Challenges Facing Black Owned Small and Medium Construction Companies: A Case Study of Nelspruit â€“ Mbombela Municipality, South Africa

Aigbavboa C.O.

doi:10.22610/jebs.v6i10.536

Abstract

The purpose of the paper is to investigate current challenges and problems facing small and medium size contractors (SME) in Mbombela (Nelspruit) - Mpumalanga Province of South Africa. This study was necessitated because the importance of small and medium sized enterprises in national building and economic development is of paramount importance in the South Africa economic debate. The primary data for the study was collected through a structured questionnaire survey which was distributed to Small and medium contractors within grade 1-4 of the South Africa Construction Industry Development Board. The survey results indicated that external factors such as high competition when tendering for construction jobs within the CIDB category is a major challenge the SMEâ€™s faceâ€™s in the procurement of work. Also, internal factors such as poor administrative management within the company, lack of skilled professionals and lack of capacity to deliver on certain project were the greatest challenges faced by the construction companies. The scope of this study is only focused on small and medium size contractors in Nelspruit (Mpumalanga province). In addition, the study is not focused on large established contractors in South Africa. The South African construction industry will continue to provide jobs but intervention is needed to develop the SMEâ€™s contractors who contribute a greatly to the economy.

Highlights

Small and medium sized enterprises (SMEs) are considered the engines of growth in developing countries (Mahembe, 2011 – National Credit Regulator document). Mahembe (2011) further informs that the in developed countries, SMEs have historically played a vital role in creating jobs, spurring innovations, and creating new products, and contributed to economic vitality and growth
This study was necessitated because the importance of small and medium sized enterprises in national building and economic development is of paramount importance in the South Africa economic debate
Findings from the questionnaire survey relating to the ownership and control of the construction SMEs revealed that 75% of the respondents were part owners of the business, while 15% were managing directors’ overseeing the activities of the business on behalf of the owners

Summary

Introduction

Small and medium sized enterprises (SMEs) are considered the engines of growth in developing countries (Mahembe, 2011 – National Credit Regulator document). Mahembe (2011) further informs that the in developed countries, SMEs have historically played a vital role in creating jobs, spurring innovations, and creating new products, and contributed to economic vitality and growth. The value of SME sectors are recognised in economies world-wide, irrespective of the economy’s developmental stage They contribute towards economic growth, job creation and social progress which is highly valued; much more, SME’s in any sphere of the economy are regarded as an essential element in a successful formula for achieving economic growth (Vosloo, 1994). According to Ahiawodzi and Adade (2012), it is estimated that SMEs account for 70% of Ghana’s gross domestic product (GDP) and 92% of its businesses. They make up 97.5% of formalised businesses in South Africa and 70% of the manufacturing sector in Nigeria (Abor & Quartey, 2010)

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