Determinants of Growth for Small and Medium Enterprises in Namibia


Academic Paper, 2020

75 Pages


Excerpt

Table of contents:

Abstract

1 INTRODUCTION

2 LITERATURE REVIEW
Delineation of SMEs
Theories of Entrepreneurship
Determinants leading to Success or Failure of SMEs
Causes of the failure of SMEs
Growth strategy
Technology adoption
Entrepreneurship Development Programs
Extrinsic determinants
Challenges of SMEs
Entrepreneurial differentia
Marketing

3. METHODOLOGY
Research Design

4 Discussion of Findings
Demographic Variables for the Sample
The determinants that affect the growth development of SMEs
Access to finance
Bootstrapping
Angel Investors
Venture Capitalists
The determinants contributing to the growth of your tourism SMEs in Katima Mulilo?
Marketing the SMEs
Human Resource Management
Financial growth Determinants
ICT growth Determinants
Operations growth Determinants
Determinants which enhance business success
Strategies most important in enhancing performance in your SMEs
Policy Recommendations

Bibliography

Abstract

SMEs are still incertitude in their quest to run their business effectively. These compunctions are lack of access to finance, lack of access to market, lack of growth, poor education, lack of family support and poor business skills. All these determinants hamper the SMEs, which ultimately leads to their failure. Globally, SMEs are engines of expansion because they play a strategic role in poverty alleviation, job creation and wealth provision of regional equilibrium through industrial dispersal and reduction of rural-urban migration. We argue that if much had been done by State to promote SMEs, then the rate of unemployment would be one digit, not two digits in Namibia. The ease of making business in Namibia is appalling rated by WHO as an environment which does not promote and not easy to enhance SMEs growth. The regulatory environment for SMEs is very challenging. There are so many prohibiting procedures for starting a business as a local and foreigner. The overall research design of this rubric entailed a survey research method and drew from the procedures for researching small tourism businesses in Katima Mulilo We made cross-sectional study and involved a sample of 14 entrepreneurs that was got between March 2017 and August 2018. Status of growth for Katima Mulilo shows that 0-2% have 10% growth, while 20% had 3-4% growth, 60% of the SMEs had average growth 5-9%. The remaining 20% had high growth of 10-25% status of growth in the company. The component score coefficient matrix shows factor component loadings using the principal component analysis. The factor loadings for individual characteristics, social determinants, poor business location and poor financial management, are very low symbolising that they are poor while human capital and planning and ordaining are higher than 0.40. They are symbolising that they are moderately below par. The principal component analysis is a variable reduction analysis and vital for checking redundancy for the figures. The component analysis is different from factor analysis because it deals with the assumption of the underlying causal structure. Factor analysis in this study assumes that covariation among the observed variable is due to the presence of one or more latent variables which exert directional influenced observed variables. We recommend that the government should have a National Entrepreneurship Policy Framework and Implementation Guideline and put in place an Entrepreneurial Act to promote Entrepreneurs in the Country.

Key Words Determinants, Growth, Small Medium Enterprise

1 INTRODUCTION

SMEs are the engine for economic growth worldwide. In support of SMEs, efforts are to promote this sector to ensure that they succeed in their business endeavours. Despite the promotion strategies implemented by the government and its agencies, SMEs are still incertitude in their quest to run their business effectively. These compunctions are lack of access to finance, lack of access to market, lack of growth, poor education and poor business skills. All these determinants hamper the SMEs, which ultimately leads to their failure. Failure of business will affect economic growth, and this will affect society at large since people will be without employment.

Small Medium Enterprises (SMEs) in the Travel and Tourism industry is one of the most significant industries in the universe, with a commodious contribution to global economic development. It is 8.1% of the universe which is 235 million tasks. This was one in every 12.3 jobs in 2010. Travel and Tourism megacorp accounts for 9.2% of world GDP and 9.2% of the annual global portfolio (Davari, 2011). SMEs Tourism in Europe surged by 4.5% to 5.5 % in 2018, in a move that will add dynamism to European hotel markets, according to Matthias Hautli, the administrator at Engel & Völkers Hotel Consulting. ‘Growth is mainly based on the universal and European economic boom and robust outbound demand from main source markets,’ Hautli told REFIRE. Germany's Top 5 markets – in conjunction with Berlin, Munich and Hamburg- all merits from both SMEs business and leisure tourism and new captivations are proving to be a draw, Hautli said (Kilbinger, 2018). Tourism development needs an ambience favourable to entrepreneurship, specifically for SMEs, given the fact that in most nations with mature tourism industries most operators (up to 80 per cent) are SMEs. The erection blocks of an éclat tourism strategy entail integrating the private sector and fostering collaboration among SMEs (Cochrane, 2014).

SMEs have been receiving attention, particularly in developing countries such as South Africa, and Namibia is no exception. According to Ihua (2009:199), SMEs play a vital role in economic growth and the creation of employment. Despite efforts taken by entrepreneurs to pursue business endeavours, having poor performance and failure (Ihua, 2009:199). Therefore, thriving and growing SMEs, irrespective of the sector they operate in, is a crucial success factor in achieving national developmental goals. In recognising this critical role, the Namibian Government adopted a National SME Policy and Programme in 1997 as a frame of reference to mould a conducive regulatory milleu in which, SMEs can be crafted and promoted by the public and the private sectors (Jokorvic, 2014). This Policy aimed at addressing challenges facing SMEs in areas of finance, technology, infrastructure, skills development and institutional support. We intend to examine determinants affecting the growth of SMEs such as firm size, firm age, growth, lagged profitability, productivity, and industry affiliation of SMEs firm.

Conundrum

Windhoek has a high number of unemployed residents (Namibian Statistics, 2012). There are many unemployed residents, retrenched and lost their jobs mainly from factories in and around the city. Some people have been flocking into the city from rural areas in search of work. To survive, they have started their own business in the hope of earning some income. However, many of these SMEs are failing to make strides in their endeavours due to a lack of business skills and financial means for start-ups and even for growing their businesses to the required levels, despite all efforts taken by the government to develop and support SMEs. Since most of the businesses prove to be failing, this is because of the harmful effect they may have on the economy and the livelihood of the citizens if the SME businesses close (April 2005:4). Business closure will, for instance, lead to unemployment, which could result in poverty and crime in the country.

In most developing countries, Small and Medium Enterprises (SMEs) face incertitude both at startup phases and after their establishment. In Africa, for example, the failure rate of MSEs is 85 per cent of 100 enterprises due to lack of skills and access to capital (Fadahunsi, 1997 ). In Namibia, about 90 per cent of SMEs have malformed within the first five years of action due to numerous determinants Chisoro, Kambwale & Karodia (2015), found that about 75 per cent of SMEs experience multifarious vicissitudes during the first twenty-four months of their existence, and in most cases, before full establishment (Namibia Chamber of Commerce and Industry , 2010). It is typical of SMEs in Africa to be lacking in business skills and collateral to meet the existing lending criteria of financial institutions (World Bank, 2004). The collateral has created a finance gap in most markets. The SMEs can source and obtain finance mostly from informal sectors like friends and relatives while medium or large enterprises obtain funds from banks. This unequal access to finance by SMEs and medium and large enterprises have undermined the role of SMEs in the economic development in African countries (World Bank, 2004). Small and Micro Enterprises operating in Katima Mulilo in the Zambezi Region in Namibia, are no exception.

Tourism is a rapidly growing industry in Namibia at large and the Town of Katima Mulilo. The tourism sector’s direct contribution to Namibia’s Gross Domestic Product (GDP) was 3 per cent in 2014, while unswerving employment from tourism was 4 to 5 per cent of total employment. Even though SMEs play a progressively essential role in furnishing new products and employment opportunities, they have encountered many difficulties, especially financing (World Travel and Tourism Council., 2015). Small and Medium Enterprises frequently lack access to institutional credit, which causes them to encounter high financial costs and prospective failure (Chisoro, 2015). The commercial, pecuniary and social losses that result from these failures could be significant.

2 LITERATURE REVIEW

Delineation of SMEs

The lexis Small and Medium Enterprises (SMEs), which is more often than not used for small business enterprises, “Micro, Small and Medium Enterprises (MSMEs), or Medium and Small Enterprises (MSEs), continue to be used interchangeably. This may vary depending on the attributes that qualify a business as an MSME, SME or MSEs and depending on the country’s level of development. According to Kayanula and Quartey (2000), there is no single and universally accepted definition of a small enterprise. Even within the same nation, delineations also change over time due to changes in price levels, advances in technology or other considerations (Emma & Akamoibi, 2009). Corporates vary in their stratum of capitalisation, sales and employment. Hence, definitions that employ evaluation of quantum (number of workers, turnover, profitability, net worth, etc.) when correlated to one sector could lead to all corporates being taxonomised as small, while the same size designation, when applied to a different sector, could lead to a different result.

The United Nations Industrial Development Organizations (UNIDO), gives an alternative definition for developing countries. Accordingly, it defines micro-enterprises as business firms with less than five employees and small enterprises as business firms with 5-19 employees (UNIDO, 2002). The National Policy on MSMEs in Namibia defines MSMEs according to the following attributes, as indicated in table 1 below:

Table 2.1: Classification of SMEs

Abbildung in dieser Leseprobe nicht enthalten

Theories of Entrepreneurship

Transaction trust embraces the extent of certitude the parties to an enterprise transaction place in each other. Therefore, state matters because it ensconces and enforces rules, regulations, and property rights (Henrekson, 2012). Good governance raises transactional credence, and so promotes entrepreneurship. Culture also matters (Brinkerhoff, 2016). For instance, despotic and stratified communities fail to honour self-made victories, and social status forms part of the payoff to SMEs.

Cantillon and risk theory

The term ‘entrepreneur’ seems to have been presented with economic theory by Richard Cantillon (1759), an Irish economist of French ancestry. According to Cantillon, the entrepreneur is a professional in taking on risk, ‘ensuring’ workers by purchasing their output for resale before consumers have shown how much they are enthusiastic about paying for it. The workers obtain an assured income (in the short run, at least), while the entrepreneur bears the risk triggered by price fluctuations in consumer markets.

Schumpeter and the hero-entrepreneur theory

Popular notions of entrepreneurship are incumbent upon the heroic vision put forward by Joseph A. Schumpeter (1934). The entrepreneur is someone who creates new industries and thereby causes significant structural changes in the economy. Entrepreneurs innovate by executing new combinations; they are not pure inventors, because they adopt the inventions made by others, nor are financiers because they are incumbent upon bankers to finance their investments. Entrepreneurs take the fundamental decision to commit resources to the utilisation of new ideas. An element of computation is not pure computation because not all the relevant factors can be truthfully measured. Hero-entrepreneurs motivations are abnormal profit, but not purely by profit: the other motivators encapsulate the ‘dream and the will to found a private kingdom’; the ‘will to conquer: the impulse to fight, to prove oneself superior to others’; and the ‘joy of creating.'

Marshall and low-level entrepreneurship

Schumpeter was the heroic or ‘high-level’ kind of entrepreneurship that, historically, motivated the creation of railways, the development of the chemical industry and the growth of combined oil companies. Marshall (1919) stressed their importance and described the role of these corporations in some detail, but unsympathetically omitted them from his formal analysis of supply and demand. Given the skills that were available to him, Marshall could only model equilibrium circumstances and so could not fit entrepreneurship into his analysis. However, he unambiguously was the essence of low-level entrepreneurship.

Success versus Failure Prediction Model for Small Business in Singapore

Considerable research has been done internationally, including Singapore, to establish the critical success factors (CSFs) of companies. DeHayes and Haeberlie (1990) quoted by Teng, Bhatia and Anwar (2011:2) discovered that the most recurrent factor for success among businesses was their capability to recognise and focus on a few niches. They recognised the following CSFs: the capability to develop and sustain technological advantage, the capability to recognise and focus on one or several market niches, acquisition of strong top leadership, implementation of critical people-bonding mechanisms in the system, the accessibility of strong management teams, strategic alliances with customers and strategic use of information technology. Gosh, et al. (2010) quoted by Teng et al. (2011:25) studied the top 50 privately owned SMEs in Singapore and tried to establish their strategy dynamics and CSFs. Enterprises needed to pay attention to factors such as market orientation and pertinent capability, effective management, robust management commitment and support, strong organisational capability and management cohesiveness and access to broad-based support and resources.

Yeung and Chew et al. (2001) quoted by Teng et al. (2011:25) studied 41 local SMEs through a postage survey and interviewed 9 SMEs and considered the advantage that local Singaporean SMEs had over their overseas transnational corporations. They concluded that on a national scale, local knowledge and expertise in soft technology embedded in Singapore’s support activities were valuable.

Determinants leading to Success or Failure of SMEs

Globally, SMEs are engines of expansion because they play a strategic role in poverty alleviation, job creation and wealth provision of regional equilibrium through industrial dispersal and reduction of rural-urban migration. In developing countries, however, SMEs are underperforming, while they are flourishing and affluent in Japan, South Korea, China, the USA, Australia, Switzerland and India (Shafeek, 2013:15). SMEs in Nigeria are facing overwhelming challenges which include poor infrastructure, developmental instability and inadequate access to capital (Shafeek, 2013:10). As seen in Table 1.1 below, small businesses in Uganda are failing due to poor accounting standards employed by several firms (Shafeek, 2013:22). In Tanzania, empirical evidence reveals that SMEs fail because financial sectors do not give them money due to lack of collateral skills and managing bankable projects (Shafeek, 2013:22). Oscarson (2007:21) elucidates that the reasons for the success and failure of SMEs could range from lack of managerial experience, failure in record keeping and financial control, lack of education and industrial training. Businesses which start during a recession have a higher chance of failure than those which start during a boom period. The reasons for success versus failure variables of SMEs in Table 2.2

Table 2.2 The reasons for success versus failure of SMEs

Abbildung in dieser Leseprobe nicht enthalten

Adapted from: Lussier and Pheiffe (2001) quoted by Oscarrson (2007:21)

Causes of the failure of SMEs

We were asking respondents to rate the four possible causes of SMEs failure on a scale from one to five, with one being the most significant cause. The table below shows the results of respondents:

Table 2.3 Data on possible causes of SMEs failure

Abbildung in dieser Leseprobe nicht enthalten

According to results in the table above 30% of the respondents indicated, lack of management, 20% indicated lack of financial education and 20% indicated lack of proper training to be the possible significant causes of MSMEs failure, contributing, to business failure respectively.

The Kolb Learning theory on entrepreneurial Tourism Education

This thesis has visual links to Kolb’s Experiential Learning Cycle (ELC). Kolb delineates experiential learning as ‘the process whereby knowledge is created through the transformation of experience. Kolb experiential learning cycle has four variables, namely concrete experience, reflective observation, abstract conceptualisation and active experimentation (Bilyk, 2012). Knowledge results from the aggregation of captivating experience and transforming it (Kolb, 2014). The ELC is a four-stage theory that expounds a cycle of experiential learning. According to this model, practical experiences are the basis for pondering and observations. These ruminations are distilled into a set of abstract conceptualisations that are tested through active experimentation and serve as inputs to the creation of new experiences (Pont, 2014).

Figure 2.1 Kolb Learning theory

Abbildung in dieser Leseprobe nicht enthalten

Theoretical Framework

Institutional Entrepreneurial theory

We theories the research incumbent upon the academia Gutierrez (2019) who decode the institutional theory in figure 2.3 below with variables of technological resources, financial, networking which necessitates organic , acquisition , and hybrid growth. Other Enterprises are there for the sake of survival, profit and others to leverage competitive position. Other necessary institutions like universal primary education also matter in that it lets latent SMEs realise that opportunities exist. Transparency to the outside world lets in different ideas and opportunities along with foreign goods and capital. Diversity also matters because it opens minds to new theories. These determinants all impact entrepreneurship because they stimulate information exchange. New ideas are a necessary predicament for successful entrepreneurship (Henrekson, 2012).

Figure 2.2 Institutions as lending organisations

Abbildung in dieser Leseprobe nicht enthalten

Source World Bank (2014)

The different institutions recognised by this theory are fundamental for lending money to SMEs (Jarvis, 2018). Jarvis (2018) did the research SME lending entails having banks, development financial institutions, non-banking financial companies, banks, micro-finance institutions and Fin Techs these are essential in giving and lending money to SMEs for its funding. The researchers argue that think tanks are essential in recognising the level of Entrepreneurial theory. Rules, regulations, property rights, and their prescription matter because they impact transactional trust.

Figure 2.3 Institutional factors

Abbildung in dieser Leseprobe nicht enthalten

Source Gutierrez (2019)

Growth strategy

Hybrid Strategy

Gutierrez (2019) highlights that the hybrid strategy is a combination of organic and acquisition which goes between the nexus of networking capabilities and outsourcing. It is a contractual relationship that cements external actors to the firm at the same time as the firm attains ownership and control.

Organic Growth

Organic growth is also known as internal growth which refers to the strategic focus on internal research and development, applied to product development, enhancements and extensions. The organic growth is related to interior expansion and improvement. Companies pursuing organic growth are likely to emphasise technological resources. This is about growing internally through research and development (Gutierrez, 2019).

Acquisition

The acquisition is a growth strategy in which an enterprise buys another enterprise with the sole purpose of growing. The essence of merger and acquisition can be best appraised in the light of its impact and restrictions on internal growth. An ecosystem that has multiple sources of financing furnishes the corporate with more operation of reducing capital costs in acquisitions. Young Entrepreneurs may not have the cash to acquire other enterprises, while those who are older may have the resources to buy and acquire more resources.

The Blue Ocean Strategy for SMEs growth

In examining the growth strategies of three SMEs Chinese Domestic Hotel Companies, Qin, Adler Cai research furnished the essential components of their strategies which were innovative positioning, keeping cost low, fast expansion, continuous innovation, concentrating on quality consistency, profound training and a plethora indigenous Chinese cultural and operational custom (Siegmund, 2012). These characteristics are vital elements in the Blue Ocean Strategy. Siegmund (2012) recognised the physiognomies of Blue Ocean Strategies (BOS) in chosen hotels in Taiwan. Nevertheless, the findings cannot be generalised to all appropriate setting; the input somehow is a significant precedent in recognising the interior values to be cognizant when adapting BOS in a hotel setting. The attributes of BOS in SME hotel industry may change from one hotel to another due to variations in business scale, scope, spatial and value differences (Kim, 2017). As the hotel is a labour-intensive SME industry, other intrinsic and extrinsic determinants such as staff turnover rate can be reckoned. The essential thing is for SMEs to reckon the determinants that they have control over and those they could not or beyond control (Mauborgene, 2017). Vanhaverbeke (2017) articulate that these qualities, however, should dwell within the three main topographies of Blue Ocean Strategy, namely focus, divergence, and offering gripping tagline to create value innovation and facilitate enterprise to occupy a sharp branding image to the clients. As competition is rife for SMEs, there is need to find a way to reconstruct the market boundaries by concentrating on plethoric issues as the alternative industries, the business dyads, the network chain, complementary products and service offerings, functional or emotional appeal to buyers and time (Vanhaverbeke, 2017).

Resource-based Entrepreneurship Theories

According to Alvarez and Basenitz (2001:20), the resource-based theory of entrepreneurship contends that admission to resources by founders is a momentous forecaster of opportunity-based entrepreneurship and new venture growth. This theory stresses the core of financial, social and human resources. Thus, access to finance enhances the individual’s ability to detect and act upon discovered opportunities. The resource-based strategies can be technological, networking and capital.

Financial management

ACCA (2017) argues that Small corporates have insufficient resources and cannot afford to make aberration like their larger counterparts. The financial information accessible to the Small Medium Enterprises must be compendious and detached from their accounts, and it must be recognised whether their commercial information was derived from a cashbook, bank statement or double-entry booking and whether their commercial system was computerized (ACCA, 2017). A constant challenge facing many small businesses is the lack of funds to put them on a sound and stable pecuniary footing (Candice, 2010). Initially, business capital may be restricted to what the owners can raise from saving, mortgaging the family home or borrowing from family. Diverse rubrics observed the prominence of fiscal issues for new and prevailing entrepreneurs (Gale, 2015). Regarding pecuniary considerations, the entrepreneurs were found to be preposterous about cash flow challenges and guaranteed income during the first year of activity and did not have much information about tax (Information Resource Management , 2013).

Networking

Networking is a critical strategic dimension in an external milieu in SME performance. Prior researchers have identified the significance of networking to business performance (Woodside, 2011). SME networks in nations like Honduras, India, Nicaragua, Mexico and Jamaica have mooted cases in which small enterprises are not only suppliers to one large corporation but also supply to other enterprises, both prospering and challenging them (Bredel, 2014). According to Woodside (2011), networking is delineated as “Joiners” embracing multiparticipant across an extensive range of social and enterprise fields, placing a high value on learning via SMEs networks. Based on this delineation, researchers describe networking as the involvement of all external parties to the business, either directly or indirectly. This may include stakeholders such as customers, suppliers, peers, state, commercial aspects of banking, business associations, politicians and the local community. Bredell (2014) articulates that access to state tender and policies are also a contributing factor in micro-businesses’ performance to help them grow.

Technology adoption

Lee (2014) asserts that efforts of technology adopted are aimed at reinforcing the technology development of SMEs. One of the critical barriers to Technology development for SMEs takes place in the design and prototype progression stages. The Small and Medium Industries Promotion Corporation's (SMIPC) recently enhanced Automation Centre will play a fundamental role in assisting SMEs to resolve technological complexities in design, pilot product manufacturing, prototype development and engineering (Lee & Harvie, 2014). We argue that advancement of disruptive technology in Katima Mulilo tourism SMEs attracts introduction of new products, changes in techniques and organisation of production, changes in the quality of resources and products, and novel ways of distributing products and new ways of saving for the rainy day and broadcasting information. The critical evaluations in business practice physiognomies are business innovation, technology adoption of e-business and focusing on the local market; all were proving to have a significant motivation for the growth of enterprise

Improving the Performance of SMEs.

The first taxonomy is related to the performance attained from organic growth and correlated to young , recently crafted enterprise whose performance goal is survival. We discovered that certain firms that are traditionally and risk averse preferably to grow organically fostering a step by step and chasing long term survival and thus attain profit. On the contrary we found out that some other firms that are aggressive and voluntary to take risks decide to grow by buying corporates aiming to increase their fortune by improving profits.

Several states have instituted directed lending programmes or policy-based lending to help SMEs with capital. India, for instance, has a Priority Sector Lending curriculum that guides the community and commercial banks to earmark 40% of their net credit to divisions like the SMEs (Kohn, 2011). Kohn (2011) articulates that the Philippines have a legal requirement for banks to set aside 8% and at least 2% of their total portfolios for SME loans. We argue that in Namibia, banks do not want to assist intelligent citizens in starting businesses because most of them emanate from poor backgrounds and do not have collateral security.

Other countries like Pakistan and Thailand have mooted robust SME banks. The state can also work with commercial banks to correct capacity constraints to better service the SME market. This may somehow assist SMEs to avoid miscarriage. To improve demand-side constraints, nations like Thailand have established Capacity Building Funds to improve SMEs’ internal competitive structures (Muraleedharan, 2014). The Bank of Namibia has established forums to curb unemployment. However, it should be noted that fighting against unemployment can be done through the promotion of SMEs to grow. Educational incentives for SMEs should be a way of enhancing the performance of enterprises. The essence of the state is essential to make specific training interpositions. Subsidised mechanisms for banks to experiment with new approaches towards SME lending are a further solution presented (Asia Development Bank, 2012).

Determinants affecting the growth of Small and Medium Enterprises

Mehralizadeh and Sajady (2006:4) made a framework hypothesising that person pursue enterprise ordinarily and must go through various stages of entrepreneurship, i.e., recognising a business idea, start-up activities and inception of the enterprise. In this context, there are determinants which influence the business. The internal determinants comprise of personal characteristics of an entrepreneur, motivation and tolerance. The dynamic ensure success and avoid failure of the business (Mehralizadeh, 2013). The surface elements consist of economics, infrastructure conditions, market information, inflation, the supply of and demand for product offerings and trade regulations. The entrepreneur has no control at all over these determinants and should have a mechanism to adapt to these variables to make sure that they do not affect the business negatively.

Some discourse in this field is concentrated on demographics and disposition physiognomies of entrepreneurs. Regarding demographics, class and educational background, age and gender are reckoned and that there is not just one kind of individual who can be successful as an entrepreneur. Preferably, there are four types: the personal achiever, the emphatic salesperson, the expert idea generator and the real manager (Jonhson, 2015). As the name suggests, the main compelling force for the personal achiever is the need to attain, but they often have inadequate knowledge to run a SMEs well and are likely to enlarge their enterprises very fast in their pursuit of success. Human capital is a generic term which encapsulates the abilities of an individual. The age of a proprietor when they commenced the business is positively correlated to the probability of survival. The maximum age for sample American entrepreneurs was 45-55 years of age. The level of education and the attendance of administration training courses are also vital aspects regarding small firm survival. Associated with this is whether the proprietor had previous management experience regarding having owned a business (Gehr, 2014).

Entrepreneurship Development Programs

Kumar (2014) asserts that entrepreneurship education and training plays an essential role in this direction. The economic and industrial progression of developing nations like India is only due to fast entrepreneurship development (Kumar, 2014). In Singapore, the fast growth of the small-scale sector is mainly due to entrepreneurship development. Entrepreneurship Development Program (EDP) focuses on recognising entrepreneurship qualities of an individual, furnishing training required for entrepreneurship progression (Sharma, 2016). Several recent reviews, however, have demonstrated that the empirical evidence for training influence on corporate performance is inconsistent and inconclusive (Nirjar, 2012). Corporates with sophisticated training systems and robust management support for training have effective training programs and are more fruitful in delivering entrepreneurship. Organisational performance can be held back through neglect of training activity. Adequate training reporting to have positive effects on organisations (Viramgami, 2014).

Lack of Capital and Access to Finance

Research by OECD (2012) unravels that SMEs also miscarry due to a deficiency of capital. Deficiency of capital is often the most critical challenge that a thriving SME faces as its real triumph creates this, and it quickly becomes a nefarious circle (OECD, 2010). Without cash flow, management, and raising more capital, embracing debt, the enterprise is often constrained by capital as it grows. Often, the income in one operating cycle is meagre to fund the extra working capital needed for the next operating cycle (OECD , 2012). This is precisely the case where an SME is either inventory or receivables intensive, and the operating cycle is a long one (i.e., the operating cycle is the average time that it takes from the first receipt of inventory to when the client pays for the goods). The researcher concurs that this can be exasperating when capital goods are needed to process the goods, and the corporation cannot finance the acquisition of these capital assets. A plethora of SMEs cannot overcome the encumbrance in their business's cash flow cycle and cannot comprehend why bankers and other lenders often cannot furnish the financing, as SMEs often do not have the security to support the debt (Klyuev, 2012).

Poor Crime Management

Radzi et al. (2014) articulate that the American Management Association (AMA) estimates that up 20% of Small businesses meet with disaster each year because of cataclysmic crime losses. This peremptory challenge of pilferages can befall an enterprise from any source, be it from a professional criminal, a client, a supplier or worker. The pressure and susceptibilities to pilferage vary with the kind and quantum of the enterprise (Radzi, 2014). On the contrary, Kambwale (2015) concentration more on internal crime in small business. According to their rubric, internal crime is precipitated by determinants, such as hiring a workforce without a meticulous background check or employment references.

Ineptitude to Manage Growth

Another challenge that causes the non-performance of SMEs is their ineptitude at managing growth. SME owners find it multifarious to manage their enterprise as they grow due to the deficiency of pecuniary training and managerial experience or skills (Mark, 2014). Growth in any enterprise places inexorable pressure upon its resources and sometimes necessitates SMEs to acquire resources, which deep SMEs, in many instances, into inexorable cash flow challenges that finally lead them to failure. Evans (2015) contends that the latter precludes SMEs from growing to full potential, as they are incapable of attaining the necessary resources and leads to SME liquidation. Hull (2013) also articulates that a deficiency of focus (prioritising) by SME owners or administration can result in catastrophe. Deficiency of prioritising is often a real challenge for an entrepreneur in an SME, as there is a normal variation in priorities, issues that need attention and other issues that require rectification (Hull, 2013). Often, opportunities present themselves, and it is complicated to say “no” to a short-term opportunity that will confuse SMEs from their long-term goals. SMEs should be crystal clear on their long-term objectives and the opportunities that will enable them to attain these objectives. SMEs should assess other opportunities based on the degree to which they draw resources away from their aptitude to attain their long-term goals (Evans, 2015).

Poor Business Location

Location is an essential determinant of the triumph of any enterprise. In the developing states, due partly to the absence of infrastructure, small business owners are required to locate their enterprise in areas that are not only reachable to customers but disruptive to the general functioning of the community (Ogbar, 2010). It is not unusual for SMEs proprietor to choose a location-based primarily on convenience or cost (Stokes, 2010). A location may be selected because of the opportunity of a vacant building, proximity to the owner’s domicile or low rent (Barnes, 2015). One of the acumens why small businesses nose-dive is because they select a site for their enterprises without first making a thorough examination of the overall location’s potential for the enterprise’s survival and growth. We argue that the essence of location is recognised by the type of business and the proximity of the business to its clients. Other determinants to be considered are whether the enterprise offers an exceptional product or service with little direct competition and whether expediency is the key marketing point in what the business offers to clients. Poor location may be precipitated by a supermarket or any other competing SMEs that is located close to a new small business (Hall, 2012).

Planning and organising a business

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Title
Determinants of Growth for Small and Medium Enterprises in Namibia
Authors
Year
2020
Pages
75
Catalog Number
V535364
ISBN (eBook)
9783346139986
ISBN (Book)
9783346139993
Language
English
Notes
Professor David Mpunwa has published plethoric books such as Corporate Managers for Today, Nuggets of Management , Enterprise Management, Integrated Management Transforming Organisations through Cambietics; the academic paper is essential for students studying at the Universities and Colleges it will develop your human capital.
Tags
Entrepreneurship, Management, Small Medium Enterprise, Determinants
Quote paper
Prof. David Mpunwa (Author)Clive Chikusi (Author)B. Mvula (Author), 2020, Determinants of Growth for Small and Medium Enterprises in Namibia, Munich, GRIN Verlag, https://www.grin.com/document/535364

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