A business framework for the effective start-up and operation of African immigrant-owned businesses in the Cape Town Metropolitan area, South Africa

Abstract

The purpose of this study is to develop a business framework for the effective start-up and operation of African immigrant businesses in the Cape Town Metropolitan Area of South Africa. The question that guides this research is: how do African immigrants use their entrepreneurial attributes to acquire the resources necessary to start-up and operate successful businesses in the Cape Town Metropolitan Area?The study was conducted within the context of the economic development mandate as prescribed by the constitution of the Republic of South Africa Act, 1996. The development agenda also includes community, social and welfare promotion premised on the Keynesian principles that the government introduces interventions where there is an economic failure. In the South African context, this relates to unemployment and due to the prevailing economic down turns a greater reliance by the populace for social and welfare support. In recent years, immigrants especially from African countries have found themselves in a similar situation (That is in need of economic, social and welfare support). However, the government, particularly local government does not have the resources, especially financial resources to assist all local entrepreneurs, including immigrant entrepreneurs. Although there is a wide coverage of immigrant entrepreneurship in developed countries, much still has to be done as far as developing countries are concerned. From a South African perspective, there is so far no study entirely devoted to African immigrant entrepreneurship. This notwithstanding, there seems to be a growing consensus on the fact that SMMEs in South Africa are disproportionately constrained by start-up and operational factors such as finance, insufficient demand, lack of business skills and lack of information, although one cannot generalise especially as immigrant entrepreneurs face a slightly different dynamic. No studies focusing on immigrant-owned businesses in general and particularly how they tap into their entrepreneurial traits to start-up and grow successful businesses has been conducted in South Africa. At one level, the finding of this study provides vital information for new immigrants venturing into self employment. At another level, the study may provide vital insight into immigrant entrepreneurship in South Africa. Limited job opportunities force African immigrants into self-employment. However, due to the numerous challenges that they face, only a few of the immigrant-owned businesses get off the ground, let alone grow. It may be argued that most of these African immigrant-owned businesses fail to reach their full potential because they (the owners) are unable to exploit the entrepreneurial attributes that they bring or have at their disposal upon arrival. Three interrelated concepts: entrepreneurial attributes, business start-up and operation resources, and business success, are linked in this study to develop a framework for the effective start-up and operation of immigrant-owned businesses. The proposed framework seeks to encourage African immigrants to match the entrepreneurial attributes that they come with to the business opportunities and challenges that they may face in establishing and growing their businesses in South Africa.The study was designed within the quantitative and qualitative research paradigms, in which a triangulation of three methods was utilised to collect and analyse the data. From a quantitative perspective, the survey questionnaire was used. To complement the quantitative approach, personal interviews and focus groups were utilised as the methods within the qualitative approach paradigm. The research revealed that an African immigrant entrepreneur is most likely to be a male within the age range of 19 and 41 who has been forced to immigrate because of political circumstances back home. The decision to immigrate as well as the choice of South Africa as a host country was entirely dependent on the immigrant. Once in South Africa, limited job opportunities forced these immigrants into setting up their own businesses within the informal sector as their starting point. In order of importance, financial, physical, human, and informational resources were identified as being critical for the start-up and operation of a business in South Africa. In terms of acquiring the resources to start-up and operate a business, and from a financial perspective point, African immigrant entrepreneurs unwillingly made use of personal savings to finance their businesses during the start-up phase of the business. Financial resources played a double role in that they determined the main sources of physical resources used. From a human resource standpoint, African immigrant entrepreneurs preferred employing South Africans during the start-up phase of the business, and the reverse was true during the growth or operational phase. To a limited extent, family labour was involved at both the start-up as well as the operational phases of the business; with formal education and prior experience playing a significant role as far as the human resource mix was concerned. In terms of information, African immigrant entrepreneurs made use of two primary sources of information namely, their ethnic networks and friends from somewhere else.