Abstract
Foreign-owned SMMEs contribute positively to national economic growth. Foreign-owned SMMEs are sources of direct foreign investment and create employment opportunities for local citizens. Although the South African government has instituted several interventions to promote SMMEs growth, very little research has investigated the impact of such interventions on the growth of foreign-owned SMMEs. This study is an attempt to address this gap by investigating government-related support interventions that have an influence on the growth of African foreign-owned SMMEs. Using quantitative research methods and a sample of 60 African foreign SMMEs owners conveniently sampled from the Pietermaritzburg city, findings reveal that training support from the government is the only single intervention that significantly influences the growth of African foreign-owned SMMEs. Thus, this chapter proposes a regression model that depicts how receiving training support from the government influences the growth of African foreign-owned SMMEs in the South African context.
TopIntroduction
Small and Medium Enterprises (SMEs) play a vital role in developed and developing economies (Ayandibu & Houghton, 2017; Blackburn & Jarvis, 2010; Cant, 2016; Hassan & Mohamed, 2015; OECD, 2017; Toma, Grigore, & Marinescu, 2014). In South Africa, SMEs known as Small, Medium and Micro Enterprises (SMMEs) generally employ up to 200 employees (Goldstuck, 2012). They are viewed as a significant engine to tackle the issues of economic growth, employment creation and poverty reduction (Herrington, Kew, & Mwanga, 2017; Labour, 2017). They represent 98 percent of the registered businesses in the country and contribute 47 percent to the total workforce. In terms of the economic value, SMMEs contribute 42 percent to the Gross Domestic Product (GDP) of South Africa (DSBD, 2016). Thus, the South African government through public and private supporting institutions has designed interventions to promote the growth of the SMME sector in an attempt to promote national economic growth. SMMEs have access to both financial and non-financial support (SEDA, 2017).
In South Africa, there are several African foreigners who have established small businesses (Khosa & Kalitanyi, 2014). According to Garg and Phayane (2014), immigrant entrepreneurs are a source of foreign direct investment (‘micro’ foreign direct investment) and contribute to the local economy. Fatoki and Patswawairi (2012) state that foreign entrepreneurs generally employ local South Africans, hence contributing to the reduction of unemployment in the country. Thus, there is a need to support foreign-owned businesses due to their potential contribution to the host economies, in this case the South African economy.
In South Africa, there is scanty research that specifically focuses on supporting foreign-owned SMMEs despite their notable contribution to the country’s economic growth. It is against this background that this study attempts to identify government-related interventions that may influence the growth of African foreign-owned SMMEs. Identifying these interventions will assist in devising adequate strategies to enhance the performance of foreign-owned SMMEs. It is anticipated that assisting foreign-owned businesses to grow will have a positive impact on the growth of the SMMEs sector and potentially increase the employment rate in South Africa.
Key Terms in this Chapter
African Foreign-Owned SMME: Any Small, Medium and Micro Enterprise (SMME) owned by a foreigner or immigrant from Africa but outside of South Africa.
Government Support Intervention: Any assistance offered by government institutions with the purpose of developing Small, Medium and Micro Enterprises (SMMEs).
Business Training: A systematic and organised process of acquiring skills, knowledge, information and attitudes to accomplish business’ objectives.
Financial Support: Any monetary assistance provided by supporting institutions to help small business owners to start and grow businesses.
Business Growth: A stage where the business reaches the point for expansion, measured in terms of the increase in business’ sales, profits or number of employees.