A framework to enhance the sustainability of Small and Medium Size Enterprises in selected municipalities of the North West Province of South Africa

Abstract

Small and Medium Enterprises (SMEs) are increasingly becoming the productive drivers of economic growth and development in South Africa. This is so because SME sector is the engine of employment creation and the key contributor to the GDP of the country. Despite their contribution to the development of the economy, the rate of failure and discontinuity of SMEs in South Africa is still one of the highest in the world. A lot of business scholars have addressed the issue plaguing the sector by identifying the causes of SME failure but have not provided a solution on what needs to be done for these business ventures to become sustainable. The purpose of this study therefore was to develop a framework for enhancing the sustainability of SMEs in municipalities of the North West province of South Africa. A number of objectives were set to accomplish the purpose of the study that built up to the development of the proposed framework to enhance the sustainability of SMEs in this region. In order to attain the objectives of this study, the study used five principal theories that address the sustainability of SMEs: the financial gap theory, the resource dependence theory, the theory of mergers and acquisitions, investment theory and trickle-down theory. The pragmatist research paradigm underpinned supported the adoption of a sequential explanatory mixed method approach for collecting and analysing quantitative data in a first phase, while the qualitative phase was built on the outcomes of the preliminary quantitative results. The target population of this study was drawn from the current number of formal (duly registered) SMEs in the North-West province as indicated by the Central Supply Database of the Provincial Department of Finance. This population was chosen from the four district municipalities of the North-West province of South Africa and a non-probability sampling method was used to select a sample size of 400 small business owners and managers for the quantitative phase and 20 for the qualitative phase. The Statistical Package for Social Science was used to analyse quantitative data and Atlas-Ti software was used to analyse qualitative data. The findings of the study indicate that the major causes of SME failure and discontinuity in the North West province is due to various factors such as lack of strategic business planning, lack of sufficient finance, poor management, lack of innovation, lack of business research and low level of human capital education and training. Therefore, it is imperative for SME owners and managers to formulate and pursue a strategic business plan for their businesses, seek for measures to foster an improved flow of finances and implement strategic management in their businesses. More so, it is necessary for SME owners and managers to be innovative in business, conduct business research and upgrade the level of education and training of their human capital to ensure successful and sustainable business enterprises. More importantly, because of their contribution to economic growth of the country, the government should endeavour to support and encourage this sector to develop by offering financial and technical assistance to small business enterprises through relevant departments and agencies.