The influence of public and private supporting institutions on small, medium and micro enterprise development : a comparative study between Lesotho and South Africa.

Abstract

Due to high rates of poverty and unemployment, economies are taking both immediate and longterm measures to tackle the issue. Amongst the measures economies have taken, are the development of SMMEs, especially in developing countries. It is perceived that SMMEs are high contributors of economic growth. To develop SMME sector, there are established public and private supporting institutions. The presence of these institutions perceived to create a favourable environment where SMMEs are able to grow sustainably and contribute to the country’s economy. If these institutions are not utilised, SMMEs could fail to develop and close down at the early stages. The aim of this research is to investigate the influence of the public and private supporting institutions with regard to businesses start-up and sustainable growth. Both Lesotho and South Africa have put in place a number of initiatives in the quest to support business development. However, there is not much said about the success or failure of such interventions from the public and private supporting institutions’ perspectives. Thus, there is a need to investigate the positive outcomes emanating from such institutions as well as the pitfalls resulting from their interventions that may hinder the start-up and growth of SMMEs. Qualitative and quantitative methods were used to collect data. Semi-structured interviews with six supporting institutions in Maseru Lesotho, and six from Pietermaritzburg in SA were conducted. The survey covered a sample size of 379 owner-managers of registered SMMEs across all sectors in Maseru, and 384 in Pietermaritzburg. These sample sizes were generated using an online sample size calculator. A non-probability sampling method known as snowball sampling was used for the interveners (implementing agencies). Probability sampling methods known as stratified random sampling and cluster sampling methods were used for the SMMEs. The coded responses obtained from the interviews and questionnaires were analysed using NVivo 10 for Windows and SPSS for Windows, Version 22 respectively. Most SMMEs’ owner-managers in both Maseru and Pietermaritzburg are aware of the available supporting institutions and the assistance they provide at start-up and growth phases. However, entrepreneurs do not make full use of these institutions. Some entrepreneurs perceive that services provided by the supporting institutions are satisfactory, while some are not satisfied with such services. The main support they use is registering with these institutions which then allows them to operate formally. However, not making full use of supporting institutions’ programmes hampers SMMEs’ establishment, and they also do not grow sustainably. It is anticipated that the vii research findings will inform policy makers about factors that may contribute to or hinder the effectiveness of supporting institutions’ interventions at SMMEs’ start-up and growth phases. This is perceived will help policy makers and supporting institutions in devising adequate strategies to improve policy implementation or their service provision to SMMEs.