMMEs need government 22 28 10 0 0
intervention and support for them
to grow (36.67%) (46.67%) (16.67%) (0.00%) (0.00%)
It is easier to acquire finance from 0 0 16 34 10
the government financial
institutions (0.00%) (0.00%) (26.67%) (56.67%) (16.67%)
Entrepreneurs are aware of the 0 2 34 24 0
DTI’s services
(0.00%) (3.33%) (56.67%) (40.00%) (0.00%)
18.1 Lack of knowledge about international markets is the reason for not
engaging in international trade
The above table 4.10, represents that 4 (6.67%) of the respondents strongly agree,
24 (40.00) of the respondents agree with the above statement that lack of knowledge
about international markets is the reason for many businesses not engaging in
international trade, 14 (23.33%) are being neutral, 18 (30.00%) of the respondents
disagree with the above statement, lack of knowledge about international markets
has nothing to do with businesses not engaging in international trade.
62
lack of penetrating new markets
strongly agree agree neutral
1% 5%
94%
The table 4.10 and figure17 above indicates that 8 (13.33%) of the respondents
strongly disagree, the majority of the respondents 44 (73.33%) agree that lack of
funds do contribute to the failure of penetrating new markets and 8 (13.33%) of the
respondents are neutral.
The table above 4.10, indicates that 24 (40.00%) and 36 (60.00%) of the
respondents, respectively, strongly agree and agree, that SMMEs need to use
technology to keep abreast of environmental changes. To make use of the internet
know more about their competitors, also social networks (Facebook, WhatsApp etc.)
to communicate with its customers. The results were consistent with the study David
(2012), as technology is an important tool in giving SMMEs a competitive advantage
over its competitors.
18.4 Lack of support from the DTI has an impact on the success of SMMEs
The results shown in table 4.10, indicates that 14 (23.33%) of the respondents
strongly agree with the above statement, 26 (43.33%) of the respondents agree that
lack of support from DTI has an impact on the success of the SMMEs and 10
(16.67%) respondents are neutral. The findings are consisted with a study conducted
by David (2012), as 43.33% of the respondents agree that lack of support from DTI
has a greater impact in the sustainability of the SMMEs.
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18.5 SMMEs need government intervention and support for them to grow
The results portrayed on table 4.10, shows that 22 (36.67%) of the respondents
strongly agree intervention from government will improve and build SMMEs, 28
(46.67%) of the respondents agree that government should intervene so that
SMMEs can grow and 10 (16.67%) of the respondents are neutral whether if the
government intervention will help SMMEs in maintaining growth. The results are
consistent with a study conducted by David (2012), that largest group of the
respondents agree that the government should intervene so that these SMMEs will
survive more that short term period.
The results indicates that none of the respondents agreed with the above statement,
due to the fact that most of the respondents indicated that they are not aware of
government programmes, 16 (26.67%) are being neutral, 34 (56.67%) and 10
(16.67) of the respondents, respectively, disagree and strongly disagree, that it is not
easy to acquire finance from the government financial institutions. The results were
consistent with the study of David (2012), as he found out that entrepreneurs were
not aware of government support, as the majority of respondents strongly disagree
with the above statement that was easy to acquire funds from the government.
The results on table 4.10, indicates that 2 (3.33%) of respondents agree with the
above statement, the majority of respondents 34 (56.67%) are being neutral and 24
(40.00) of the respondents disagree with the statement that entrepreneurs are aware
of the DTI’s services.
The next section of this chapter will discuss the hypothesis testing. According to
Zindiye (2008:222) and Chimucheka (2012:152), hypothesis testing is associated
with statistics measures to determine the probability that will show a given
hypothesis is true or not (accepted or rejected).
64
4.3 TESTING HYPOTHESIS
This research study was conducted to investigate the perceived barriers experienced
by township SMMEs in the Buffalo City Metropolitan Municipality in the Eastern Cape
Province of South Africa. The hypotheses are as follow:
H3: There are significant barriers SMMEs experience when managing their
businesses
H4: There are significant barriers that SMMEs experience when accessing markets
for their businesses
Each of these hypotheses is tested individually in the following section:
Hypothesis 1
H0: There are no significant barriers faced by SMMEs in townships
H1: There are significant barriers faced by SMMEs in townships
Hypothesis one was the primary hypothesis of the study and was envisioned to
determine the perceived barriers experienced by Township SMMEs in the Buffalo
City Metropolitan Municipality.
65
The results of chi-square are shown in the above table 4.11. Results from the chi-
square test above indicate that there are barriers faced by SMMEs as p-values are
less than 0.05. Therefore, we conclude by saying that we reject the null hypothesis
and fail to reject the alternative hypothesis. Therefore, it can be said that there are
significant barriers faced by SMMEs in townships.
H0: There are no significant barriers SMMEs experience when establishing their
businesses
H2: There are significant barriers SMMEs experience when establishing their
businesses
Table 4.12 Establishment Barriers
Variable DF Chi-Square P-Value
Barriers when 12 54.653 0.001
establishing
The results from the above table 4.12, indicates that chi-square value is 54.653, 12
degrees of freedom with a p-value of 0.001 which is less than 0.05. The null
hypothesis is rejected and we cannot reject the alternative hypothesis. Therefore, we
conclude that there are significant barriers SMMEs experience when establishing
their businesses. The results are in line with Chimucheka (2012:157); Isaacs et al.,
(2007:614) that barriers for establishment do exist as they are the issue for the
survival of SMMEs.
Hypothesis 3
H0: SMMEs do not significantly face financial barriers
H3: SMMEs are significantly facing financial barriers
66
Results from the chi-square test above indicates that there are financial barriers
faced by SMMEs as p-value = 0.078 which is less than 0.05. Therefore, we conclude
by saying that we reject the null hypothesis and we do not reject the alternative
hypothesis. Therefore, it can be said that there are significant financial barriers
facing SMMEs. These results were consistent with the findings of Maphalla
(2010:105) and Kunene (2008) that there are key obstacles when SMMEs access
capital from financial institutions for start-up capital. Lack of collateral is among the
barriers that make it difficult for SMMEs to access finance.
Hypothesis 4
H0: There are no significant barriers that SMMEs experience when managing their
businesses
H4: There are significant barriers SMMEs experience when managing their
businesses
From the above results, a chi-square value of 62.914 and 6 degree of freedom with a
p-value of 0.000 was obtained in this research. The p-value of 0.000>0.05, therefore
this means that we reject the null hypothesis and we do not reject the alternative
hypothesis. It is concluded that there are significant barriers SMMEs experience
when managing their businesses. The results are in line with David (2012) who
mentioned that most of SMMEs do face management barriers as to lack of
managerial skills and lack of knowledge about government support has impact on
SMMEs growth, as managerial skills plays a crucial role in SMMEs growth.
Hypothesis 5
67
H0: There are no significant barriers that SMMEs experience when accessing
markets for their businesses
H5: There are significant barriers that SMMEs experience when accessing markets
for their businesses
The results from the above table 4.15, shows that p-value of 0.000 is less than 0.05,
with chi-square value of 18.895and 3 degrees of freedom. We reject null hypothesis
and fail to reject alternative hypothesis. We, therefore, conclude that there significant
barriers that SMMEs experience when accessing new markets for their businesses.
The results of this study are consistent with the findings of OECD conducted as they
show that barriers when accessing new markets are caused by limited firm
resources and international contacts as many township SMMEs don’t have
international contacts as well as lack of requisite managerial knowledge about
internationalisation.
68
4.4 SUMMARY
The questionnaire was very useful in terms of gathering the data to help the
investigator to grasp certain conclusions based on the formulated hypothesis. This
chapter focused on the presentation and analysis of the result of this study. The
analysis was done through SPSS (Statistical Packaging Social Science) software
program, with the assistance of the University of Fort Hare’s Statistics Department.
Through these results, the researcher discovered that most of the SMMEs are still
facing barriers such as financial barriers, lack of skills and education, marketing
constrains and regulatory barriers. Thus, those barriers make it impossible for
SMMEs to maintain long term survival. The following chapter provides a
comprehensive discussion of conclusions drawn from these findings. The next
chapter will also highlight on recommendations and suggested areas for further
research.
69
CHAPTER 5
70
5.1 INTRODUCTION
This research study was undertaken to investigate the perceived barriers
experienced by SMMEs in the Buffalo City Metropolitan Municipality. This chapter
further discusses the research findings and the recommendations. In addition, also
highlight areas for further research. The chapter proceeds as follows:
Firstly, section 5.2 of this chapter provides an overview of the research problem,
research objectives, the literature review relevant to the main findings and research
design as well as data analysis interpretations.
Secondly, section 5.3 will highlight the study recommendations including further
research areas.
This chapter covered a discussion on the background of the study, the research
problem and the hypothesis. It was noted that many small, medium and micro-
enterprises (SMMEs) are growing or improving across the globe, they contribute
most importantly in providing new jobs, especially for people who are unemployed
(Ladzani and Van Vuuren, 2002:2). Fin Mark Trust (2006) also reasoned that these
SMMEs are important to destitution mitigation, salary fairness, work and reasonable
financial development in South Africa. There is clear evidence that SMMEs play a
critical role in economic development (DTI, 1995:3). It is therefore important to
encourage growth in this sector by limiting barriers experienced by this sector. The
primary objective was to determine the barriers faced by township SMMEs in the
Buffalo City Metropolitan Municipality. The significance, the research methodology,
validity and reliability and limitations of the study were included in this chapter.
This chapter examined the definition of SMMEs both in International and South
African perspective. The importance and contribution of the SMMEs in the South
African economy in terms of employment and poverty alleviation was also discussed.
According to Fin Mark Trust (2006), small businesses redress the unemployment
situation, as they create employment and to encourage development in SMMEs. As
71
noted on the study conducted by Abor & Quartey (2010) it was estimated that
SMMEs contribute approximately 61% of employment in South Africa. Finally, it was
noted that most of South African SMMEs still face a number of challenges which
makes it difficult for SMMEs to sustain growth and development. Access to finance
and lack of education are the biggest challenges which are faced by SMMEs.
Chapter three concentrated on the empirical research phase. The researcher made
use of both primary and secondary data. The type of research method that was used
was quantitative research method. The simple random method was used as the
sampling method. Data was collected through the use of self-administered
questionnaire, and the Statistical Package for Social Science (SPSS version 23) was
used to analyse the data. Validity and reliability of the study as well as the ethical
consideration were precisely dealt with in this chapter.
This chapter discussed the findings of the research as well as analysis and
interpretations of the collected data.
72
It is concluded that township SMMEs do perceive and experience barriers in the
Buffalo City Metropolitan Municipality. The primary objective was to determine the
perceived barriers faced by SMMEs in townships and the results showed that there
are financial barriers, lack of education and skills, marketing constraints and
regulatory barriers. These barriers make it impossible for township SMMEs to
survive for long term success. These results were consistent with the findings of
Mutezo (2005:6) who stated that SMMEs require support if they are to grow. Nieman
and Nieuwenhuizen (2009:35); Chimucheka (2012:160) stress that those SMMEs
that are managed by people with entrepreneurial skills and knowledge, are more
successful and make more profit, if you can compare them with those who are
managed by people who lack these crucial skills.
5.3 RECOMMENDATIONS
It has been highlighted that SMMEs play an imperative role in our economy, but
many struggles to function as they face complex challenges which restricts them for
long term survival and success. Even though, these challenges or obstacles are
universal. For instance, the study shows that financial barriers and lack of education
and skills are leading challenges or obstacles that affects township SMMEs in the
Buffalo City Metropolitan Municipality. The recommendations of this study are as
follow:
73
5.3.1 Government agencies
Government agencies should provide services to those SMMEs that are in need
efficiently. These government agencies include Khula Enterprise Finance, Ntsika
Enterprise Finance Limited, the Department of Trade and Industry as well as Small
Enterprise Development Agency (SEDA) and other government establishments. The
government should implement strategies that can help to improve SMME
performance in the Buffalo City Metropolitan Municipality. Government agencies
should target young entrepreneurs and empower them to become employment
creators rather than normal job seekers. Chimucheka (2012) suggested that the
government agencies should work hand in hand with the banks to ease access to
finance by SMMEs. The mission of SEDA is to develop and promote small
enterprises to ensure their growth and sustainability in co-ordination and partnership
with other role players.
5.3.2 Government
The role that is played by the SMMEs in the Buffalo City Metropolitan Municipality in
reducing unemployment and poverty, the government should constantly evaluate the
performance of SMMEs, and help provide resources, where necessary, but in a
more sustainable manner. The government should provide resources in a manner
that will benefit all SMMEs around the Buffalo City Metropolitan Municipality.
74
across all disciplines, this means that it should not be limited only to commerce
students. There is also a need to market entrepreneurship as another career
alternative for students. This will motivate students to start their own businesses and
employ other people rather than just becoming job seekers. It is also important that
entrepreneurship education by universities and colleges should not be only limited to
registered students, it should be extended to the people around university and
college communities, through community engagement projects. Institutions of higher
learning should teach people in their communities to create economic opportunities
for themselves rather than being dependent on employers or the government.
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5.5 AREAS FOR FURTHER RESEARCH
Area for advance research study leads to some clarifications that future researchers
will be interested, as they represent the seed from which further research can be
developed.
5.6 CONCLUSION
SMMEs sector in South Africa cannot be undermined as they provide solutions to
high rates of unemployment and a means to increase the growth rate. Though, the
government intervention is not being felt, as it is shown on the study that there’s a
high rate failure of SMMEs due to financial barriers, Lack of education and skills,
marketing constraints and regulatory barriers. The government should support these
SMMEs in terms of finance and try to implement new strategies to tackle these
challenges that are being faced by SMMEs.
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APPENDICES
Dear Respondent,
Cell: 0719737344
Email: 201203230@ufh.ac.za
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Email: ERungani@ufh.ac.za
INFORMED CONSENT
I understand that this consent form will not be linked to the questionnaire, and that
my answers will remain confidential.
Should I have any questions the contact details of the researcher are made
available. I understand that my feedback will be part of the University research
paper.
……………………………..
Signature of participant Date:…………………..
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SECTION A
Personal Information
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8. Indicate the type of barriers you experienced or perceived from the
following list (you can choose more than 1)
Financial Lack of skills Marketing Regulatory
barriers and education constrains barriers
SECTION B
Financial barriers
Please select an option by using an X in the correct box
10. Where did you get the capital to start your business?
Family Own Financial Large Other
members savings institutions companies
11. Please indicate the problems which you have experienced in your
business from the following list in respect of financial support?
Lack of start- Lack of Lack of Lack credit Other
up capital establishing expansion facility from
capital capital suppliers
12. The following are believed to be the key obstacles that you experienced
when accessing funds from financial institutions
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Lack of business skills
Other
SECTION C
Managing the business
14. Do you believe entrepreneurs need Yes 13. No
training?
15. If you select yes, in question 15 above, please indicate in which field the
need for training exists
Motivation Entrepreneurial Business Other
skills skills and training skills skills
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SECTION D
Barriers when accessing markets and government support
SEDA
19. Please select the most appropriate response for each statement in
relation to barriers experienced when accessing new markets and
government support. Indicate the extent you agree with the following
statements. (1=strongly disagree; 2=disagree; 3=neutral; 4=agree; 5
strongly agree)
1 2 3 4 5
Lack of knowledge about international markets is the reason
for not engaging in international trade
lack of funds contribute to the failure of penetrating new
market
SMMEs need to use technology to keep abreast of
environmental changes
Lack of support from the DTI has an impact on the success
of SMMEs
SMMEs need government intervention and support for them
to grow
It is easy to acquire finance from the government financial
institutions
Entrepreneurs are aware of the DTI’s services
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