Evaluating the South African small business policy to determine the need for and nature of an entrepreneurship policy

Abstract

Even the best developed policies can and do fail, without attaining their desired outcomes. Many countries have developed small business policies directed at supporting and creating a favourable environment for cultivating small business and entrepreneurship. Policies specifically aimed at entrepreneurship are less prominent but also growing (Lundström & Stevenson, 2005:53; United Nations Conference on Trade and Development (UNCTAD), 2012:1). The existence of entrepreneurship policies in developing nations continues to be rare, despite the belief that entrepreneurship can spur economic growth and employment. The literature review introduced various important elements within the field of small business and entrepreneurship and, specifically, in the policy domain. The context of policy monitoring and evaluation was also addressed. Furthermore, the literature revealed clear differences between small business and entrepreneurial ventures which were not genuinely considered when small business support was initiated in South Africa with the introduction of the National Small Business Act (No. 102 of 1996) as amended. Only a small business was defined by the Department of Trade and Industry (dti) and not an entrepreneurial venture (dti, 2003:8). At present, both start-up and established businesses are operating in South Africa with the possibility of either growing into a small business or entrepreneurial venture. The main purpose of this study is to evaluate the national small business policy of South Africa and to determine its shortcomings. An entrepreneurship policy was identified as a possible alternative to address the gaps left by the small business policy. A content analysis of entrepreneurship and small business policies highlighted that the main differences between these two policies are the focus on individuals versus business ventures; pre-start-up versus post-start-up support; and a broad versus narrow definition of which institutional structures constitute the support environment. In this research, constructs drawn from the literature study were used to formulate the conceptual framework, research questions and hypotheses. Quantifiable data were obtained from three groups of respondents – namely, start-up business owners, established business owners and government officials involved in small business development and entrepreneurship. The sample consisted of 23 government officials and 340 start-up and established business owners from five metropolitan municipalities in the Gauteng, KwaZulu-Natal and Western Cape provinces of South Africa. The empirical research was undertaken between 01 November 2011 and 30 April 2012. The One-Way ANOVA Test, Kruskal-Wallis One-Way ANOVA Test, Friedman Two-Way ANOVA Test, Mann-Whitney U Test and Chi-square Test were executed to present the statistical significant differences between the three groups of respondents. The statistical tests were also executed to illustrate the statistical significant differences within the different groups as well as within different metropolitan municipalities in selected provinces. Pearson’s correlation coefficient was conducted to determine whether there was a significant relationship between the different small business policy evaluation factors and the needs factors of business owners. The findings of this empirical study prove that the small business policy does not address the needs of both start-up and established business owners which may support their development into small business and entrepreneurial ventures. Even though there is a mismatch between the supply and demand of support services, this study did not find evidence to support the need for an entrepreneurship policy in South Africa to supplement the existing small business policy. Businesses will continue to operate irrespective of an additional policy. The results of the study can be utilised by government to formulate and design adequate policies that focus on the specific needs of start-up and established business owners. The contribution of this study to the body of knowledge, and the possible limitations of the study, are discussed. Areas of future research are outlined and various recommendations are made to guide current and prospective small business and entrepreneurship policy makers regarding the choice of policy instruments, monitoring and evaluation. In conclusion, this study demonstrates the importance and value of policies to business owners and entrepreneurs that can effectively assist business venture survival, growth and success.