Abstract
A survey was conducted (2012 to 2014) in the City of Tshwane in order to assess and evaluate determinants of adequate municipal services that are routinely provided to operators of start-up business enterprises. Data used in the report come from 1.058 small businesses. The aim of research is to assess and evaluate the relationship between the quality of services and sustained viability in small business enterprises. The study was conducted against the background of a high failure rate among newly established small businesses in the City of Tshwane. The study showed that there was a significant association between positive perception of business operators on the quality of municipal services provided to them and viability of businesses. The percentage of viable business enterprises that were satisfied with the quality of services provided to them was 87%. The percentage of non-viable business enterprises that were satisfied with the quality of services provided to them was only 13%. Profitability in business enterprises was significantly affected by lack of capacity for fulfilling the business and entrepreneurial needs of newly established businesses [hazard ratio = 3.58; P = 0.000; 95% C. I. = (1.45, 5.46)], inappropriate policy [hazard ratio = 3.19; P = 0.000; 95% C. I. = (1.39, 5.28)], and lack of tailor made training programs directed at newly established small businesses [hazard ratio = 2.89; P = 0.000; 95% C. I. = (1.24, 4.77)]. In-depth interviews conducted with business operators led to similar findings. Keywords: city of Tshwane, small businesses, municipal services, perception, hazard ratio. JEL Classification: L26, H7, L8
Highlights
The study was motivated by the need for isolating key barriers to profitability in start-up business enterprises in the Tshwane region of South Africa. Marivate (2014) and Khale (2015) have reported that more than 50% of all start-up small, micro and medium-sized enterprises (SMMEs) that conduct business in and around Tshwane fail in their first three years of establishment due to lack of entrepreneurial skills, lack of access to loans and lack of monitoring and evaluation programs
I. = (1.39, 5.28)], and lack of tailor made training programs directed at newly established small businesses [hazard ratio = 2.89; P = 0.000; 95% C
Findings reported by Khale (2015), Marivate (2014) and Edoho (2015) indicate that the current high failure rate among start-up SMMEs in and around Tshwane is attributed to inefficient municipal services, overregulation, unnecessary bureaucratic procedures, lack of transparency, lack of good governance, lack of efficiency in the administration and management of license applications, inability to assess and evaluate tax, lack of entrepreneurial skills, lack of accounting and auditing and bookkeeping skills, inability to draw up business plans, inability to make oral presentations, inability to network with business rivals and competitors, difficulty in securing loans from commercial banks and microlending financial institutions and lack of infrastructure
Summary
The study was motivated by the need for isolating key barriers to profitability in start-up business enterprises in the Tshwane region of South Africa. Marivate (2014) and Khale (2015) have reported that more than 50% of all start-up small, micro and medium-sized enterprises (SMMEs) that conduct business in and around Tshwane fail in their first three years of establishment due to lack of entrepreneurial skills, lack of access to loans and lack of monitoring and evaluation programs. Nenungwi (2012), Booysens (2011), Brownson (2014), Marivate (2014), Worku (2015) and Khale (2015) have reported that sustained growth and viability in start-up SMMEs conducting business in and around Tshwane is undermined by the lack of efficient municipal services, bureaucracy and overregulation. Brownson (2014) and Edoho (2015) have reported that over-regulation, too much bureaucracy and failure in incubation programs rolled out by SEDA are key obstacles to profitability in start-up SMMEs operating in the various parts of Gauteng Province including Tshwane.
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