Social network brokerage prevalent in SMME road freight operations in South Africa: An exploratory study

Abstract

This research study’s objective was to discover the structure and behaviours of social network brokerage that is prevalent in the road freight operations that is preventing SMME operators from being sustainable and to expose what participants must do to be included in lucrative broker networks. The research was a deductive qualitative study using a semi-structured interview guide on a sample of twelve road freight operators and stakeholders. SMME road freight operators are important to the South African government’s NDP 2030 economic transformation goals. Road freight operations are one most targeted categories of spend for cost reduction and outsourcing these services is one of the primary economic transformation vehicles adopted by public and private organisations to include previously disadvantaged persons in the economy. SMME road freight operators fail because they are being outcompeted in the market by established operators and brokers. Applying some principles of social and economic network theories the study exposed the nature of networks that are prevalent in the industry and the behaviours of brokers who drive it. The evidence presented by the participants shows that the structure of the network creates the conditions for brokerage that are exploited by entrepreneurial brokers who operate with low overheads to close structural holes between buyers and sellers for their profit. Furthermore, the study revealed that the road freight operators are applying an outdated and unprofitable business model that is based on asset ownership in a commoditised, late-stage industry with price as the source of competitive advantage. Moreover, the study found that the industry is plagued by rampant corruption with bribery, nepotism and lawlessness thriving. A model was developed to depict the change in the industry to aid road freight operators transform to the new conditions.