Abstract
This study attempts to identify and quantify factors that adversely affect the growth and development of emerging contractors in the construction industry of Limpopo Province in South Africa. The study is based on a stratified random sample of 229 emerging contractors who operate in the construction industry of Limpopo Province. The degree of entrepreneurial skills in emerging contractors was assessed by using a composite index defined by Beck and Demirguc-Kunt (2012). Quantitative and qualitative research methods were used for data collection and analysis. The study found that 139 of the 229 emerging contractors selected for the study (60.70%) lacked entrepreneurial skills by the standards of Beck and Demirguc-Kunt (2012), whereas 90 of them (40.18%) had adequate entrepreneurial skills by the same standards. The study also showed that 141 of the 229 emerging contractors in the study (61.57%) lacked basic skills in construction engineering. More than half of the contractors in the study had disadvantaged backgrounds in terms of technical and entrepreneurial skills as well as capital and access to finance. The study found that 122 of the 229 emerging contractors (53.28%) were viable financially while the remaining 107 emerging contractors (46.72%) were not viable financially. Results obtained from the study showed that viability in emerging contractors was significantly influenced by barriers such as lack of construction engineering skills, lack of entrepreneurial skills, lack of access to finance, inability to network with well-established contractors, inability to draw up business plans, and delay in payment for services rendered, in a decreasing order of strength. Keywords: construction industry, emerging contractors, Limpopo Province. JEL Classification: C5, M21
Highlights
The study was conducted in order to identify and quantify key predictors of failure and underperformance among emerging contractors operating in the construction industry of Limpopo Province in South Africa
The study is based on data collected from a random sample of size 229 emerging contractors operating in the construction industry of Limpopo Province as an extension of the study conducted by Tshivhase and Worku (2012)
According to reports issued by the Limpopo Business Support Agency (LIBSA, 2015), the failure rate among newly established emerging contractors in Limpopo Province is above 50%
Summary
Reports published by the South African National Department of Public Works (2015) and Tshivhase & Worku (2012) show that the key barriers to sustained growth and development among newly established construction firms in Limpopo Province are shortage of technical skills in construction engineering, shortage of capital and inability to network with well-established construction firms. A study conducted by the Limpopo Provincial Department of Trade and Industry (2014) shows more than half of newly established businesses in Limpopo Province are not viable financially mostly due to shortage of entrepreneurial skills and inability to render services. The study conducted by Tshivhase and Worku (2012) shows that emerging contractors in Limpopo Province are characterized by lack of artisan and engineering skills, lack of capital, inability to network with well-established construction firms and failure to penetrate the local market. The study attempts to identify and quantify key obstacles to sustained growth and development in newly established construction companies in Limpopo Province based on data collected from a stratified random sample of size 219 emerging companies in the construction industry of Limpopo Province
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