Development of a business framework to integrate informal SMMEs and entrepreneurs with the formal South African economy
Date
2006-12
Authors
Brand, Riaan
Journal Title
Journal ISSN
Volume Title
Publisher
Stellenbosch : University of Stellenbosch
Abstract
South Africa has an uneven distribution of economic wealth. The political history of recent
decades is the main reason for this phenomenon and has led to a situation where vast
numbers of citizens did not receive the necessary training and development to embark on
self-employment or to be employed at existing companies. These circumstances place a
burden on the present government to fight poverty and crime, and in return establish national
well being and economic stability. It requires them to find innovative ways by which they
can promote business development and create sustainable jobs for unemployed people.
Various programmes to improve the delivery of essential social services to the majority of
the population are under way. However, the vast numbers of people in desperate need for
employment or other income generating activities outstrip the support programmes already
implemented by the government.
Actions from the government are aimed at supporting and training previously disadvantaged
entrepreneurs to become active contributors to the economy. One method of generating
employment opportunities is through the deployment of SMMEs (Small Medium and Micro
Enterprises) that can operate as part of the formal economy. “South Africa's 2-million small
businesses represent 98% of the country's total number of firms, employ 55% of the labour
force and contribute 42% of the country's wage bill. Yet 87% of these enterprises are
survivalist and operate outside the formal economy” (Le Roux, 2006).1 Ideally, one would
like to see previously disadvantaged entrepreneurs as owners of these SMMEs. However,
these entrepreneurs do not necessarily have the capacity to take up business responsibilities
and management.
This research project focuses mainly on situations in the South African economic
environment with specific attention given to SMMEs. The primary objective is to find a
sustainable solution that ensures effective and successful deployment of SMMEs. A solution
is proposed in the form of a Business Framework where similar informal SMMEs are
grouped together to operate under a governing body. This governing body (Business
Framework) provides the necessary infrastructure to support the development of products
and services within these SMMEs. Entrepreneurs and SMMEs affiliated to this Business
Framework are nurtured till they are mature enough to partake in the formal economy. The
Business Framework therefore focuses on the possibilities of incorporating survivalist
1 Source: Business Day, June 27, 2006.(informal) SMMEs with formal economic activities and by doing so, tries to improve their
sustainability and create long-term income generating enterprises.
Development of such a Business Framework requires investigations of the economic
circumstances in which these SMMEs operate. This includes a study of current government
support programmes and the influences of the formal and informal economies on each other.
Various engineering tools and methodologies are applied to evaluate and characterise these
SMMEs. Through the use of Enterprise Life Cycle and Value Chain analyses, internal
business processes of informal SMMEs are studied and shortcomings in terms of business
processes are identified. A GAP-Analysis is performed and from this a list of requirements is
drawn up that the Business Framework should fulfil.
A generic Business Framework is developed using the Zachman Enterprise Reference
Architecture. This concept of a Business Framework is tested by means of a case study and
documented at the end of the report.
This document serves not only to describe project related issues from an academic
perspective, but shares a concept that can be used by governments and private organisations
to deploy business development more dynamically and effectively.
Description
Thesis (MScEng (Industrial Engineering))--University of Stellenbosch, 2006.
Keywords
Dissertations -- Industrial engineering, Theses -- Industrial engineering, Small business -- Management, Business enterprises