Public sector demand-led growth strategy for small and medium enterprises-validation from selected South African Townships

Abstract

This study focused on factors that affect the growth of township SMEs in selected townships in South Africa. The intention was to identify approaches to sustainable business growth that can be reinforced by a carefully crafted public sector strategy that is based on government demand. The strategy aims to support job creation and economic growth. Three theoretical underpinnings were discussed to show their natural linkage to township SMEs, namely, behavioural economics, business management principles and public demand. A comparison of BRICS and SADC SMEs to SMEs in South Africa found that SMEs face more or less the same challenges across these regions. The overall research paradigm adopted for this study was epistemology in pursuit of gaining new knowledge. A mixed research method was used for the study. An interview and a questionnaire were used as the main data collection instruments. Descriptive and inferential analyses were done on the data collected. The study assessed the evolution of the relevant factors that drive SMEs growth in townships. It concluded that factors that hindered SMEs growth a decade ago are still prevalent. The findings also revealed that there are new additional factors that have worsened the situation, i.e., the COVID-19 lockdown and loadshedding. It is recommended that the factors hindering SMEs growth should be the foundation for developing a public sector demand-led growth strategy for SMEs, while following sound strategy formulation and implementation principles. The proposed public sector demand-led SMEs growth strategy is adaptable and considers the development of local value chains. The strategy can be implemented in any region, and it takes into account the core pillars of: undertaking the process of designating priority regions; coordinating human resource drivers; clarifying purpose, targets, products and value chains; harnessing government buying power; developing business sustainability approaches; pursuing cooperation and collaboration; instilling community involvement; maintaining databases; and conducting performance monitoring of the strategy.