Small and medium enterprises (SMEs) growth taxonomy in eThekwini Municipality - (in South Africa).

Abstract

Small and Medium Enterprises (SMEs) are considered to be the engine of growth for many economies. Their contribution to GDP and employment creation is significant in both developed and developing countries.The study sought to develop a growth taxonomy for SMEs in eThekwini Municipality Area.The main research instrument was a questionnaire aided by semi-structured interviews.Respondents ranked a number of variables and established that eight of these variables constitute the taxonomy. These variables are, namely: Innovation, The Business Plan,Training, Culture and Employees, Networking, Religious Beliefs, Relationships with Banks and corruption. In addition, included in the taxonomy are Chinese companies and others which include Market Exposure, Sharing Information and Negotiation Skills. Measures of SME growth which are impacted upon by the mentioned eight variables are Sales Growth, Net Profit Growth and Employment creation. The study found out that both Chinese Public companies and SMEs make capital investments in Africa and do not intend to leave. Further, Chinese companies employ about 44 percent of local indigenous people in management positions.A major deterrent to SME growth in eThekwini is the high crime rate which needs to be curbed by both the Municipality and the South African government. The study further established that there is a positive correlation between the number of employees and sales turnover. In addition, there is also a positive correlation between the number of years in business and sales turnover, pointing to the learning curve effect. The more the number of years an entrepreneur spends in business the more the increase in the following year’s sales turnover. In conclusion, a number of recommendations and suggestions among which the following stand out; that South African universities should expedite commercialisation of patents in order to promote SME development and growth and the need to improve relationships between banks and SMEs regarding funding and collateral security. The study further noted that South Africa lags behind many other countries in supporting and encouraging women entrepreneurs and revealed the need for both the South African government and eThekwini municipality to find ways of encouraging women participation in entrepreneurship and SME development.