ALI MPHAKI
MOST small informal businesses in Gauteng townships are bullish about their future.
About 68 percent of these businesses surveyed in Soweto, Alexandra, Tembisa and Sebokeng from 1994 to 2011 believe that their income will increase and that they will still be in business in the next 12 months.
On how profitable township businesses are, 62 percent indicated growth in revenue and 18 percent reported that they were very profitable.
These findings come from a research study that was conducted by the Centre for Small Business Development (CSBD) at the University of Johannesburg (UJ) and Business Leadership SA.
The overall objective of the study was to explore and investigate factors that caused success and failure of small businesses. About 50 small and medium-sized enterprises took part in the survey.
The study found that only 4 percent of businesses indicated a cash-flow problem and that 10 percent thought their income would decline. A total of 12 percent stated that they might not be successful because of the competitive nature of the market.
While the results may be encouraging, the study indicated that successful businesses appeared to be older and were established because of a lucrative opportunity rather than instigated by unemployment.
Successful businesses are characterised by the full-time involvement of the owner; they are more likely to be incorporated; and they are a franchise or a multi-owned institution.
The survey further found that only half of the small and medium businesses were registered for VAT, as 66 percent of businesses were operating from their homes, and the municipalities had not provided for the development of business parks or infrastructure such as manufacturing hubs or centres for small businesses.
Factors preventing small and medium businesses from achieving higher levels of success are competition, offering the same type of service or product in the same area, financial constraints, expensive input material, crime, the shrinkage of staff, and bad weather.
Esther Njiro, a researcher at UJ’s CSBD, said that until recently, township areas were dominated mainly by small, mostly informal, businesses offering basic products and services.
“These businesses were located mainly in small business centres and on residential sites, or operated as street vendors at major transport intersections,” said Njiro.
“The rapid increase in consumer expenditure by residents in township areas during the past decade, together with the fact that the majority of township dwellers expressed no intention of moving out of their townships, creates substantial market potential in these areas.
“This has resulted in a drastic change in township retail structures,” she said.
Njiro said the overwhelming factor that determined whether small businesses survived and prospered was the level of entrepreneurial skills.
“Entrepreneurial initiatives such as updating business and operation plans, budgeting, formulating marketing policies and regularly analysing the competitive environment can result in the adjustment of strategies, thus ensuring business sustainability.
“Food and beverages (26 percent) and hair salons (12 percent) show the highest level of mortality and remain the most important among the survivalists businesses,” Njiro noted.