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  • i

    INVESTIGATING INTERDEPENDENT AND CONFLICTING OBJECTIVES

    IN SOUTH AFRICAN SMME POLICIES: COMPETITIVENESS VS.

    EMPLOYMENT CREATION

    Robert Stuart Cass

    A research report submitted to the Faculty of Engineering and the Built

    Environment, University of the Witwatersrand, Johannesburg, in partial fulfilment

    of the requirements for the degree of Master of Science in Engineering.

    Johannesburg, 2012

  • i

    DECLARATION

    I declare that this research report is my own unaided work. It is being submitted to

    the Degree of Master of Science in Engineering to the University of the

    Witwatersrand, Johannesburg. It has not been submitted before for any degree or

    examination to any other University.

    ……………………………………………………………………………

    (Signature of Candidate)

    ……….. day of …………….., ……………

    (day) (month) (year)

  • ii

    ABSTRACT

    Local and international research on small enterprises speaks to the importance of

    Small, Medium and Micro Enterprises (SMMEs) in contributing to their

    respective economies and the potential of these enterprises to generate

    employment. The National Small-Business Strategy, as proposed in the 1995

    White Paper on Small Business, was developed to assist the processes of

    employment creation and economic growth through assisting SMMEs in

    becoming more competitive in the global marketplace. Debate as to the

    effectiveness of this strategy and the subsequent development programmes has

    given rise to claims of conflict between the goals of economic growth and

    employment creation potential of SMMEs. The purpose of this research is

    therefore to determine links between employment creation potential and growth

    potential through increased competitiveness of ten South African SMMEs. Semi-

    structured interviews were conducted with owner-managers of each of the

    SMMEs. The interviews focussed on issues of competition in the respective

    markets, competitive practices, labour issues, technology issues and perspectives

    on the South African business environment. Additional interviews were conducted

    with a human development consultant and a politician at municipal level with

    experience in small enterprise development. The additional interviews covered the

    same broad topics as the SMME interviews but from perspectives removed from

    those of the owner-managers. Thematic Content Analysis (TCA) was used to

    extract themes emerging from the interviews from which links between

    competitiveness of the SMMEs and employment creation potential could be

    drawn. Results show that SMMEs aiming to become more competitive will tend

    to limit their dependence on labour to minimise costs and productivity constraints.

    Therefore, the policy objectives of economic growth and employment creation

    through SMMEs are divergent. The research adds to the body of knowledge on

    South African SMMEs and points to the need for continued research, particularly

    in developing up to date statistics on the SMME economy.

  • iii

    ACKNOWLEDGEMENTS

    I would like to thank the following people for assisting me in completing this

    project:

    • My supervisor Bernadette Sunjka for guidance and support in producing this

    research report as well as all her assistance over the past 4 years of my

    academic career.

    • Johann Coetzee for a huge amount of support, guidance and assistance and

    whom without this project never would have been completed.

    • My father and sister for support during this project and for never asking too

    many questions.

    This report is dedicated to the memory of my mother Veronica Cass. I will love

    you forever.

  • iv

    CONTENTS

    Declaration ............................................................................................................... i

    Abstract ................................................................................................................... ii

    Acknowledgements ................................................................................................ iii

    Contents ................................................................................................................. iv

    List of Tables........................................................................................................ viii

    List of Figures ........................................................................................................ ix

    List of Acronyms .................................................................................................... x

    Chapter 1 – Introduction ......................................................................................... 1

    1.1 Introduction ................................................................................................... 1

    1.2 Background and Contextualisation ............................................................... 2

    1.3 Motivation for the Study ............................................................................... 4

    1.4 Research Question ......................................................................................... 5

    1.5 Research Hypothesis ..................................................................................... 5

    1.6 Objectives ...................................................................................................... 6

    1.7 Assumptions and Limitations ........................................................................ 7

    1.8 The Engineering Approach............................................................................ 8

    1.9 Project Layout ............................................................................................... 9

    Chapter 2 – Literature Review .............................................................................. 11

    2.1 Small Enterprise Development .................................................................... 11

    2.1.1 History of Small Enterprise Development ............................................ 11

    2.1.2 White Paper on Small Business ............................................................ 12

    2.1.3 Review of the Elements of the National Small-Business Strategy ....... 13

    2.1.4 Approach of the National Small-Business Strategy ............................. 15

    2.1.5 Review of the Approach of the National Small-Business Strategy ...... 18

  • v

    2.1.6 The National Small Business Amendment Act .................................... 19

    2.1.7 Current State of SMME Support .......................................................... 20

    2.1.8 Vision for Small Business Development .............................................. 20

    2.1.9 Summary ............................................................................................... 23

    2.2 Small, Medium and Micro Enterprises (SMMEs) ....................................... 26

    2.2.1 Definition of SMMEs ........................................................................... 26

    2.2.2 Characteristics of SMMEs .................................................................... 27

    2.2.3 SMMEs: Local vs. Global .................................................................... 31

    2.2.4 Contribution to Economy/Country ....................................................... 32

    2.2.5 Employment Creation Theories ............................................................ 36

    2.2.6 Doubts over Employment Creation Potential of SMMEs .................... 38

    2.2.7 SMMEs Competing in a Global Economy ........................................... 40

    2.2.8 SMMEs Employing Technology .......................................................... 43

    2.2.9 Summary ............................................................................................... 45

    Chapter 3 – Research Methodology ...................................................................... 48

    3.1 Introduction ................................................................................................. 48

    3.2 Research Instruments .................................................................................. 49

    3.3 Research Sample ......................................................................................... 51

    3.4 Research Procedure ..................................................................................... 52

    3.4.1 Interview Guideline .............................................................................. 52

    3.4.2 Interview Process (Data Collection) ..................................................... 53

    3.4.3 Data Analysis (Thematic Content Analysis) ........................................ 54

    3.5 Evaluating the Research Methodology ........................................................ 56

    3.6 Ethical considerations .................................................................................. 58

    Chapter 4 – Analysis and Results ......................................................................... 60

    4.1 Biographical Data of