Perceptions of small business executives on determinants of performance in the construction industry in Gauteng, South Africa

Abstract

Small businesses growth and profitability is a national problem in South Africa (SA) and the Emerging Contractors (ECs) in the construction industry in Gauteng Province are no exception. The SA government expect ECs to become the main players in economic transformation and growth, job creation and income generation. However, ECs fail to live up to the expectations as some are characterised by low performance levels and are at risk of business closure. The purpose of this research is to examine the perceptions of Small Business Executives (SBEs) on determinants of business performance so that a performance model that could guide ECs within the construction business is developed. The researcher used a mixed approach to examine the perceptions of SBEs on determinants of ECs’ performance by applying both qualitative and quantitative research approaches. The population from which the sample was drawn comprised of 1890 urban based ECs registered with CIDB in the construction industry in Gauteng. Systematic random sampling was utilized and a sample size of 501 ECs was used. A structured questionnaire and interview guide were administered as the data collection instruments. A pilot survey was conducted where 2 key informants (SBEs) and 15 respondents (SBEs) were interviewed as representatives of ECs. A survey was used to assess the four hypotheses in the study. Content analysis was used to identify themes that emerged from qualitative data. The analysis of qualitative data demonstrated the perceptions of SBEs that financial factors, manpower, materials, machinery and equipment, project implementation, quality of work, legal and environmental and strategic planning were the main determinants that should be addressed when setting up and running construction businesses to reduce the negative impact on business performance. Based on the perceptions of SBEs, in quantitative, the univariate and multivariate statistical methods were performed to measure the level of significance between and among the performance determinants were tested at 5% confidence interval. Multiple linear regressions carried out based on the perceptions of SBEs identified strategic planning, project implementation and project performance as the most statistically significant factors in predicting the performance of ECs in Gauteng Province. The results from both qualitative and quantitative methods were synthesised and analysed through data transformation, typological development and case study analysis and the perceptions of respondents indicated a strong agreement between the qualitative and quantitative results. Based on multivariate results which were a result of the perceptions of SBEs, a performance prediction model was developed which is the core contribution of the study. The structure of the model, how it is used, its advantages and disadvantages were presented. The model provides a platform upon which ECs could predict performance and this would benefit ECs, clients, community and policymakers. In conclusion, the study established three significant determinants that include strategic planning, project implementation and project performance as highly relevant variables to improve construction business performance. Based on the perceptions of the respondents, the study recommends ECs to acquire and develop financial management skills that would enable them to understand and manage financial requirements that stakeholders such as financial institutions need in the areas of budgeting and cash flow management, bookkeeping knowledge, financial policies and controls and project pricing strategy. On the shortage of skills, the study recommends SBEs to take an initiative role in training employees, motivating and retaining competent workforce. The government need to establish technical colleges for training workers (apprenticeship) in order to equip them with appropriate industry knowledge, skills and experience. Lack of collateral security was widely reported by most SBEs and the study recommends the formation of a sector bank that would support emerging contractor businesses.