The role of background characteristics of individuals in the sustainability of grant based SMMEs

Abstract

The case of small medium and micro enterprises has been a major concern for the new government of South Africa. The subject is given attention from the president down wards. There are different programmes such as the Black Economic Empowerment and the Small Business Programme which the previously disadvantaged people benefit from. The government has made tremendous changes in the legal frame work of SMMEs. There are different agencies which provide comprehensive business support services to South African small businesses. Ntsika Enterprise Promotion Agency which was established by the Department of Trade and Industry{DTI) to provide an efficient and effective promotional and support services to SMME sector, the National Manufacturing Advisory Sector,(Namac)Trust which was established to implement the small enterprise support programme which include: the Manufacturing Advisory Center (MAC), the Business Referral and Information Network(BRAIN),the Franchise and Information Network(FRAIN) and the Community Public Private Partnership(CPPP) with the aim of supporting the integration of marginalized communities into the main stream economy. On Saturday 11 2004,when the President of South Africa signed the National Small Business Amendment Act, Act No.29 of2004 which brought the Small Enterprise Development Agency (SEDA) into being. There are also a number of loan schemes like Khula Enterprise Finance to increase access to finance to SMMEs. All these show how this sector is the buss word in the country. In spite of all the efforts done from the government, non- Governmental organisations and the private sector, there is still a problem on the sustainability of SMMEs. The purpose of this study is therefore to determine if the background characteristics of individuals contribute to the failure of SMMEs. Respondents had to provide information about their family background, educational level, experience, training, locus of control and motivation. The study revealed that the background characteristics of individuals affect the sustainability of SMMEs. Seventy five percent of respondents agreed to using external sources of funding to start their business while 25% do not agree on using external source of funding. This shows that 75% of the respondents are grant based SMMEs. Thirteen Percent of the respondents have been running their business for less than 6 months, 18% for more than 6 months but less than I year, 22% for more than one year but less than 2 years, 15% for more than 2 years but less than 3 years, and 31 % for more than 3 years. This is an indication that more than 53% of the SMMEs in the population tested have existed for a period of less than two years. This indicates that the majority of grant- based SMMEs are not sustainable in the Mafikeng geographical area. The study recommended that success/failure is not only a matter of money, rather it is mainly dependent on the personality /characteristic of those individuals which include education (subject matter and management skills), work experience, age, commitment, motivation, and locus of control. A combined effort from government, non- government organisations and the private sector in preparing the person through training, coaching and mentoring can enhance the sustainability of SMMEs.