The identification of social-economic challenges : a regional comparative study of the Emfuleni and Midvaal local municipal areas

Abstract

The importance and the significant role that SMMEs play towards economic development and growth cannot be overstated. With the growing epidemic of poverty and unemployment, SMMEs are seen as a key solution. However, SMMEs are struggling to survive and grow due to the socio-economic challenges that have a negative impact on them. The socio-economic challenges that were identified have an internal (financial and managerial challenges) and external (economic, markets and infrastructural challenges) impact on the survival and growth of the SMMEs. In order to grow SMMEs in the country, an entrepreneurial culture needs to be established as South Africa has one of the lowest entrepreneurial activities globally. However, an enabling environment can be created for the survival and prosperity of SMMEs in South Africa and more so on a local level. The study had the primary objective to identify the different socio-economic challenges that have an impact on SMMEs and its link to economic development in the Emfuleni and Midvaal local municipal areas. This entailed identifying the different socio-economic challenges on a local level. In order to strengthen the primary objective, the study further identified whether an enabling environment is being created for small businesses in the two study areas. Moreover, the study analysed the perception of small business owners in the two study areas regarding the socio-economic challenges and further analysed if government is creating an enabling environment for the survival and growth of the businesses. A sample size of 200 were selected. Data were collected through the use of structured questionnaires that were administered through two trained fieldworkers. A total of 200 questionnaires were returned and only 198 were deemed usable. The sample was almost evenly split between small businesses in the two chosen study areas which was the Emfuleni (sample size = 100) and Midvaal (sample size = 98) local municipal areas, which has resulted in suitable and consistent statistical results. The statistical techniques employed in analysing the data included the use of frequency distribution and cross-tabulations. Frequency distributions were used to interpret the demographics in the results which included; race, age, gender, level of education and the duration which the participants have been self-employed. The results indicated that the majority of business owners in the Midvaal area are White and in the Emfuleni area are Black/African. The majority of the participants in the Midvaal were between the ages of 51 and 60 and in the Emfuleni area they are between the ages of 31 and 40 while the majority of the participants were male in both study areas. Furthermore, there is a low percentage of participants who have obtained a post-graduate degree in both municipal areas and the second lowest percentage is the number of participants who have obtained an undergraduate degree. Frequency distributions were also used to interpret the results pertaining the business information of the participants. The results indicated that majority of the participants have not received some sort of business training in the two areas while a large portion of the participants felt that an enabling environment is not being created for businesses in their areas. Likewise, almost half of the participants manage their business operations in the CBD areas. Cross tabulations were used to interpret the results pertaining to the different socio-economic challenges which have been identified. Based on the overall results it was clear that participants in the Emfuleni area experience a higher volume of both internal (financial and managerial) and external (economic and infrastructural) challenges, however, the Midvaal area experiences a higher volume of market challenges (inadequate demand, high competition and high transportation costs). The results also showed that a better enabling environment is being created for businesses in the Midvaal area compared to the Emfuleni area. The results indicate that the Midvaal area experiences less socio-economic challenges and also has a better enabling environment compared to the Emfuleni area, which further gives an indication that SMMEs in the Midvaal local municipal area are more prone to be successful. Overall the study found that the reason why SMMEs are struggling is because of the socio-economic challenges which were identified in the study. Therefore, there is a need for government and other stakeholders to intervene in order to minimise the risk encountered by SMMEs with regards to the socio-economic challenges. Furthermore, the study identified that there is a need to create an enabling environment for SMMEs on a local level. The overall results indicate that the Midvaal local municipal area is stronger than the Emfuleni local municipal area regarding the success of small business development.