Small, micro and medium enterprise support intervention : an exploratory analysis of clustering effects in Clairwood and Cato Manor, Durban.

Abstract

This study identifies and explores the clustering effects of external economy and joint action of SMMEs throughout clusters in Clairwood and Cato Manor in Durban. It attempts to contribute to an understanding of clustering effects of SMME support intervention that aligns with a wider initiative by local government to engage in the redevelopment of previously disadvantaged areas. Particularly in the South African context, the market structure is marked by enormous unequal access to basic services based on location and education among other factors to counteract obstacles to SMME development. Agglomeration generates external economies like cooperation, information sharing and inter-firm interaction. Joint action between SMMEs in these clusters and external actors harnesses the collective efforts of all actors to promote specialisation, innovation and upgrade in SMME clusters. A survey method that combined quantitative and qualitative techniques was applied to conduct voluntary, semi-structured interviews using a questionnaire. External economies, such as, supplier linkages, repayment of money borrowed and upgrade point to the extent of interactions based on a collective and shared knowledge base. Also, the pursuit of joint action is explored through existing partnerships and the potential for partnerships between enterprises in the future, highlighted qualitatively by prevailing sentiments of entrepreneurs. The findings suggest that clustering effects in Cato Manor and Clairwood are complex. SMME clustering effects reveal layers of an incipient industrialisation process with two major challenges. External economies for generating relationships with supplier networks are tenuous. Though there is flexibility, it is not sufficient to increase inerfirm relationships. Training is lacking among 53 percent of entrepreneurs in the sample. This undermines learning and cooperation for cluster specialisation. Joint action is extremely limited and difficult to achieve. The findings show that 73 percent of survivalist and micro enterprises are individually owned. In sum, cluster effects reveal that enterprises are involved in unrelated activities within the same clusters, which undermines agglomeration and collective efficiency in SMME clustering. Future research must explore the feasibility of targeted support interventions at SMME clusters that are engaged in similar and related activities by location with specific outcomes for SMMEs development in clusters.