Small-Scale Enterprise Development In South Africa Case Solution & Answer

Small-Scale Enterprise Development In South Africa Case Solution

Introduction & Demography of South Africa

 South Africa is one of largest country of the Africa and its geographical location is at the southern slope of Africaits official name is Republic of South Africa. It’s a developing country and ranked 114th in the Human Development Index & 7th in Africa. There are eleven official languages are spoken in South Africa.

According to the survey of 2019 South Africa population increased and grown at 59 million people, 37% youth constituted in population. In South Africa’s National Youth Commission Act, 1996, young people are defined as those between the ages of 14 and 35.

The World Bank has categorized it as a new manufacturing country with Africa’s second largest economy and the 33rd largest in the world.

The population of South Africa in 2016 was 55,653,654 (Statistics SA Community Survey 2016). Of the 55.6 million, 20.1 million were in the 15- and 34-year-old age group, or 36.2%. If the age group 0-14 is counted in, the rate will increase to 66%. This means that 66% of South Africans are 34 years of age and under.(Laubscher, 2018)

The Nature and Challenges of Youth-Owned Enterprises in South Africa

 SAAPAM Fourth Annual Conference on Supportable-Private enterprise-growth in the Form of Small, Medium and Micro Enterprises (SMMEs) Proceedings In difference of opinion, property development, economic growth, economic competition, economic independence, self-confidence, job creation, social well-being as well as political It can help in stability and national security of a country.

It is a well-known fact that several nation state today are trying to develop minor and medium-sized creativities to deliver-services opportunities and economic growth to their growing youth population.

In African countries such as South Africa, for example, micro and small enterprises (MSEs), as they recognized the important associates in economic growth, and they estimate that GDP and employment will contribute 20% and 72% respectively. Furthermore, in countries such as South Africa, although it is difficult to accurately assess the social and financial influence of business on supportable monetary development, such an impact is considered to be highly dynamic and significant. (Madzivhandila, 2015)

Nature of Owned Enterprises in South Africa

The Section of Commerce and Manufacturing (DTI) published a comprehensive report on South Africa’s SMME division in 2008. Since then, the national and worldwide economy has changed pointedly. The worldwide financial disaster of 2008 and 2009 plunged South Africa’s budget into downturn. National financial strategies have changed, interest rates have fallen sharply, a new political administration has come to power, and much more. All these factors of variation have affected the SME backdrop in South Africa. (Agency, 2016)


S.No Key Indicators 2015 Q2


Amount of SMMEs 2 251 821


Amount of formal SMMEs 667433


Amount of informal SMMEs 1 497 860


SMME holders as % of entireoccupation 14%


% functioning in trade & accommodation 43%


% functioning in publicfacilities 14%


% functioning in construction 13%


% functioning in fin. &commercial services 12%


% involvement to GVA* 21%


% black owned formal SMMEs 34%


% functioned by profits< R30k pa 7%

Challenges of Owned Enterprises in South Africa

Access to Finance and Credit.

Limits on financing for SMEs are very common. As per South Africa’s GEM 2014 report, the main reasons for the business stalemate in South Africa is lack of access to financial assistance and low profits. The report also points to the fact that low profits, as a cause of stagnation, are growing rapidly. Common barriers to financing small businesses include: insufficient suicide by the industrialist, lack of credit account failure to develop a satisfactory business strategy as per financial institutions,unhealthy market research and business running ideas and lack of access to dynamic marketplaces (GEM, 2014).

Poor Arrangement

Poor business environment hinders infrastructure development in the country. Weaknesses in planning, coordination, and financing. And a reduction in private sector involvement in the provision of infrastructure.

Lack of access to physical structure is a major barrier to business development and significantly increases the cost business.

The facts showed that small businesses in Gauteng have more trouble finding the physical space to work in (Finmark Trust, 2010). In the northwest, SMEs cited utility issues, especially power outages. In further regions, the practices were different. There SMEs claim to have access to acceptable services and space.

Low Levels of Research and Development (R&D)

It is main point for minor businesses to improve R&D skills, as this can benefit to determine the possibility of turning ideas into real business. Invest in this part of business also gives businesses access to new solutions through the procedure of discovery. Modern start-ups are likely to develop earlier than old-style start-ups. They found South African SMEs to be less advanced than developed countries. Buenos Aires (2011) shows that innovation in South Africa is building strong upward links with large companies due to the failure of small businesses. This failure denies them technological openings. The GEM report (2014) suggests to provide motivations for R&D to the government. It aims to foster modernization, and to attract and consolidate sustainable links between deep national and external in formation firms.

Difficult labor laws

South Africa’s labor laws have been a regular impediment to business development, especially when it derives to layoffs (OECD, 2015). Small business holders have noticed that when they hire workers, the law makes it harder for them to leave if the business have no affordability to keep them or if it proves fruitful. Labor rules do not provide variations in small businesses (GEM, 2014).

Barry Alt et al (2002) recognized SMMEs within the industrial sector, e.g. Manufacture of outfit and equipment is just as laborious. Such SMEs are subject to relatively high labor prices, which is the cause of labor laws in South Africa that were intended to advantage workers. On the other hand, South Africa’s relatively minimum wage is showing to be expensive for small businesses, especially the BER Research Note 2016 is not 19 at its launch stage. SMEs have also found it expensive to hire untrained and semi-skilled workers, adding to the barriers to small industry.

An Inadequately Polished Employees

The National Development Plan (NDP) records that small businesses in services Lack of talents negatively affects the parts. This reduction is mostly correct Business services such as secretarial and sales abilities. Remarkably, South Africa’s trade and housing sector. Which is based on sales. This occurs when SMEs have the most compared to other subdivisions. The Department of Commerce and Industry (2008) recognizes the lack of expertise And imperfect business skills act as barriers to job development.

Ineffective Government Organization

Government policies play an important role in increasing business activity, as they fixed up a stage on which fresh businesses can start and sustain. The Competition Report identifies the state bureaucracy as the biggest obstacle to business and entrepreneurship in South Africa. The DTI is of the view that at the depth of inter-sectorial disputes, the many sections abandon any coordination in their efforts and create the functions of SMEs themselves. This usually outcomes in repetition of efforts and the ability to evaluate the success of SME programs. The development of monitoring and diagnostic frameworks is hampered………………………

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