"An exploratory study of the relationship between government contracts and entrepreneurship in South Africa": a case study within eThekwini Metropolitan Municipality.
Gasa, Lindani Goodwill.
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Public procurement of goods, services, and infrastructure has the potential to create synergies between entrepreneurship and economic growth. The South African Supplier Diversity Council (SASDC) concurred with OECD findings and added that procurement through both public and private sector could be used as leverage to promote entrepreneurship. The 1997 Green Paper on public procurement reforms had intended for public procurement to be utilised for the advancement of entrepreneurship and SMME development. At the time of public procurement reforms in 1997, government spending accounted for 13% of GDP. National Treasury has budgeted R1.56 trillion in 2017 for public expenditure accounting for 29% of GDP. However, despite this significant public expenditure from which public procurement is derived, the Global Entrepreneurship Monitor (GEM) reported that South Africa’s (SA) rate of entrepreneurial activity is very low for a developing nation compared to other sub-Saharan African countries. GEM also found that the level of business discontinuation is higher than the rate of business start-ups in SA. Within public procurement, ‘tenderpreneurship’ has taken centre stage and is seen to be preventing entrepreneurs from participating in government tenders. This happens during a period of entrepreneurship evolution where in countries like China, entrepreneurship is transitioning from network-based to innovation based in anticipation of the 4th industrial revolution. The study aims to explore whether a relationship between government tenders and entrepreneurship exists in SA. The data collection instrument used was a survey questionnaire which was administered by the researcher within eThekwini Metropolitan Municipality. Dependence on government tenders was found to be high as descriptive statistics indicated that participants’ businesses derived 90.48% of income from government tenders. Data was further analysed using Principal component analysis and regression analysis. Principal component analysis was used to explore the dimensions of tender recipients’ opinions on the relationship between entrepreneurship and tenders and to further explore the dimensions on the personality traits exhibited by tender recipients in relation to entrepreneurship. Ordinary least squares regression modelling was used to develop a model of the degree of dependence on government tenders. The results show that ‘tender-minded’, ‘non-tender minded,' ‘business growth-minded,' and ‘conservative driven’ participants had a significant higher degree of dependence on government tenders.