Internal and external factors affecting the growth of SMMEs: A qualitative study

Abstract

Background: Small, medium and micro-enterprises (SMMEs) are vital to South Africa’s economy, creating jobs and providing livelihoods. However, South Africa has the world’s highest SMME failure rate, with 70% – 80% failing within 5 years. Addressing growth barriers is crucial.

Aim: This study explored the internal and external factors affecting SMME growth in Overstrand.

Setting: The study setting involves Overstrand Local Municipality, Western Cape, South Africa.

Methods: To capture the experiences of 12 owners, an interpretivist, qualitative approach using semi-structured interviews was employed. Purposive sampling ensured participants met the National Small Business Act criteria for SMME classification. The thematic analysis examined perspectives on motivation, skills, infrastructure, finance access and government backing.

Results: Growth was limited by business expertise gaps, poor infrastructure and lack of external funding. Despite national promotion efforts, SMME support was seen as inadequate and misaligned with entrepreneurs’ needs. Key internal barriers were financial illiteracy and human capital shortages, partly addressed through training. Externally, poor utilities, premises and transport severely hindered development. The location also limited market access.

Conclusion: Targeted skills programmes and infrastructure improvements can boost small businesses. However, better access to finance and coordinated policies is needed to support SMME growth fully.

Contribution: Understanding growth obstacles can inform policies to assist South African SMME advancement, economic participation and unemployment reduction.