Factors limiting the success, growth and sustainability of SMMES in Ladysmith.

Abstract

Small and medium enterprises (SMEs) play a critical role in developing the economy by creating employment and propelling growth. Their contribution is however stifled due to extremely low levels of entrepreneurial activity despite multiple government support initiatives for SMEs. Within their initial two years of operation 63% of businesses fail and above 70% of businesses fail within five years of inception. Consequently, this exploratory study endeavours to gain an elaborate understanding of the challenges that SMEs in Ladysmith experience, as well as the factors that limit their growth and promote the competitiveness and sustainability of SMEs based in Ladysmith. The conceptual framework for the study developed by performing an extensive synthesis of the literature pertaining to the challenges, growth limiting factors and critical success factors (CSFs). The interpretivist paradigm was chosen to comprehensively understand this phenomenon, which was based upon the perspective of SME managers or owners, as the literature was well developed. Data collection occurred via the means of semi-structured face-to-face interviews of eleven SME managers/owners based in Ladysmith. These participants were chosen using the maximum variation subset purposive sampling. The validity of the study was bettered by the use of data investigation triangulation and data triangulation. The most prominent challenge experienced by SMEs in Ladysmith are government regulation, access to finance, crime and corruption, infrastructure and access to markets. The most persistent growth bottlenecks to SMEs in Ladysmith are access to markets, access to finance and government regulation. The preponderant CSFs are entrepreneurial characteristics followed by managerial competency and SME characteristics (as passion, motivation, willingness to learn, risk-appetite and prior experience). It was recommended that SME managers/owners; engage in entrepreneurship or business-related studies as well as improving their leadership and interpersonal skills, engage in more business networking and jointly employ security to combat crime and dilute crime-related expenses, in order to enhance their competitiveness and sustainability. It was also recommended that government; develop entrepreneurs’ skills/knowledge via mentorship programmes, facilitate access to finance for SMEs using incentives and simplify regulatory compliance to reduce the administrative cost burden on SMEs by moving regulatory processes online. The Alfred Duma Local Municipality was recommended to create an environment to spur growth and create employment via incentives to attract businesses to Ladysmith. The municipality should also prioritize unemployment by creating a database of suitably skilled jobseekers and refer them to SMEs that require these skills.