An assessment of factors impeding business growth of small and medium enterprises in Govan Mbeki Municipality in Mpumalanga province

Abstract

Small to medium sized enterprises are generally acknowledged as the drivers of innovation, economic growth and employment in many countries including South Africa. However, these entities still face various challenges that hinder their business growth to reach bigger markets. This lack of business growth is believed to be the cause of eventual failure of small to medium enterprises within a very short space of time after inception. It has recently been reported that almost 50% of small to medium enterprises fail within two (2) years of inception, according to the Head of Small Enterprises at Standard Bank. Despite the overlap between factors that hinder business growth and those that cause business failure; this study sought to investigate the former in Govan Mbeki local Municipality. In the context of this study, business growth refers to an increase in the market dominance, assets, number of employees and revenue of a business. The main research question sought to find factors that prevent small to medium enterprises from becoming large entities. This study was conducted through the distribution of questionnaires to owners and managers of small to medium enterprises within the demarcated area. The said questionnaire consisted of a total of forty statements formulated to probe the factors affecting growth. Statements in the questionnaire were grouped together to form relevant constructs. The formulated constructs were inspired by the findings from the literature and previous studies on typical factors affecting business growth. These constructs were access to finance, regulatory laws, business location, training and resources, general economic impact and strategy and growth intention. The survey was conducted by sending questionnaires to owners of the enterprises in Govan Mbeki local Municipality. The results from this study showed that the growth SMEs in Govan Mbeki local Municipality is hindered by the general economic outlook which involves lack of markets for their products and services. The respondents further cited the lack of resources and training together with the absence of strategies and know-how capabilities on to growing the enterprise. Lack of access to finance and funding for growth was also raised as a barrier to enterprise growth in this area. Furthermore, respondents also strongly agreed that corruption is a hindrance to the growth of their businesses. This study has also created an opportunity for future studies to focus on the development of strategies to grow small to medium enterprises in South Africa.