A funding model framework for SMMEs and Co-operatives: the case of Dr Kenneth Kaunda District Municipality

Abstract

The new democratic dispensation post-1994 saw various remedial actions being undertaken to mitigate the disparities of the apartheid era. The South African government designed a multitude of legislative prescripts and official regulatory frameworks aimed at addressing socioeconomic inequality, chronic poverty and unemployment. These prescripts and frameworks advocated for a conducive environment for local enterprises, and in particular SMMEs and co-operatives, because they were recognised as potential agents of economic growth, social prosperity through job creation and entrepreneurship. It is against this background that Dr Kenneth Kaunda District Municipality (Dr KKDM) initiated a business grant-funding initiative. Such funding is aimed at supporting local entrepreneurs and furthering the growth of their businesses. However, it soon became apparent that Dr KKDM was channelling funds to enterprises without having an integrated funding model that encouraged SMMEs and co-operatives to be committed to the continuous growth of their businesses. A further problem with the existing funding arrangement is that there are virtually no monitoring or performance evaluation procedures in place to assess the growth of enterprises after the allocation of grants. It is thus extremely difficult to ascertain the cost-benefits of funding and to determine whether taxpayers' money is being effectively and economically utilised. It is in light of these problems that the researcher aimed to develop a funding model for Dr KKDM to establish a detailed step-by-step process to facilitate the application of funding and the monitoring of businesses after they obtain funding. Several datasets (literature review, statutory and regulatory frameworks, case study and survey) were collected, in light of which a new funding model was designed to address the existing challenges associated with SMME and co-operative funding. The semi-structured interviews served as main data collection method. The findings emanating from this method led to the verification, validation and finalisation of a proposed funding model. Interviews were conducted with two cohorts, namely officials from Dr KKDM and its local municipalities as well as representatives of enterprises (i.e., SMMEs and co-operatives). The utilisation of two cohorts enabled the researcher to compare and contrast the findings. This further validated the research results. The results confirmed that existing funding arrangements were plagued by serious challenges. The participants endorsed the proposed step-by-step model and made input to further refine and operationalise it. The most significant contribution of the study is that the proposed model includes action steps to address the main challenges identified by including a strong monitoring and evaluation element, as well as other steps to address deficiencies in the funding application process. It is suggested that, although the study involved the utilisation of a single case study, the model could also be utilised by other district municipalities in the country. As such, it makes a significant contribution to business growth, local economic development and the general well-being and prosperity of communities in South Africa.