An analysis of challenges in running micro-enterprises: a case of African foreign entrepreneurs in Cape Town, Western Cape

Abstract

The primary objective of this study was to analyse the challenges in operating micro-enterprises faced by African foreign entrepreneurs in Cape Town. The rationale behind the study is the fact that foreign entrepreneurs are faced with different challenges in operating micro-enterprises; some of these challenges are detrimental to the enterprises and lead some entrepreneurs to stop doing business. South African entrepreneurs and African foreign entrepreneurs share similar challenges to some extent. However, African foreign entrepreneurs are faced with challenges such as xenophobia and problems obtaining capital from banks, which increases the stressors on these entrepreneurs. The literature review is divided into two sections, namely: Small-, medium- and micro-enterprises (SMMEs) and immigrant entrepreneurship. Convenience sampling (which falls under non-probability sampling) was employed; resulting in sample of 93 respondents. The study used mixed methods, where data were collected by conducting semi-structured personal interviews and from self-administered questionnaires. The study was limited to the Cape Town central business district (CBD) and surrounding suburbs that host a high number of African foreign entrepreneurs, including Bellville, Mowbray, Woodstock, Salt River and Wynberg. The findings show that though xenophobia is not a frequent challenge to African foreign entrepreneurs in Cape Town, it is detrimental to their enterprises. Lack of knowledge of local languages also appears to be a problem, making it difficult for African foreign entrepreneurs to converse with local customers. These immigrant-owned micro-enterprises are also affected by sales fluctuations. Competition is a constraint as there are many businesses of the same nature servicing the same market. Obtaining start-up and growth funding is not easy, especially for micro-enterprises owned by African foreign entrepreneurs, as it is extremely difficult to obtain funding from banks and financial institutions. Hence, these entrepreneurs use their own capital or capital from family and friends. Obtaining a business location is also a challenge; it can take as long as 10 years or more to secure a good business premises. High rent and crime are also obstacles to the enterprises.

The recommendations of the study are based on the research objectives aimed at answering the research questions. Recommendations are directed to government departments dealing with African immigrant entrepreneurs and immigrant entrepreneurs themselves.