The importance of the SMME (Small, Medium and Micro Enterprise) sector in South Africa cannot be overstated. As a result, the challenges affecting the performance of these SMMEs have been deeply interrogated with the aim of removing these proverbial “thorns from their flesh”.
The lack of education and training among small business managers and directors is seen as one of the most significant barriers to entrepreneurial activity, according to research on the local SMMEs landscape.
Let’s dig a bit deeper…
“An investment in knowledge pays the best interest,” (American politician and inventor, Benjamin Franklin)
Most SMMEs (Small, Medium and Micro Enterprises) in South Africa fold in the first two years of doing business. Reports suggest that the lack of education and training are some of the primary reasons for the low level of entrepreneurial activities and the high failure rate of SMMEs. To add salt to the wound, the overall quality of entrepreneurship in South Africa is recorded as lower than average.
Here are some of the visible results of the impact of, and lack of, education and training for SMME managers along with some corrective recommendations:
- Quality of SA’s entrepreneurial activity below global average
South Africa’s entrepreneurial activity is rated at 5.1%, which is below the Global Economic Monitor (GEM) average of 6.4% and the average of 6.7% for efficiency-driven economies. (In 2019, South Africa ranked 49th out of 54 economies on GEM’s National Entrepreneurship Context Index, ahead of only Croatia, Guatemala, Paraguay, Puerto Rico and Iran. This index provides a single composite number that can express the average state and quality of the entrepreneurial ecosystem in a country and be compared to those of other economies.)
According to existing research on the subject, “This and other figures show a lower than average level of entrepreneurial activity in South Africa and present challenges to all role players (government, the private sector and educators) for getting programmes that encourage entrepreneurship off the ground, so that this gap can be decreased”.
- Quality education linked to managerial confidence
In 2019, Ahmad Al-Tit, Associate Professor of Business Administration at Qassim University reported aspects such as the “business owner’s age, educational attainment, management skills, training, business size, and general business experience”, as elements impacting the success of a business.
“From these factors, the attainment of good quality education, general age, and business experience is believed to result in higher managerial confidence and quickens the procedure of obtaining adequate business finance,” he further stated.
- Academic recommendation to solving the problem
Considering the importance of SMMEs to the economy, the responsibility to educate entrepreneurs is spread among several stakeholders.
Based on the findings of research published by the University of Fort Hare, the following recommendations are suggested to the stakeholders:
- Government Agencies: “It is also suggested that government agencies work hand in hand with the banks to ease access to finance (training programmes) by SMMEs”.
- Government: “It is recommended that the government explore other strategies to compliment entrepreneurship education that will help create independent entrepreneurs instead of educated beggars.”
- SMME Owners and Managers: “SMME operators need to take advantage of entrepreneurship education programmes that are offered by institutions of higher learning and government agencies if they really want to improve the performance and survival chances of their businesses”.
- Institutions of Higher Learning: “They need to play a critical role in providing entrepreneurship education, for they have the expertise and resources to do so”.
- Banks: “It is recommended that banks provide financial resources to SMME operators who show potential for success”.
Consider additional education and training for SMMEs offered by the Institute of Directors South Africa (IoDSA) to improve your understanding of good governance requirements. These will improve your likelihood of success and the attractiveness of your business while reducing the potential of regulatory risk.
Ask your accountant to guide you through the entrepreneurial training and education programmes that could give your business a better chance of succeeding.