Assessing the causal failures of emerging manufacturing SMEs in Johannesburg

Mthabela, Thabani Eddison
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This report provides an examination of reasons that may be responsible for the failure of start-up manufacturing small to medium enterprises (SMEs) or businesses in Johannesburg, South Africa. The high failure rate of manufacturing SMEs can be, to some extent ascribed, to the following factors: The lack of support that the small, medium and micro-enterprises receive from Government and its policies, lack of sponsorship from well-established organisations that could provide SMEs with commercial advantages such as legitimacy of the brand, and also their own internal processes that are weak in organisational design and execution of strategies. While it is well-known that the SME sector is regarded as the major contributor to any economy, it can be highlighted that the failure of most businesses could also be as a result of common causes such as lack of entrepreneurial mindset and financing, due to lack of up-skilling, inability to meet customer requirements and international standards certification. This research study was exploratory in nature, descriptive and employed a qualitative and quantitative analysis. A research instrument was presented by email and also physically sent to the respondents by the researcher and delegates and semi-structured interviews were also conducted. The results of the study indicated that the most common causes of SMME failure are lack of Government funding, lack of coaching and mentorship and high interest rates and taxes. Based on the findings of the study, recommendations were developed to try and minimise the failure rate currently crippling SMMEs. The study recommends that the South African Government should review its SMME governing policies and make them more flexible towards SMME establishment. Government should also create transparent communication channels between start-up SMEs and bigger organisations within the same field of interest and also sponsorship for additional studies to be conducted based on SMME failure. Should these recommendations be properly implemented, the failure levels of SMMEs could be reduced, not only in Johannesburg but across South Africa as a whole.
Thesis (M.M. (Entrepreneurship and New Venture Creation))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2015.