Reframing place-based economic development in South Africa: the example of local economic development

Local Economic Development (LED) planning is a place-based approach to development planning and increasingly significant across much of the global South. One of the key challenges facing LED planning is the necessity to adjust planning in relation to the dynamic nature of both international and national framework conditions. The purpose of this article is to show this challenge by examining the dynamic nature of the national policy environment impacting upon LED planning in South Africa, a country which has a relatively long history of LED planning. Five dimensions of the changing landscape of national economic development planning in South Africa are identified. These relate to (a) LED within the context of new national economic and development plans; (b) initiatives for reindustrialising the South African economy, the associated importance of localisation and promotion of the green economy; (c) changing programmes around small business development; (d) shifts in rural development interventions; and (e) the fluid spatial context within which LED planning as a form of placebased economic development is embedded

South African small business growth through interfirm linkages

Economic stagnation in sub-Saharan Africa since 1970 is well documented. While the causes are varied, the paradigm of nationalistic state-led economic development has changed. Economic development occurs in a global marketplace. Manufacturing has shifted from developed to less developed countries, an opportunity that was seized in Asia and Latin America. South Africa’s labour, unskilled and costly by world standards, is at a disadvantage as an agile and competitive world market seeks skilled labour at the lowest cost. South Africa’s Gear economic policy suggests that 300 000 new jobs need to be created annually until 2004 in order to reduce unemployment. Small, medium and microenterprise growth is central to meeting this target. Numerous government structures to assist small enterprises have been created. Few, however, assist small business with the demands of the marketplace. Most focus on generic skills training and questionable small business finance. This thesis suggests that interfirm linkages between large and small enterprises is one strategy that can assist the growth of small business, create employment and, increase labour skills. International experience shows that generic training is less effective in promoting small business than linking business training to actual market-demands. Interfirm linkages, most often through subcontracting, is a strategy used successfully in Taiwan, Indonesia, Malaysia and Brazil. Such linkages are usually government supported and provide incentives for both large and small businesses to work together productively. Three South African interfirm linkage case studies are critiqued. Case study findings indicate that interfirm linkages expose emerging businesses to market conditions, and can provide access to process technology training, low cost raw materials, creative finance, and new markets. Small business ‘learns by doing’ and also ‘learns while earning’. The state has a role in the development of a vibrant small, medium and microenterprise sector in South Africa. Current support strategies are largely unrelated to market conditions. Interfirm linkages are an approach that applies market forces in the development of small business. Government policy would be wisely directed to support such business interactions

Optimising closely held entities to enhance commercial participation and development: The Southern African experience in comparative perspective

The important contribution of the small business sector to economic growth and regional development is widely and generally acknowledged. In 1984, the South African Close Corporations Act introduced a simple, inexpensive and flexible closelyheld entity for the business consisting of a single entrepreneur or small number of participants, designed with a view to his or their reasonable needs and expectations and without burdening him or them with legal requirements that would not be meaningful in the circumstances. This example was followed with varying degrees of success in Southern Africa and Australia by legislative developments aimed at the introduction, in various guises, of new legal forms for small business. In more recent law reform initiatives in Australia and especially the United Kingdom, various options were analysed to optimise closely-held entities with a view to enhancing commercial participation and economic development through small businesses. Eventually, the somewhat less imaginative approach of merely simplifying the private company was chosen. Attention will be given to the Southern African experience of closely-held entities and then to a critical comparative analysis of and perspectives on recent developments in Australia and especially the United Kingdom

ICT adoption and development of E-business among SMEs in South Africa

Objectives: This paper examines ICT adoption among small hotel establishments in South Africa. The paper identifies the key ICT adoption attributes and explains how these influence ICT adoption and development of e-business among these typical SMEs in South Africa. Prior Work: The paper draws and builds on several studies on ICT adoption in small firms (Gibbs et al., 2007; Beckinsale and Ram, 2006; Zappala and Gray, 2006; Manueli et al., 2007). Notably, the paper mainly draws from the Gibbs et al. (2007) model which identifies and integrates the key ICT adoption factors that include government; environmental attributes; owner (managerial) attributes; organisational attributes; adoption attributes and social networks. Approach: This qualitative research takes a multiple case study approach highlighting the experiences of small hotel establishments in South Africa. Semi-structured interviews, observation and document analyses are used to collect data from a total of 3 case studies theoretically sampled from two locations in Johannesburg. The underlying technique in the analytical and interpretative process within the multiple case study methodology is that of epistemological bootstrapping (Archer, 1988). Results: The findings suggest internet; websites; fixed-line and mobile phone networks as the most common technologies adopted by SMEs to support their e-business operations. The results also suggest both formal and informal networks as important for ICT adoption. These are key sources of information, technology, social and business support. In addition, financial and owner manager support, including personal skills and experience are also crucial in the adoption of ICT. Power outage is identified as a major barrier across the three case studies. Government intervention is largely indirect and crucial in areas such as setting up of national ICT policy; infrastructure; dissemination of information; facilitating public-private partnerships; capacity building and power supply. Implications: The paper highlights ICT adoption and the distinctive and behavioural characteristics of SMEs operating small hotel business in South Africa. Potentially, other sectors and, SMEs in general may benefit from these insights which may also be useful to policy-makers in terms of effective policy reviews, implementation and support strategies for SMEs. Value: Although this paper only presents the findings based on SMEs in South Africa, the original doctoral project also included case studies from Botswana and Zimbabwe. The findings contribute to literature on ICT adoption among SMEs in general, but more specifically bring new insights to this area of study in developing nations within SADC. In addition, the research framework was applied within different geographical, economic, political and social contexts of the SADC countries and provided insights which suggested it was a useful framework for undertaking this research in southern Africa. Future research involving more SADC countries and other SME sectors would bring more detailed insights into ICT adoption at regional level

Institutional framing of CSR and social entrepreneurship interactions in South Africa

Objectives. This paper considers the intersection of Corporate Social Responsibility (CSR) and social entrepreneurship in South Africa through the lens of institutional theories and draws upon a number of illustrative case study examples. In particular it: (1) charts the historically evolving relationship between CSR and social entrepreneurship in South Africa, and how this relationship has been informed by institutional changes since the end of apartheid, particularly over the last few years; (2) identifies different interactional relationship forms between social enterprises and corporates engaging in CSR, with an emphasis on new innovative multi-stakeholder partnerships; and (3) considers internal engagements with social responsibility by SME social enterprises in South Africa. Prior Work. Reflecting South Africa’s history of division, the controversial role of business during apartheid, and the ongoing legacies of that period, the South African government has been particularly pro-active in encouraging companies to contribute to development and societal transformation through CSR and Black Economic Empowerment (BEE). Accordingly a substantial body of work now exists examining and critically reflecting upon CSR and BEE across a range of sectors. In response to perceived problems with BEE, efforts have recently been made to foster broader-based economic empowerment. However the implications of these transitions for the relationship between CSR and social entrepreneurship in South Africa have received scant academic attention. Approach. Analysis is undertaken of legislative and policy changes in South Africa with a bearing on CSR and social entrepreneurship. Data collected during fieldwork in South Africa working with 6 social enterprise case studies is utilised including qualitative data from key informant interviews, focus groups with stakeholders and observational research. Results. The paper considers the historically evolving relationship between CSR and social entrepreneurship in South Africa informed by institutional change. Five different relationship forms are identified and illustrated with reference to case examples. Finally internal engagement with social responsibility concerns by small and medium social enterprises are critically discussed. Implications. This paper sheds light on some of the innovative partnerships emerging between corporates and social enterprises in South Africa. It reflects on some of the strengths and weaknesses of South Africa’s policy and legislative approaches. Value. The paper provides insights useful for academic and practitioner audiences. It also has policy relevance, in particularly for other African countries potentially looking to follow South Africa’s example, in the development of legislative and policy frameworks to promote corporate responsibility, empowerment and transformation

Angel networks as a business start-up financing option in South Africa

The following study is about business angels financing small business start-ups. It explores the aspect of starting up an entrepreneurial venture in which the entrepreneur seeks to secure start-up finance from lenders, raising the various issues that are known to characterise this engagement between the entrepreneur and the lender. Using the phenomenological paradigm, the study seeks to determine the awareness of small scale financing by entrepreneurs in South Africa, to determine the most commonly used source of start-up business funding in South Africa, to assess the extent to which business angel financing could be used to finance businesses in South Africa and to determine the factors impacting the use of business angel financing in South Africa. From these objectives, the study will also seek to determine the extent to which business angel networks could facilitate the financing of business start-ups. Small businesses invariably come up in different policy spheres as the main avenues to social and economic construction across national and regional lines. The importance of a successful business start up to a growing economy should not be underestimated. In line with this is the particular factor of gaining access to start up capital, which continues to emerge as a leading contributor to the success or failure of business start ups. Studies continue to verify that the most common challenge faced by most emerging entrepreneurs is start-up capital, either in the lack of this capital, the unfavourable conditions surrounding its availability, the lack of assets to serve as collateral for its use or the ambiguous flow of crucial information between lenders and providers of finance in the funding relationship (Abor and Biekpe, 2006: 69;Hernandez-Trillo, Pagan and Paxton, 2005: 435, ISPESE, 2005: 7, CDE, 2004: 5; Musengi 2003: 11). Roger Sorheim (2005: 179) refers to business angels as private individuals who offer risk capital to unlisted companies that are struggling to obtain start up capital to finance their business ideas. Business angels are further defined as high net-worth bearers of substantial private capital who predominantly invest in the early stage of high risk high potential return business ventures with a positive further growth potential. Business angel finance is typically a ‘once-off’ early stage form of small firm financing compared to the more frequent later stage venture capitalist funding. Studies show that business angels represent an underutilised wealth creation mechanism when it comes to small firm start-ups as most business angels contribute expertise in addition to finance to the start-ups they get involved in. This brings valuable business insight to the commercialisation of a good business idea. The business angel network exposes a range of potentially viable business prospects to willing investors by facilitating the flow of information about entrepreneurs and their businesses, thereby eliminating ambiguity, information asymmetry and transaction costs (Aernoudt and Erikson, 2002: 178; Van Osnabrugge and Robinson, 2000:374; Macht, 2006:1; Ehlrich, De Noble, Moore and Weaver, 1994:70; Sorheim, 2005:179). To achieve a holistic approach to a phenomenon which appears to be relatively new in South African business circles, the study will follow a qualitative approach in which two categories of populations will be used, one of small business operators and the other of business angels in South Africa. In the study, 20 small business operators and five business angels in Grahamstown will be approached using the convenience and snowballing sampling methods respectively. Face-to-face semi-structured interviews will be used as a data collection method and content analysis will be used as a data analysis tool (Collis and Hussey, 2003:156, Driver, Wood, Segal and Herrington, 2001:32, National Small Business Act ). There has been very limited research on business angels in the South African context, therefore the study would significantly contribute in entrepreneurship, government and small business development circles as it brings about attention to what the researcher predicts is an underutilised business start-up financing option

Exploring the perceptions and value of the Field Study Programme for small business owners on their human capital development

Magister Artium (Development Studies) - MA(DVS)The South African government is promoting Small, Micro- and Medium-Scale Enterprises (SMMEs) as a key strategy for job creation, economic growth for poverty alleviation and a reduction in inequalities. The sustainable development of small businesses is therefore seen as the antidote for high levels of unemployment and poverty alleviation. Academics and policy makers agree that entrepreneurs, and the new businesses they establish, play a critical role in the development and well-being of their societies. If South Africa is to overcome its pressing challenges of unemployment and poverty, it urgently needs to become a more entrepreneurial society. The Field Study Programme (FSP) initiated by the Tertiary School in Business Administration (TSiBA) in South Africa, and the Northeastern University (NU) in Boston, United States of America, aims to guide and support small business owners. The goal of the FSP was, therefore, to support small business owners to improve their understanding of managing their small business and their competency in finding innovative solutions to their current market challenges. Since the inception of the FSP at TSiBA in 2008, very little research has been undertaken to understand the value and benefits of the FSP from the perspective of community small business owners over the past seven (7) years. This study explored the perceptions and experiences of small business owners and the value of the FSP towards their small business venture to assist business schools and higher education institutions to execute FSP’s with greater success and impact. In terms of the FSP, local and international business students acted as ‘consultants’ applying their respective academic knowledge and skills to assist small business owners to adapt their business model to sustain their livelihoods. The major purpose of the FSP was for students to consult with participants regarding their needs or challenges and to transform their needs and challenges through practical intervention towards meaningful and sustainable solutions which are mutually beneficial for all parties involved. The FSP attempted to demonstrate how a joint service-learning and social entrepreneurship approach could contribute to improving the human capital of small business owners. The study applied a qualitative research approach to explore the experiences and perceptions of small business owners who participated in the FSP. Purposive sampling was used to acquire information from small business owners. In this study twenty (20), participants were chosen on the basis that they had run their own small businesses at the time of being selected for the FSP for more than 6-12 months. The FSP was conducted over a seven-month period from February 2014 to August 2014. The qualitative research instruments for this study were pre- and post-interviews with individuals and focus-group discussions. Tape recorded data was transcribed verbatim for each pre-and post-interview with individuals and focus group discussions. The researcher analysed the transcripts using thematic analysis. The study highlighted the following findings: A majority of participants reported a positive experience and satisfaction with their participation in the FSP. Most of the participants felt that the solutions presented had contributed to addressing their challenges and influenced the ongoing operations of their small business venture. It was perceived that a combined service-learning and social entrepreneurship approach to FSP could improve community outreach programs. Despite the positive feedback, more must be done to incorporate black small-businesses into the main economy. A further recommendation is that a more integrated approach is needed between small business owners and students to join forces and provide solutions and relevant skills-training once the FSP has been completed

An evaluation of the challenges faced by rural-based small, micro and medium enterprises in Pietermaritzburg, South Africa.

Small, Micro and Medium Enterprises (SMMEs) in the South African present context are integral instruments of economic and social development. In these times of high unemployment in South Africa, the need for SMMEs to alleviate the high rate of poverty due to unemployment is evident. The government is committed to ensure that small businesses progressively increase their contribution growth and performance of the South African economy in critical areas such as job creation, equity and access to markets. As from 1994, with the new advent of a new democratic era, government has taken measures to ensure that small business development becomes a key focus. Since then, government has put in place institutions and programmes within all three tiers of government with the aim of providing comprehensive support to small business. This is suggestive of the government being mindful of the challenges/gaps which still need to be addressed to support small business especially in rural areas where unemployment and poverty are rife. Whilst there are institutions which provide support to SMMEs, the overall impact of these initiatives is insignificant. This study explored the perceptions of the owners of rural-based SMMEs about factors responsible for the success and failure of rural-based SMMEs. The study adopted a qualitative approach and it was exploratory in nature. Semi-structured interviews were conducted with five owners of rural-based SMMEs and with three key informants from three local municipal districts/offices around Pietermaritzburg in KZN. The main findings of the study identified initiatives to address the challenges to rural-based SMMEs, such as, provision of good infrastructure, business management skills, business equipment and land/premises. The recommendations suggested a need of partnerships between banks and community business support organizations, subcontracting of SMMEs to big business, introducing entrepreneurship from school level and introducing monitoring and evaluation systems in all government levels as proposals to address challenges to rural-based SMMEs

The challenges of forming partnerships between informal businesses in informal settlements and corporate South Africa

Since the institution of apartheid in the last century, informal businesses have not been looked at in a positive light. Some of them have been attacked, some have been displaced in the city, and much more profoundly, they have been rendered invisible in both urban and industrial policy. While the dawn of a new democracy has facilitated the development of new policies to cater as much as possible for this sector, many of them still fall through the crevices. The reasons given are: they are small, informal and ‘unbankable.’ In the informal settlements of South Africa, these reasons have been epitomized by many other associated social, political and economic justifications. For these reasons, the formation of partnerships between informal businesses in townships and corporate South Africa has remained a pipe dream. This study seeks to explore the reasons for the persistence of this scenario. In doing so, the research starts by adopting a ‘continental approach’, that is, exploring the literature dealing with experiences of informal businesses in various continents such as Latin America, South Asia and Africa. This approach is accompanied by a comparative analysis of these experiences, with particular reference to South Africa. The discussion of these experiences is linked to the investigation of the Diepsloot case study whereby twelve informal operators were interviewed in terms of their partnership linkages with corporate South Africa. The interviews were also conducted amongst corporate businesses such as Group Five and Corobrick. The major finding of this research is that the informal sector has the potential to operate effective businesses, but it is constrained by overly restrictive by-laws, lack of business skills and access to financial assistance. The research reveals that there is a maze of linkages that exist between various actors in the townships and the rest of the country which are defined in social, political and economic terms, but are not yet part of the transaction in developing partnerships in economic development. The researcher makes the planning recommendation that Provincial governments working with local municipalities should develop policies and a comprehensive management plans to provide skills training, access to capital in order to encourage corporate South Africa to engage businesses operating in informal settlements with a view of creating sustainable partnerships

The impact of local economic development on economic sustainability of Buffalo City Metro Municipality

The national framework of local economic development (LED) in South Africa (2006 – 2011) has the goal to support the growth of sustainable local economies through integrated government action. Municipalities as custodians of integrated development programs and local economic development strategies work with different stakeholders such as private industry, other government departments, non-government organizations and relevant community sectors in attaining envisioned developmental goals; thus are avoiding wasteful duplication of effort and resources. LED in the context of this study is defined as development of infrastructure within the BCMM for sustainability of small medium and micro enterprises in alleviating poverty in the area. This report presents an evaluation of the impact of local economic development in terms of basic infrastructure availability on the sustainability of small medium and micro enterprise development in the Buffalo City Metro Municipality (BCMM). This refers to amongst others accessibility of electricity and telecommunication in the operations of a business. The overall approach followed by the researcher throughout this research is the mixed methods or pragmatic approach. The research method followed is that one of a descriptive approach. The results of this study indicate that local economic development is still a new notion which is still unclear. There is evidence that there is a lack of basic services in some areas in the Buffalo City Metropolitan Municipal, this including access to electricity. The respondents also saw the local municipality as not doing much in support of new and small business and creating job opportunities for them. The study recommends that factors such as skills development, accessibility to basic service, development and promotion of SMMEs, are also major contributors to the effective impact of LED in BCMM