Entrepreneurship & SMME's in Emerging Economies

• The text provides an overview of emerging economies, focusing on their characteristics, challenges, and the role of entrepreneurship and small businesses, particularly in South Africa.
• It also touches on South Africa’s involvement in BRICS and SADC, and the concept of Ubuntu in business.

Contributors

• Collins C. Ngwakwe is a professor at the Turfloop Graduate School of Leadership, University of Limpopo, specializing in integrated accounting, corporate governance, and financial management. His research focuses on sustainability accounting and management.
• The late Simon Radipere was an associate professor at Unisa, contributing to entrepreneurship qualifications and serving as chair of the Department for Applied Management. He had a special interest in business plans.
• Mamoloko F. Rangongo is a senior lecturer at the Turfloop Graduate School of Leadership, University of Limpopo, focusing on management, human resource management, organizational behavior, and research methodology.
• Wise Sambo is a senior lecturer at Unisa, a consultant with SEDA and UNDP, and an accredited specialist by the UN. He is involved in SMME development and has published extensively in the field.

Key points covered

• The concept of emerging economies
• Characteristics of emerging economies
• Challenges facing small and medium enterprises in South Africa
• The role of entrepreneurship education and small business in South Africa
• The state of the informal sector and local economic development
• Ubuntu as a value for entrepreneurs
• South Africa’s role in BRICS
• Opportunities and weaknesses of BRICS
• Unemployment in BRICS
• Benefits and barriers to regional cooperation in SADC
• Differences between developed and emerging economies
• Policy implications for South African policymakers

Key Terms

• Emerging economies
• BRICS (Brazil, Russia, India, China, and South Africa)
• Sub-Saharan
• SADC
• Small business and entrepreneurship
• Africanisation and Ubuntu
• WTO (World Trade Organization)
• Developed and developing economies

Introduction to Emerging Economies

• Entrepreneurship and small business development are critical for economic growth, especially in emerging economies.
• The 21st century is marked by the rise of emerging economies in market growth and business strategy changes.
• BRIC countries (Brazil, Russia, India, and China) are now among the largest economies globally.
• South Africa is among the top 30 economies and a member of BRICS.
• By 2050, BRICS economies will likely outpace the G6 (US, Japan, UK, Germany, France, and Italy).
• BRICS countries are important drivers of economic growth.

Definition of Emerging Economies

• Emerging economies are complex environments blending traditional and modern institutions.
• They are seen as searching for growth opportunities and experimenting with new business models.
• Most emerging economies are in the “Global South” (Asia, the Pacific, and Africa) and were once colonized.
• These countries were underdeveloped by colonial powers, serving as sources of raw materials and markets.
• They are now “emerging” from the shadows of colonial domination, catching up to the Western world.
• Emerging economies include transitional economies in Central and Eastern Europe, Asian nations, countries in Central and South America, and countries in Africa.
• These economies seek growth opportunities and offer new products and services, facing unique cultural, value, and infrastructure challenges.

Historical Context

• Emerging economies are emerging from colonial pasts where their economies served Western colonial powers.
• Colonies were sources of raw materials and markets for European powers.
• Infrastructure improvements in colonies were solely for exporting goods.
• Minimal education was provided to create a literate labor force for colonial instructions.

The Term "Emerging Economy"

• Represents newly industrializing economies (NICs), including BRICS.
• It is loosely applied to the global South, also known as the “developing world” or “developing economies”.
• The term focuses on economic rather than political aspects.
• China and India are expected to surpass Western economies in GDP.

Characteristics of Emerging Economies

• Trade: Developing countries increasingly trade among themselves.
• Finance: The dominance of Western-led institutions like the IMF and World Bank is declining.
• Institutions: IMF, World Bank, and WTO policies have led to debt burdens and prescriptive policies for countries in the South.
• Hegemony: The Global South is distancing itself from the West, pursuing South-friendly policies.

South Africa's Position in BRICS

• Despite its smaller population and economy compared to other BRICS countries, its natural resources, developed infrastructure, access to finance, and regulatory frameworks favor its inclusion.
• China is a dominant member of BRICS and a top investor in South African banking, infrastructure, mining, transport, and renewable energy.

Small Businesses in Emerging Economies

• Emerging economies contribute to the world economy through global manufacturing operations.
• Employment is more expensive in developed countries, making emerging economies competitive in manufacturing.
• A booming small-business sector is a significant characteristic of a flourishing emerging economy.
• Small businesses play a crucial role in the South African economy but face constraints in development, growth, and sustainability.

Key elements

• Defining small businesses, ideas for startups, factors causing failure, the role of small businesses, different categories, and the macro environment in emerging economies are important

Defining Small Businesses in Emerging Economies

• There is no universally accepted definition of a small business.
• In South Africa, an enterprise with fewer than 100 employees is considered a small business, while in Egypt, it is 5-50 employees.
• Vietnam considers SMEs to have 10-300 employees.
• The Inter-American Development Bank defines an American small business as having a maximum of 100 employees, compared to European SMEs with fewer than 250 employees
• Economies considered "emerging" include Brazil, Chile, China, Colombia, Czech Republic, Hungary, India, Mexico, Russia, and South Africa.

South African Context

• A small business is defined by the number of employees or turnover (National Small Business Act of 1996).
• The National Small Business Act (amended in 2003 and 2004) defines a small business as a separate entity, including cooperatives and NGOs, managed by one or more owners.
• Categories include survivalist, micro, very small, small, and medium businesses, often referred to as SMMEs or SMEs interchangeably.
• The definition of SMME is based on the number of employees, annual turnover, and gross assets excluding fixed property, as per the National Small Business Act 102 of 1996.