Evaluating high growth entrepreneurs' knowledge of the South African Small Medium and Micro Enterprise policy framework and impact of such knowledge on business performance

Abstract

Policymakers worldwide are seeking new ways to use their shrinking fiscal budgets to stimulate their economies to grow, attract foreign direct investment, increase job creation, increase their revenue and provide quality products and services—ultimately improving the standard of living for their citizens. It is, therefore, important that governments understand factors that enable the development of a supportive environment for achieving higher economic growth rates and/or mechanisms to foster business growth. Economic growth literature suggests many factors that influence economic growth rates. These include the environment, culture, education levels and system, property rights, saving propensity and mineral deposits (Bleaney & Nishiyama, 2002:45). Due to the contribution that small and medium enterprises (SMEs) have on the economy, the impact of a regulatory and administrative system on economic growth grabbed the attention of both policymakers and other central role players in recent years (Mabonga & Daniel, 2015:55). After recognising the SME sector's growing potential, many countries rolled out several policies to promote SME growth and development (Yoshino & Hesary, 2016:5). Most Organisation for Economic Co-operation and Development countries have gone further and recognised the need to differentiate traditional SME policies from growth-oriented policies suited to entities with high growth potential. Research shows that these entities make an important contribution to stimulating innovation and competitiveness within their industries. In most economies, only 6% of SMEs grow and create a large pool of new jobs, and this is exactly why these entities are receiving attention in policy circles. Most research on high growth entities (HGEs) has been conducted in developed countries. This literature review showed differences between developed and developing countries and why the definition of HGEs used in developed economies is not appropriate for emerging economies. The research defined the period of measurement, measurement elements and ultimately, the definition of HGEs to be used in emerging markets. The study's main purpose was to evaluate high-growth entrepreneurs' knowledge of the South African small, medium and micro enterprise policy framework and the impact of such knowledge on business performance. The unit of investigation was the 120 identified HGEs that participate in the Small Enterprise Development Agency and Transnet high-growth programmes. The questionnaire's reliability was evaluated by computing Cronbach's alpha values—and the researcher acknowledged that the validity of the questionnaire used had already been tested and proven by Moos (2014). Descriptive statistics focussing on personal as well as business venture characteristics were presented. Finally, the researcher provided an outline of inferential statistics used to test the strength of the relationship between the variables using the univariate analysis of variance, Spearman correlation coefficient and Wald logistic regression analysis. This study showed a correlation between 1) the kind of support provided to SMEs and performance and 2) the number of years in business and performance. This shows that surviving in business for several years will not necessarily catapult the SME into being a HGE if incorrect support (generic support) is provided. The research also proved that there is a correlation between knowledge of the SME policy framework and performance. It is thus important that in order to foster an SME's development, there should be a proper knowledge of the SME framework. SMEs cannot take advantage of the current support if they do not understand government SME policies and procedures meant to provide an enabling environment for them to grow in. It is, therefore, not enough for the government to create an environment conducive to SME development if SMEs do not understand it. When it comes to policy, given the triple challenge of inequality, poverty and unemployment that faces South Africa and given its shrinking fiscal base, the country cannot continue on its current trajectory and still hope to realise its objectives of lifting the majority of its people out of poverty. South Africa is thus at a stage where it must institute 'meritocratic SME development policies' focussed on various (segregated) stages of business growth. Areas of future research were outlined, and the study limitations were provided and discussed. Notwithstanding the study's limitations, the researcher believed that this study presented the most compelling case for further research on the impact of high-growth entrepreneurship in South Africa. The researcher concluded that policy initiatives that include characteristics commonly attributed to high-growth entrepreneurship policy (meritocratic policies and interventions) can deliver significant value and positively impact the economic growth of South Africa. Keywords: Developed countries; Emerging economies; Entrepreneurship; High-growth entities; Meritocratic SME development policies; Small businesses; SME policy framework