A targeted approach to informal business development: The entrepreneurial route

Abstract

The present paper maintains that initiatives to promote and support small businesses need to focus on those with growth potential rather than on the small business sector as a whole, and that the human factor, especially entrepreneurial intentions and behaviour, is the overwhelming force in small business success. Empirical evidence shows that many entrepreneurs setting up businesses in the informal economy of South Africa have little business acumen. The majority of informal businesses operate as survivalist entities with limited development and growth potential. The paper suggests that only between 10 and 15 per cent of informal entrepreneurs have sufficient business skills to expand and develop their businesses. These should be the focus of policy initiatives. Separate collective support measures should be designed to make the business environment more hospitable to low-potential informal businesses.