Beyond seed funding: the challenges of informal small businesses in the Wineland district of the Western Cape Province

Abstract

This study sought to ascertain why, and the extent to which informal small businesses struggle to grow in spite of receiving seed funding. The study also examined factors that influence the growth of these businesses, as well as support structures that are available to them, and how helpful the seed funding was. Although government has provided infrastructure, finance and equipment for informal small businesses in rural areas, it appears that small businesses that received seed funding do not grow so that they become sustainable, and can contribute to job creation and poverty alleviation. Hence, the study is significant. The study adopted a quantitative research approach, using questionnaires that the researcher distributed to 60 entrepreneurs who received seed funding in the Winelands District of the Western Cape. Predominant findings from the study included a lack of finance and insufficient seed funding, instability of businesses, limited business space, crime, as well as a lack of infrastructure, marketing, coaching and mentoring, business management skills and transport. The study recommends that the government should release funding in portions to monitor business development instead of providing once-off payments; it should build warehouses in each local municipal area where informal business owners can keep their stock safely; and it should provide permanent structures for them from which these entrepreneurs can operate their businesses. This study recommends infrastructure provisioning in terms of marketing tools, computers, transport and safety and security measures for all seed funded small businesses in the Cape Winelands District Municipality. Further, it promotes establishment of forums and partnerships between successful informal small businesses and those that are struggling to grow so that they may share and explore new business strategies and opportunities through networking. The study also recommends that informal business owners should seek professional advice, guidance and training in terms of how to operate their respective businesses effectively, while the government should provide flexible policies that allow them to determine what support each business requires. Government should also increase seed funding amounts to cover infrastructural development at least, and should appoint officials or incubators to support these businesses.