Small, medium and micro-sized companies play a significant role in net exports, employment creation, poverty eradication and the decrease of income inequality in many nations throughout the world. They also contribute to economic growth (Zulu 2021). The importance of SMMEs in the South African setting is still at the forefront of policy deliberations, according to Mohamed, Yasseen and Nkhi (2020), particularly given that SMMEs help to expedite socio-economic growth. In continued attempts to enhance SMME growth, the South African government has produced a number of relevant policy interventions outlined in the National Development Plan. For instance, in 2014, the Department of Small Business Development (DSBD) played a vital role in the government’s initiatives to accelerate economic change by fostering the creation of competitive, sustainable entrepreneurs, small enterprises and cooperatives (Mnguni 2018). The DSBD promotes small businesses in navigating the legal and administrative system and enhances efficient access to financial markets. Before establishing the DSBD, the government previously offered the necessary support to SMMEs through capital funding and business incubations. Equally, the Department of Trade and Industry (DTI) formulated a series of steps to encourage SMMEs’ growth by providing several organisational support and development processes or services.

The National Development Plan (NDP) highlights the role SMMEs play in economic growth, removal of inequalities and poverty reduction. In continued attempts to enhance SMME growth, the NDP committed to create approximately 11 million job opportunities required in South Africa by 2030 to the SMME sector and equally decrease the unemployment rate by approximately 6% (Mnguni 2018). Of concern is that SMMEs in the country continue to face an inimical business environment (Bowmaker-Falconer & Herrington 2020). With the increase in unemployment rates in South Africa, it is imperative to offer the necessary support to SMMEs to reduce unemployment (Bhorat et al. 2018; Bushe 2019; Herrington, Kew & Kew 2015; Herbst & Gills 2015).

Studies reveal that when compared with other developing nations, South Africa has one of the highest failure rates for SMMEs, with a failure rate of between 60% and 80% during the first and second years of business (Leboea 2017; Mthabela 2015). The high failure rate can be linked to the entrepreneurial climate, which is not beneficial to the expansion and growth of businesses (Matekenya & Moyo 2022). The 2015 SMME Growth Index headline results indicate that external factors and challenges impeding small business growth include arduous regulation high labour expenses, a lack of funding, challenging local economic circumstances, high municipal costs, poor service delivery and increased competition.

Mazzarol (2015) and Koryak (2015) have shown that the lack of managerial experience and skills, low entrepreneurial culture and obstacles to market access are some notable reasons responsible for the failure of SMMEs. According to Kongolo (2010), insufficient institutional support and financial resources have an impact on the sustainability and effectiveness of South African SMMEs. This is supported by Van de Vrande et al. (2009), who explain that in comparison with larger enterprises, SMMEs have weaker connections with other organisations, making it harder for them to get the information required to sustain their objectives (Dodourova & Bevis 2014). The challenges to the sustainability of SMMEs can be linked to poor management and leadership skills attributed to a lack of leadership experience and inadequate training and education, which affects technical and management competence (Chimucheka 2013; Hossain 2015).

The actual world is unclear and complicated, which presents a variety of difficulties for business people (Gregory & Miller 2011). Managers are challenged by the interconnection of people, ideas and beliefs as they attempt to ‘make sense’ of the world around them. Entrepreneurs must recognise the complexity of the environment they operate in today and recognise that there is no ‘easy’ way to overcome the difficulties they confront (Caldwell, Harris & Renko 2012). The strategic models on which management choices are based, according to Rajagopal (2012:209), ‘need to be more comprehensive than ever, owing to a closer coupling among diverse components of the environment’. To reach this outcome, the ability of business people to think holistically and address systemic issues is to be improved. This can be performed by broadening the understanding of systems thinking and of systems in entrepreneurial contexts.

Leadership is an important entrepreneurial skill because it ensures that action is strategically directed to enabling the required outcomes. Good leadership has been identified as one of the essential factors contributing to SMEs’ success (Madanchia et al. 2016b). According to Abdelkafi and Täuscher (2015), leadership is a component or method that motivates groups of people to achieve a common objective. However, SMME failure is primarily because of inadequate and subpar leadership abilities (Razak 2011).

One of the most significant issues confronting SMMEs in terms of management and technical knowledge was attributed to the lack of leadership abilities (Mhlongo 2021). Poor management abilities caused by insufficient training and education and a lack of business sustainability skills might be connected to the absence of a long-term business success vision (sustainable initiatives) in SMMEs (Adendorff, Emuze & Vilakazi 2013; Hogeforster 2014; Kalane 2015; Leboea 2017; Ngibe & Lekhanya 2019). It is also said that SMMEs lack the knowledge and resources to implement the necessary organisational reforms (Singh & Wasdani 2016).

According to Hashim, Ahmad and Zakaria (2012), it is becoming harder for executives to manage their firms in the 21st century successfully. As a result of its potential to help one recognise their value in the entrepreneurial process, leadership is significant as an entrepreneurial behaviour. As such, fostering innovation and adapting to shifting environments is essential (Mamun, Fazal & Muniady 2019; Renko et al. 2015). As a result of the complicated and non-linear nature of organisations, it is not possible to establish a single, practical theory of leadership or leadership effectiveness (Osborn & Marion 2009). Leadership in entrepreneurship (use of leadership to provide successful entrepreneurship in driving a business to success) has been identified as an important skill that company owners might use to create sustainable and competitive growth for their companies (Lubis 2017). Leitch and Volery (2017) emphasise the need to consider the cognitive, interpersonal and social complexity of leadership in SMMEs and the necessity to grasp the mechanisms that would explain results. According to Leitch and Volery (2017), studying and comprehending entrepreneurial leadership is necessary to further the field’s knowledge of small enterprises.

The autonomous areas of entrepreneurship and leadership are seen to be converging and the blending of ideas from the two professions has resulted in the creation of a new, all-encompassing construct known as ‘entrepreneurial leadership’ (Cogliser & Brigham 2004; Fernald, Solomon & Tarabishy 2005). Balogun, Bartunek and Do (2015) define leadership in entrepreneurship as a distinct type of leadership that predominantly concentrates on dealing with challenges and complex matters and crises in organisational settings. For the authors, the notion of entrepreneurship leadership thus stems from a process whereby people who pursue entrepreneurial intentions and opportunities work collaboratively with others, using different cognitive methods to understand and respond to systems.

Davids (2012) states that the four key entrepreneurial leadership strategies include attention by vision, importance via communication, trust via placement and confidence via respect as the cornerstone of entrepreneurial leadership success. These models are essentially connected to leadership behaviour, which seeks to integrate appropriate leadership philosophies with appropriate degrees of development for each person to achieve specific goals (Ebere & Fragouli 2015).

Leitch and Volery (2017) and Renko et al. (2015) identify three approaches to the entrepreneurial leadership theory. According to the first theory, entrepreneurial leadership is a procedure that an entrepreneur participates in because it is a development of the area of entrepreneurship (Leitch & Volery 2017). This theory states that an entrepreneurial leader is an entrepreneur who can seize opportunities, take calculated risks and inspire a group of followers (Leitch & Volery 2017). The second perspective views an entrepreneurial leader as a typical leader with an entrepreneurial spirit and attitude, regardless of the organisation he works for, even if that organisation is enormous. This view relates entrepreneurial leadership to the area of leadership (Leitch & Volery 2017; Renko et al. 2015). The final strategy places entrepreneurial leadership at the intersection of business and leadership. Entrepreneurs are leaders by definition, and their leadership style is authentic leadership (Leitch & Volery 2017). Harrison, Agnew and Serido (2015) recognise that context is essential when studying entrepreneurial leadership because models, ideas and analytical frameworks that work well in one field could not work in another.

Even though entrepreneurial leadership is a relatively new concept, Simba and Thai (2018) claim that it has been used to identify management development and growth-related problems in small enterprises. It is recognised as a leadership style developed to create strategic wealth (Gupta, MacMillan & Surie 2004). This perspective has been expanded and emphasises the significance of identifying and seizing business opportunities (Hejazi, Maleki & Naeiji 2012; Renko et al. 2015). For the entrepreneurial activities to assist the development of more vital skills, resulting in organisational performance, entrepreneurial leadership strongly focuses on adopting a strategic approach to entrepreneurship. Management is practical and geared at resolving issues and adding value to the marketplace (Surie & Ashley 2008). Therefore, entrepreneurial leadership may be defined as a style of leadership that an entrepreneurial leader employs while taking business risks, being proactive and coming up with new ideas. Entrepreneurial leaders tend to be creative, driven by success, enthusiastic, quick to seize opportunities and imaginative and the main objective (Davids 2012).

The entrepreneurial leadership skills provide entrepreneurs with personal competencies and skills to be cognisant of the changes in the global and local business environment, together with the effective inception and/or transferal of the individual SMME values and strategies among the company’s team members, at all levels. To do this, entrepreneurs must know their strengths, weaknesses and leadership styles, as well as know what they eventually want to accomplish. Entrepreneurs should make the most of their strengths to expand and develop their companies while gaining a competitive edge and long-lasting building enterprises (Palalic et al. 2017). Entrepreneurial leadership helps company owners to build new ideas and spot possibilities to see a prosperous future for their companies.

The very complicated and dynamic business environment continues to be a problem for SMMEs, as seen by their comparatively high failure rates and subpar performance levels (Maani & Cavana 2007). The problems brought on by the rapid advancement of economic, technical, social and environmental development also contribute to the complexity of the corporate environment (Maani & Cavana 2007). The dynamic complexity of the business environment must be appropriately recognised and dealt with if SMMEs are to achieve their targeted goals and remain sustainable over the long run. To successfully handle these dynamic complexities and comprehend how the framework of complex systems, such as an entrepreneurial system causes system complexities, entrepreneurs must be skilled in systems thinking.

According to Balogun, Agumba and Ansary (2018), for SMMEs to generally improve their contribution to the economy of the nation and job creation, South Africa must create an enabling environment and entrepreneurial system that enables entrepreneurs to grow. For the sector to reach its claimed potential, studies that aim to strengthen SMMEs’ resilience and their entrepreneurial leadership competencies (such as systems thinking skills) are important.

Through systems thinking intervention by business owners, the growing failure rates of SMMEs observed in the research may be significantly reduced. However, one of the biggest challenges that policymakers face is how to devise appropriate strategies and policies for SMMEs that could attain business sustainability in highly complex and dynamic entrepreneurial contexts. With the help of systems thinking, entrepreneurs may have the solution to the existing business challenges through engagement in holistic and non-reductionist thought processes. To ensure the survival and sustainable growth of small businesses in dynamic environments, understanding the system dynamics and system thinking approach that should be applied in dealing with distinct factors attributed to entrepreneurs’ leadership skills remains central.

Following Rashed, Deluyi and Daud (2015), Tofighi, Teymourzadeh and Ghanizadeh (2017) and Afzal, Siddiqui and Dutta (2018), entrepreneurial complexities are best viewed and analysed using dynamic systems approaches.

Abdelkefi and Täuscher (2016) consider system dynamics a strategic approach or technique for re-organising complex systems and examining their behaviours. Rengkung (2018) describes system dynamics as a modelling mechanism that examines necessary resources and abilities in a particular system for assessing and understanding the complex systems in which changes happen within the business environment over time. The most commonly employed model in system dynamics includes causal loop diagrams (CLDs) and stock-and-flow diagrams (SFDs). Causal loop diagram indicates a causal loop among the distinct groups of components and/or variables, whereas SFD is designed from the CLD to focus on the physical structures (Rengkung 2018).

In system dynamics, the focus is always on understanding how system variables and components produce behaviours in interactive patterns within a system. System dynamics have formulated specific patterns and symbols to represent them; the variables and feedback loops take centre stage. Naidoo (2015) argues that system dynamics offers an approach for mapping and modelling scenarios that happen in the real world in distinct and described settings. Monat and Gannon (2015) argue that the behaviour of components in the height of systems thinking offers counterintuitive; therefore, system dynamics and modelling are incorporated to improve the general understanding of the system’s behaviours over time. Abdelkefi and Täuscher (2016) believe that the system dynamics process enables modelling and simulating through integrating feedback loops of those same systems. Including the real-scenario feedback loops allows entrepreneurs to alter the system to attain a competitive advantage compared with their competitors and improve overall business performance.

Business organisations are often established to solve one or more socio-economic issues, making the system dynamics approach critical. This can be accomplished through understanding the system’s dynamic structure that captures detailed facts, human response, sources of information and other direct and indirect factors, thus giving entrepreneurs an in-depth understanding of the status of the business and its complexities (Tang & Vijay 2011). The simulations established from the system dynamics models assist in coming up with suitable organisational policies and processes, enabling the business leaders to decompose a complex characteristic or social system into distinct elements, then coalescing them again to be envisioned and analysed to distinguish the eventual effects.

In this qualitative study, the approach was deemed suitable to investigate phenomena in a particular context. In this case, it was used to investigate leadership challenges within the entrepreneurial context to understand the existing problem better. Inductive methodology and interpretivism philosophy are often linked to qualitative research (Saunders et al. 2016). According to interpretivist epistemology, social interaction produces all knowledge and reality. They are produced because of interactions between people and their surroundings, and reality is connected to the social context (Green 2017). An inductive approach in a research study concerns the context in which a phenomenon occurs. The study began with semi-structured qualitative interviews and created CLDs. We used CLDs to show we empirical findings from SMME entrepreneur interviews and workshop discussions. The CLD approach is frequently used to demonstrate the causal links between various interacting variables, time delays, non-linear effects and feedback loops. It is an appropriate investigative approach for such scenarios (Sterman 2000). To use this method, the entrepreneurs’ stories or narratives were reviewed from interviews and workshop discussions to identify the primary variables that emerge from the data and construct causal relationships between variables.

The study’s population consisted of SMMEs from the cities of Johannesburg, Ekurhuleni and Tshwane in the Gauteng province. These SMMEs belonged to different sectors, including agriculture, mining and quarrying, manufacturing, electricity, gas and water construction, retail and motor trade, repair services, wholesale trade, catering, accommodation and other trade, transport, storage and communications, finance and business services, community and social and personal services.

Newman, Newman and Newman (2011) define the study’s sample as ‘a small set of cases a researcher selects from a large pool and generalises to the population’. The purposive sampling technique was used to select 46 entrepreneurs who were in business over 1 year. The inclusion criteria were that the entrepreneurs needed to reside in the Gauteng province and operate a business from either the cities of Johannesburg, Ekurhuleni or Tshwane. Purposive sampling, one of the most common sampling techniques for qualitative designs, was used in the study and is very popular among researchers in the social sciences (Mack et al. 2005). The sample size of this study was large enough to provide a deep understanding of challenges within the entrepreneurial system and the creation of CLDs and modelling phases of the research process.

To collect rich data, semi-structured interviews were performed with 46 entrepreneurs. A semi-structured interview is a popular qualitative data-collecting approach. According to Bryman (2008), semi-structured interviews are best suited to studies in which certain lines of inquiry must be examined while allowing the interviewee to provide subtlety, commentary and new themes for consideration. The purpose of the interview was to elicit respondents’ perspectives on the leadership problems that entrepreneurs encounter in their entrepreneurial environments.

To convert the interview data to CLD, the researcher followed the processes outlined by Sterman (2000). During the first step of data collection, participants were asked to evaluate the entrepreneurial system’s leadership problems and complexity. Basic CLDs were created based on the critical factors during the coding process. The second phase involved further analysis of the interview data and workshop discussions to determine the causal relationships between topics. The CLDs were then refined by specifying specific correlations between variables to explain variations in performance over time. These were then combined into unified diagrams with a single set of feedback mechanisms capable of describing the many behavioural patterns observed in this research. As the model evolved, we examined each connection in the CLD to see whether the apparent relationship was validated by field data or previous research. This stage assisted us in ensuring that the model was founded on the acquired data and adhered to the main principles of decision-making and strategic management literature.

Ethical clearance to conduct this study was obtained from the Durban University of Technology Faculty of Management Sciences Research Ethics Committee (No. 3/18FREC). The key ethical issues for this study were maintaining participants’ anonymity by securely, discreetly keeping data and writing up the findings in a way that did not reveal identifying characteristics. Participants received comprehensive information about the research and were told they may leave at any moment without being penalised. Before data collection, the researcher’s university’s research ethics committee authorised the project.