Challenges of entrepreneurship in Northern KwaZulu-Natal : a case study of Edumbe Municipality

Abstract

Most of the world economies view entrepreneurship as an integral aspect of economic development and the fight against the scourge of unemployment. Faced with a high unemployment rate, a highly unequal society and a largely youthful population, South Africa is no exception in its approach to entrepreneurship. The study looked into the challenges faced by entrepreneurs in a largely rural setting, as most studies concentrate on the more urban areas. The aim of the study was to determine the challenges of entrepreneurs in eDumbe municipality that affect the growth and sustainability of their enterprises. For this study, a quantitative approach was adopted. A questionnaire and purposive sampling was used for data collection from small, micro and medium enterprises in both the formal and informal sectors. The SPSS software package was employed for the analysis and presentation of the data. The results show that the bulk of small businesses started with entrepreneurs having little or no education, struggling to make it past the start-up phase. It has been found that male entrepreneurs seem to be more formally educated compared to their female counterparts. Yet, female entrepreneurs are more likely to receive external funding when compared to male entrepreneurs. The results also reveal that the majority of SMEs perceive access to external finance to be a challenge. Only a small percentage of SME owners/managers knew of existing business funding institutions in the area. It furthermore emerged that the ability of an enterprise to receive external finance is influenced by whether it operates in the formal or informal sector of the economy. The majority of entrepreneurs are ‘necessity entrepreneurs’ due to a lack of opportunities and skills. Entrepreneurs tend to concentrate on the retail and services sectors, while most of them run their own businesses. For enterprises to be sustainable the majority of entrepreneurs highlighted the need for reliable suppliers and better infrastructure as being the most critical, while for business growth, cheaper cost of communication and access to external financial assistance were their most pressing needs. The study concluded that for interventions to be more effective, they should be tailored to the education levels and requirements of the intended beneficiaries. Gender plays a role in the levels of formal education of entrepreneurs. Formal education also influences the economic sector in which entrepreneurs operate. Financial institutions should ensure that they market their products effectively and be visible to their clientele, as most are unaware of their existence. Furthermore, for SMMEs to be sustainable the focus needs to be on the entire value chain, as the unreliability of supplies is deemed as the utmost challenge, followed by the need for improved infrastructure.