The purpose of this study was to identify the risk factors that prevent or limit SMMEs in South Africa from surviving and/or growing. This study also tested the hypothesis that reduced risk is function of scale and that scale is determined by turnover.
An extensive literature review was conducted in order to ascertain the risk factors that inhibit SMME growth in South Africa. A thorough assessment of 50 relevant academic studies resulted in the identification of 12 key risk factors. The hypothesis that risk is correlated with turnover in SMMEs was also tested. The review revealed that levels of risk are not directly linked to turnover or any other measure of scale (such as number of employees). Instead it was found that risk was associated with the presence of one or more of the 12 identified risk factors. These factors increase the likelihood of business closure or the inability of the SMME to scale-up its activities, thus contributing to the maintenance of a small, survivalist SMME sector.
The findings have a number of important implications for stakeholders operating in this space. It also presents extensive research and other opportunities for not only the SAB-Foundation, but other players too. Recommendations have been presented and are tailored to the SAB Foundation’s requirements. The review and proposed recommendations have revealed a number of exciting opportunities for the SAB Foundation to pursue which have the potential to strengthen the SAB Foundation’s operations; place the SAB Foundation in a unique position to lobby government; and contribute to continued research that can positively impact the SMME sector in South Africa.
In summary, the study:
- Presented a brief overview of the landscape of SMMEs in South Africa.
- Presented the regulatory constraints on enterprise development in South Africa, particularly with regards to SAB Foundation’s concerns.
- Identified the risk factors that limit the survival and growth of small business in South Africa.
- Tested the hypothesis that reduced risk is function of scale and that scale is determined by turnover.
- Presented recommendations on how to build upon the findings of this study.