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Journal of Small Business Management 2002 40(2), pp. 153–160
䊏GLOBAL PERSPECTIVE
Entrepreneurship Training for Emerging SMEs
in South Africa
by Watson M. Ladzani and Jurie J. van Vuuren
This study analyzes the course content, training methods, and profiles of trainers
and trainees of SME service providers in the Northern Province, South Africa. The
findings include the need for training as well as the existence of certain deficiencies
in the present entrepreneurship training. The conclusion emphasized the importance
of a comprehensive entrepreneurship-training program for successful small business
enterprises. Recommendations that could help sustain emerging small business enter-
prises are presented to SME stakeholders.
Big businesses for years have enjoyed
much support from governments, finan-
ciers, and other stakeholders. This situ-
ation is, however, changing quickly in all
the economies of the world (Scarborough
and Zimmerer 1996). The focus is shifting
towards small business development. Big
businesses are trying to survive and be-
come more competitive by downsizing
and merging. This process results in
many retrenched and unemployed peo-
ple establishing their own small business
enterprises, not only for survival, but
also to generate wealth in their respec-
tive communities.
The proliferation of small businesses is
welcome, since the development of small
andmedium-sizedenterprises(SMEs)
contributes significantly to job creation,
social stability, and economic welfare
across the globe. In the United States, for
example, small business enterprises have
introduced innovative products and ser-
vices, created new jobs, opened foreign
markets, and in the process sparked the
U.S. economy into regaining its competi-
tive edge in the world (Scarborough and
Zimmerer 1996). Japan’s SMEs account
for the bulk of the country’s business
establishment, providing vital support
for employment, for regional econo-
mies,and,byextension,fortheday-to-
day life of the Japanese people (Ministry
of International Trade and Industry
1997). In Taiwan, SMEs account for
about 98 percent of the nation’s GDP.
Although these businesses are relatively
small in scale, limited in funds, and weak
in structure, they make significant contri-
butions to economic prosperity, create
innumerable jobs, and promote social
stability (Annual Report 1983).
Many African countries are also chang-
ing their economic policies regarding
small business enterprises, thereby pro-
moting the development of SMEs (Na-
tional Economic Policy Research Unit
1995). In South Africa, the White Paper
on National Strategy for the Develop-
ment and Promotion of Small Business
(1995) reinvented the wheel of small
business development.
LADZANI AND VAN VUUREN 153
Open Rubric
It should be noted, however, that when
many small businesses emerge, a consider-
able number of them fail. Some fail at their
infancy stage and some fail within a few
years after start-up. The failure rate can be
attributed to lack of preparedness and fail-
ure to accurately estimate the cost of start-
ing and running one’s own enterprise
(Macleod 1995).
There seems to be little difference in
small business failure rates between devel-
oped and developing economies. For ex-
ample, it is estimated that approximately
50 percent of all start-ups fail in their first
year, and 75 to 80 percent fail within the
first three to five years in the U.S. (Ander-
son and Dunkelberg 1990). The Small
Business Development Corporation
(1996) indicates that up to 50 percent of
the small businesses started in South Africa
eventually fail. According to Macleod
(1995), 80 percent of new businesses
started in the Durban region of South
Africa failed.
The Northern Province is one of the
poorest provinces of South Africa. Of its
estimated total population of 4.8 million,
46 percent is unemployed. This province
has the lowest household income (55.8
percent of the workforce earns less than
R6 500 per annum) and low literacy levels
(27.8 percent has no education and only
7.8 percent has post-matriculation qualifi-
cations). The public sector in the Northern
Province is the single most important
provider of employment opportunities
(University of Pretoria 1996).
South Africa’s enterprise density (the
number of people in the population for
which self-employment is the primary
source of household income per 100 peo-
ple) is 2 percent. For comparison, the en-
terprise density in the U.S. is 2.8 percent,
3.3 percent in Germany, and 5.9 percent in
Italy. Small business development in the
Northern Province is undoubtedly of para-
mount importance. The province’s enter-
prise density is the lowest (1.1 percent) of
all the provinces of South Africa (Ntsika
1997). The difference could be attributed
to the fact that the Northern Province is
mostly rural (89 percent), compared to
urbanized provinces such as Gauteng and
the Western Cape. This low enterprise den-
sity should, however, offer an opportunity
for enterprise development. The Northern
Province’s potential industries where suc-
cessful SME development could be
launched are mainly in agriculture, min-
ing, manufacturing, and tourism.
Entrepreneurial skills training is, how-
ever, relatively new in South Africa. The
government’s Reconstruction and Devel-
opment Programme (RDP) places major
emphasis on entrepreneurial awareness
and training. However, it is only since the
early 1990s that colleges for vocational
education and National Senior Certificates
started recognizing the need for intensive
training in entrepreneurship (Bowler and
Dawood 1996).
Literature Review
Marais and Israelstam (1997) indicate
that rapidly changing circumstances re-
quire ongoing training at all levels of the
organization. Private and public organiza-
tions as well as SMEs should receive regu-
lar training. Kroon and Moolman (1992)
have noted that training can help
owner/managers learn how to approach
certain problems, and in this way save time
and money, and to become aware of cer-
tain rules and procedures that could help
them do the work with fewer difficulties.
Useful categories of training might in-
clude motivational, business, and en-
trepreneurial skills training. Despite this
broad range of possibilities, many training
institutions conduct training in only one
area. Institutions that mainly focus on
business skills (management training) or
on motivational skills and offer very little
on entrepreneurial skills do a disservice to
the SME sector they serve. Training for
SME owner/managers should be under-
stood to be like a three-legged pot, which
will not stand with any leg missing.
Van Vuuren and Nieman (1999) devel-
oped a model amenable to empirical test-
154 JOURNAL OF SMALL BUSINESS MANAGEMENT
ing that attempts to address the question
“How do you improve the entrepreneurial
performance of an individual by means of
training intervention?” The model postu-
lates that entrepreneurial performance is
a multiplicative function of motivation
times entrepreneurial skills and business
skills. Entrepreneurial performance is
based on the starting of a business/utilizing
an opportunity and growth of the business
idea. Motivation is seen as the entrepre-
neur’s level of need for achievement. En-
trepreneurial skills include creativity,
innovation, risk-taking, and the ability to
interpret successful entrepreneurial role
models and identification of opportuni-
ties. Business skills include being able to
formulate business plans, and financial,
marketing, operational, human resources,
legal, communication, and management
skills.
Many studies have proved that entre-
preneurs can be trained. While most re-
searchers agree that SMEs are important
for development, Bechard and Toulouse
(1998) indicate that organizations wishing
to develop entrepreneurship by education
presuppose that the lack of training for
entrepreneurs is the main reason for SME
failure. In a similar note, Gupta (1989)
cited the results of the research done in the
state of Gujarat, India, which revealed that
trained entrepreneurs had a closure rate
of less than 10 percent, compared to the
20 to 25 percent among other small enter-
prises. Profit analysis in this research re-
vealed that 80 percent of the trained
entrepreneurs were making profits, as op-
posed to 60 to 70 percent of the other
small enterprises.
For an institution to claim that it pro-
vides entrepreneurship training is not
enough. The content of what is provided,
analysis of potential entrepreneurs and
the expertise of trainers should also play
an important role. High quality training
interventions are earmarked by reduced
failure rates, increased profits, and growth
of SMEs.
This study addressed the problem of
the high business failure rate in the North-
ern Province, South Africa. It is assumed
that most emerging small business
owner/managers start their enterprise
without prior entrepreneurship training. A
further assumption is that the small busi-
ness training centers in the Province pro-
vide little or no entrepreneurship training.
Methodology
Case studies were conducted among
the SME service providers in the Northern
Province, South Africa. An in-depth de-
scription of entrepreneurial training
providers was conducted, and their train-
ing materials were reviewed and com-
pared to each other. A sample of three SME
service providers was drawn from a list of
eleven such service providers in the region
(Department of Trade and Industry 1998).
The three were: the Centre for Opportu-
nity Development (COD); the National In-
dustrial Chambers Purchasing and
Advisory Centre (NICPAC); and the Na-
tional Training Trust (NTT). Serving an
average of 1,300 trainees per annum, their
prominence and impact when compared
with other service providers similar in terms
of entrepreneurial training were taken into
consideration in choosing them.
A questionnaire was used to collect the
data through both personal and telephone
interviews. Face validity was determined
by distributing the questionnaire among a
group of colleagues, followed by a group
discussion to strengthen the validity of the
questionnaire. Interviews were held with
the managers heading the training divi-
sions of these service providers.
Study Results
Table 1 lists the different dimensions of
entrepreneurial performance training.
Only three (Centre of Opportunity Devel-
opment, National Industrial and Cham-
bers Purchasing & Advisory Centre, and
Northern Training Trust) of the eleven
LADZANI AND VAN VUUREN 155
service providers provide business, en-
trepreneurial, and performance motiva-
tional training. That is, only 27 percent of
the institutions in the region provide sig-
nificant entrepreneurship training. The
rest of the service providers either have
very little or no entrepreneurial training
among the services they provide to SMEs.
As shown in Table 2, the managers of
the three firms that were interviewed
pointed out that all these areas of training
are provided for. However, review of the
training materials found that the emphasis
seems to be more on business skills train-
ing (that is, skills such as general manage-
ment, financial management, marketing
management, production management,
pricing calculations, costing and legal
skills) than on the other categories of
skills.
As indicated in Table 3, a few fundamen-
tal elements of entrepreneurship training
were highlighted. The content and extent
of training in these elements were com-
pared to one another. Two service provid-
ers offer these services to large extent. The
third one seems to put less emphasis on
some of these elements. All three service
providers offered conventional manage-
ment training to a large extent.
Profiles of Trainers and Trainees
Interviews with the trainers from the
three firms indicated that they have under-
taken an entrepreneurship course in one
level or another (either at degree, di-
ploma, or certificate level). Training and
business experiences were also taken into
consideration when these trainers were
employed. However, the owner/managers
(trainees) whom the three firms trained
did not undergo training prior to starting
their enterprises. This is discouraging in
that much capital is lost when these emerg-
ing entrepreneurs struggle to find their
way when starting and growing their own
enterprises towards success.
Figure 1 presents data on the number
of enquiries and trainees these three firms
receive in a year. As the figure shows, the
number of business enquiries is much
greater than the number of actual trainees.
The findings indicated that the margin be-
tween business enquiries and training at-
tended is much wider than expected.
While on the one hand, it proves that there
is potential for training; on the other hand,
answers should also be sought as to why
many people do not make use of the exist-
ing SME service providers.
Recommendations and
Conclusion
Although the failure rate among emerg-
ing small business enterprises is high,
there are at least some firms that are
trying to address this situation. What
needs to be done in the Northern Province
is to improve the training that is currently
Table 1
Content of Entrepreneurial Performance Training
Motivation Entrepreneurial Skills Business Skills
Need for achievement Creativity Management/Leadership
Ability to inspire Innovation Business plans
Expectations of the high achiever Ability to take risks Financial skills
Obstacles or blocks Ability to identify opportunities Marketing skills
Help Ability to have a vision for growth Operational skills
Reactions to success or failure Interpret successful entrepreneurial Human Resources skills
role models
156 JOURNAL OF SMALL BUSINESS MANAGEMENT
provided. The public and private sector
should support and strengthen the initia-
tives of the present institutions. Training
alone may not be the magic for small busi-
nesses to flourish. Constraints such as the
lack of financial resources, lack of access to
markets, lack of support services, and low
literacy levels should also be addressed.
According to Hisrich and Peters (1995),
training plays a pivotal role in supporting
emerging small businesses. For example,
although a business may have the needed
finance, without financial controls, its fail-
ure is probable. In the same manner, a
business may have access to the markets,
but ignorance about how to market prod-
ucts and services poses a serious obstacle
to success.
An effort should be made to balance the
three constructs indicated in Van Vuuren
and Nieman’s (1999) model in the training
programs of the firms in the study. En-
trepreneurship training should be seen as
one of the basic requirements of starting
and running a business.
The region reviewed indicated a very
high potential for small business estab-
lishments. For this potential to be realized,
knowledgeable SME training providers
need to be in place. The SME service
providers in the Province should pool all
their resources to serve this emerging mar-
ket. Efforts should be made to train both
existing and new entrepreneurs.
The following actions are recom-
mended to reduce the failure rate of new
small businesses and to strengthen en-
trepreneurship training for successful
small business enterprises in the Northern
Province:
Table 2
Training Services Provided
Training Services Service Provider
COD NICPAC NTT
Business ✓✓✓
Entrepreneurial ✓✓✓
Technical ✓✓✓
Othera✓✓✓
aThis includes after-care services, tendering procedures and negotiation skills.
Table 3
Content and Extent of Entrepreneurship Training
Skills COD NICPAC NTT
Management skills 1 1 1
Opportunity identification 1 2 3
Business plan 1 2 3
Need for Achievement 1 2 1
SCORES: To a large extent = 1; to some extent = 2; to a lesser extent = 3; Not at all = 4
LADZANI AND VAN VUUREN 157
·Existing Training Firms Should
Revise their Training Materials.
It is good that business skills are
offered to entrepreneurs. It is even
better to introduce and strengthen
entrepreneurial skills, particularly to
emerging entrepreneurs, so that
they know how to generate ideas,
screen these ideas, identify opportu-
nities from the generated ideas, and
assess whether they have en-
trepreneurial characteristics that
would enable them to succeed in
business.
·SME Service Providers Should
Benchmark their Services with
Successful Similar Institutions.
SME service providers that are suc-
cessful should share the secret of
their success with those that are at-
tempting to succeed.
·Educational Institutions Should
Introduce and/or Strengthen En-
trepreneurship Education.
An entrepreneurial culture should
begin at home, and then proceed
to higher education and training
institutions. When pupils are ori-
ented into entrepreneurship from
an early age, it becomes easier
when they have their own en-
trepreneurial ventures.
·Emerging and Potential Entrepre-
neurs Should be Encouraged to
Take Courses in Entrepreneurship.
The government, labor, business,
Figure 1
Statistics of Business Enquiries and Entrepreneurship
Trainees per Annum
158 JOURNAL OF SMALL BUSINESS MANAGEMENT
community centers, and church or-
ganizations should join hands in
empowering existing and potential
SMEs with the necessary en-
trepreneurial skills. SME owners
should, for example, be encouraged
to be trained either through corre-
spondence courses, short courses,
diploma courses, or in-house train-
ing. In this context, entrepreneurs
should meet periodically, and cur-
rent successful entrepreneurs could
discuss keys to successful business
ventures.
Limitations of the Study
The study did not include interviews of
individual entrepreneurs and small busi-
ness owners. The assumption is that train-
ing institutions deal closely with these
people on a periodic basis and therefore
know their strengths and weaknesses.
Also, the interviewer could not attend
training sessions in order to observe the
effectiveness or otherwise of the training
techniques and reactions of trainers and
trainees.
Conclusion
Entrepreneurship in South Africa ap-
pears to be an uncultivated field waiting to
be cleared, cultivated, and planted. Re-
search on areas such as evaluating the
quality of training programs, comparing
outcomes of trained versus non-trained
entrepreneurs, and evaluating the contri-
bution of entrepreneurship toward curb-
ing unemployment still needs to be
conducted.
Watson M. Ladzani
Technikon Southern Africa
Business Management
Programme Group
South Africa
Jurie J. Van Vuuren
University of Pretoria
South Africa
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