This is against the backdrop of South Africa’s jobless growth phenomenon where even if economic growth (gross domestic product ) tends to always exceed population growth annually – such growth still fails to create the needed jobs.įor example, a study by Berry et al. Unemployment is growing at an unprecedented pace because of the ‘massification’ 3 of higher education enrolment and the churning of thousands of graduates annually against a dwindling job market. ![]() It is often argued that if SMMEs are promoted, they would contribute immensely to economic growth and development however, the rate of SMMEs failure cannot account for the needed economic growth, especially with proportional to the challenge of employment creation. At present unemployment is rated at 24.30% after dropping from 25.40% in the third quarter of 2014 (Statistics South Africa 2014). Despite the fact that SMMEs are regarded as a panacea to unemployment, for instance, unemployment in South Africa is pegged at 24.30%, an all-time high, in eighth position globally in comparison to those with the worst unemployment and fourth in the world for those with the worst youth unemployment. Furthermore, there still lacks a consolidated framework for putting the challenge into perspective to make it easier to tackle at all levels: macro, micro and all other levels of entrepreneurial initiative envisaged. This poor survival rate is corroborated by the 2012 global entrepreneurship monitor (GEM) 2 report, which highlighted that ‘the survival rate for local start-up businesses in South Africa is low by global standards.’ĭespite the globally accepted view that SMMEs are a much-needed panacea to promote economic development, particularly that they contribute to job creation (reduction of unemployment), poverty eradication, equitable distribution of income and improved lifestyle, among others, research into the causes and impact of SMME failure is still negligible in the developing and underdeveloped countries of the world and South Africa is not an exception from the challenge. It is estimated that 40% of all new businesses in the country fail in their first year of existence, while 60% in the second year and 90% with the first 10 years from inception. Lings ( 2014:169) pointed out that there is apparently a very high rate of business failure among small to medium enterprises, hereinafter referred to as small to micro and medium enterprises (SMMEs 1) in South Africa. Consequently, the success of SMMEs would be found in the reverse of these elements, namely, entrepreneur capacity, enterprise competitiveness and environmental conduciveness (alignment). The impacts are loss of jobs and income, poverty, social evils and unemployment, among others.Ĭonclusion: Every SMME failure situation ought to be reviewed as a unique case and treated on its own merit. ![]() All these are attributed to poor understanding of the varied needs of SMME at each stage of its growth process. ![]() Results: Because of varied SMME failure factors, this study consolidated its findings around three factors: entrepreneur incapacity, environmental inauspiciousness and enterprise incompetence. Methods: This study conducted an empirical review of literature from an explorative perspective focusing on the causes and impact of SMME failure in South Africa. Setting: This study is located in the Republic of South Africa where SMME failure and success are important among national strategic priorities in the wake of many economic hardships, chief among which are unemployment, poverty, as well as HIV and AIDS. ![]() This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution,Īnd reproduction in any medium, provided the original work is properly cited.īackground: Over 70% of small to micro and medium enterprises (SMMEs) in South Africa fold within the first 5–7 years of inception and there is generally no agreement among scholars and experts as to why this is so.Īim: This study conducts an empirical review of literature which summarises itself into a hypothetical framework, putting the causes of SMME failure into some reasonable perspective and finally making suggestions for further enquiry into the subject in future. The causes and impact of business failure among small to micro and medium enterprises in South Africa Bushe, B., 2019, ‘The causes and impact of business failure among small to micro and medium enterprises in South Africa’, Africa’s Public Service Delivery and Performance Review 7(1), a210.
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