The impact of business incubation on post-incubation performance of small and medium enterprises in South Africa
Date
2015
Authors
Mokgoko, Moroka Luntu
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Abstract
ABSTRACT
Unemployment is a serious and widespread problem in South Africa. Small and medium
enterprises (SMEs) have been identified as having a vital role to play in the fight against
unemployment in the country. The high failure rate of small and medium enterprises
(SMEs) in South Africa, particularly during the first year of their incubation, is therefore
of great concern. Business failure is caused by various market failures. Business
incubators exist to help SMEs overcome market failures and reach their economic
potential.
Policymakers inform their business incubator resource allocation decision-making based
on SME performance data produced during incubation. Evidence in literature suggests
that post-incubation data may better inform their perspectives. This study seeks to
identify the post-incubation impact that business incubators have on job creation,
survival and sales performance of graduate SMEs. This is done with a view to informing
decision making of policymakers.
The data for the study was collected through an online survey administered to 119
graduates from the SAB Kickstart programme’s classes of 2012 and 2013.
From the findings of the study, the author was able to determine that over 68 percent of
the business incubator graduate SMEs survived longer than 42 months. The
respondents in the study meet the job creation expectations of the majority of youth
entrepreneurs in South Africa. Sales turnover distributions of graduates improve postincubation.
It is important to note that the results are a clear reflection of the theory of economic
development through entrepreneurship. 68.75 percent of the graduate SMEs survived
longer than 42 months. Based on the theory, this would have a positive knock-on effect
of increased job creation and an improved tax base. The data presented shows an
improved level of average job creation rates and a positive change in the distribution of
turnover/sales over time. We can conclude that not only are business incubators effective in helping SMEs fulfil their economic potential, but also using post-incubation performance data of small and medium enterprises (SMEs) is a reliable source of information which can inform policymakers in their decision making.
Description
MBA 2015
Keywords
business incubators, economic development, new business enterprise, small business