Entrepreneurship and small business PDF

1 Entrepreneurship and small business management An emerging economies perspective G.E. Chiloane-Tsoka & E.M. Rankhumise EDITORS Van Schaik PUBLISHERS 2 Pub...

1 Entrepreneurship and small business management An emerging economies perspective G.E. Chiloane-Tsoka & E.M. Rankhumise EDITORS Van Schaik PUBLISHERS 2 Published by Van Schaik Publishers A division of Media24 Books 1059 Francis Baard Street, Hatfield, Pretoria 0083 South Africa All rights reserved Copyright © 2019 Van Schaik Publishers No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise – without written permission from the publisher, except in accordance with the provisions of the Copyright Act 98 of 1978. Please contact DALRO for information regarding copyright clearance for this publication. Any unauthorised copying could lead to civil liability and/or criminal sanctions. Tel: 086 12 DALRO (from within South Africa) or +27 (0)11 712 8000 Fax: +27 (0)11 403 9094 Postal address: PO Box 31627, Braamfontein, 2017, South Africa http://www.dalro.co.za First edition 2019 ISBN 978 0 627 03455 8 eISBN 978 0 627 03456 5 Commissioning editor Claire Thornton Production manager Shelley Swanepoel Editorial coordinator Nangamso Phakathi Copy editor Paula Marais Proofreaders Sarah O’Neill & Wendy Priilaid Cover design by Werner von Gruenewaldt Cover image Shutterstock Typeset in 9.25 pt on 11 pt Sabon LT Std by Pace-Setting & Graphics, Pretoria eBook conversion by InfoGrid Pacific Every effort has been made to obtain copyright permission for material used in this book. Please contact the publisher with any queries in this regard. Please note that reference to one gender includes reference to the other. Website addresses and links were correct at time of publication. This book has been reviewed by independent peer reviewers. 3 PREFACE Entrepreneurship and small business management: an emerging economies perspective aims to provide a perspective on entrepreneurship in emerging economies to students and entrepreneurs. Entrepreneurship and small businesses are vital determinants of economic growth, particularly in emerging economies. They are acknowledged as engines driving economic growth, competitiveness and job creation. Often, emerging economies are fuelled by a search for growth opportunities, which leads to experimenting with new business models while building on and extending traditional approaches to strategy and management. Critical issues such as conducting a feasibility analysis to test a business idea are discussed. Success factors and challenges linked to small business start-ups in emerging economies are also touched on. The book aims to provide a balanced theory and practical approach to help budding entrepreneurs develop successful businesses. Fundamental aspects such as innovation and creativity, as well as entrepreneurial strategies are discussed. There is a focus on enterprise functions in order to ensure that there is an understanding of what small-business owners should do in their respective endeavours. The analysis of the BRICS member countries adds value for the reader as it provides background to various entrepreneurial environments. The book touches on current issues such as high rates of unemployment and how to tackle poverty in emerging economies. Businesses of all sizes are required to operate within certain parameters. The importance of ethics, governance, sustainability and social entrepreneurship are explored. The case studies included in the book allow for reflection, and encourage the reader to explore the intricacies of entrepreneurship in emerging economies in the 21st century. STRUCTURE OF THE BOOK This book is divided into four sections. Section A: The entrepreneurial ideas and contextual nature of entrepreneurship This section covers chapter 1–10, and provides the reader with information pertaining to entrepreneurship in developing economies. There is a focus on areas such as entrepreneurial skills, creativity and innovation, as well as feasibility analysis. Section B: Enterprise functions This section covers chapters 11–16, and gives a perspective on enterprise functions, such as human resource management, finance, and marketing and sales, for example, with a view to providing guiding principles in terms of performing them. Section C: Types of business focus This section covers chapter 17–21 and deals with types of businesses such as family businesses, franchising, corporate and social entrepreneurship. Section D: Plans and cases studies This is the concluding section of the book, which essentially covers the essence of the business plan as well as relevant case studies. Case studies are presented as a way of ensuring that the reader understands and is able to identify different scenarios. 4 About the editors Evelyn Chiloane-Tsoka is a professor at Unisa in the department of business management specialising in entrepreneurship. Part of her role is to supervise M&D students. Her focus area in research is on small businesses and entrepreneurship, and also on generic entrepreneurship and climate change. She is a co-author of a book on multidisciplinary studies, and a member of the editorial board of the international journal ABRM. Nationally, she serves as a board member for several organisations. In 2013, she received a prestigious award in Mauritius as the best female professor in the southern African region (SADEC). She is the recipient of several other awards, as well as a fellowship by an international academy of business and retail marketing. Edward Malatse Rankhumise is an associate dean and professor at Tshwane University of Technology. As an associate dean, he is responsible for the research activities in the faculty of management sciences, and advises staff and students on research matters. He is further responsible for chairing the Faculty Higher Degrees Committee, the Faculty Research and Innovation Committee, and the Faculty Research Ethics Committee. He also represents the faculty on the Higher Degrees Committee and Postdoctoral Fellowship Committee. Prof. Rankhumise has interest in human resource development, sustainable business development and entrepreneurship, and has published widely in these research areas. He has contributed to more than 60 publications at international conferences and published widely in both national and international journals. He holds an MTech degree in business administration (Unisa) and a doctorate degree in public management (Tshwane University of Technology). 5 About the authors Kgaugelo Sammy Boya is a senior lecturer in the Department of Business Management at the University of South Africa (Unisa) where he currently teaches International Business. His research and teaching interests are entrepreneurship, strategic management, international business, corporate citizenship, fast-moving consumer goods (FMCG), supply chain relationships, passenger transport, integrated logistics networks, community engagement issues, and multi-intra-trans-disciplinary and reflective research. He is also a qualified business advisor and mentor to emerging entrepreneurs. Unathi Sonwabile Henama teaches Tourism at the Tshwane University of Technology. He holds a Magister Atrium (African Studies) from the University of the Free State. He graduated in 2003 and 2004 from the Central University of Technology with a BTech in Tourism Management and Project Management respectively. He has published extensively and has presented at conferences both in South Africa and abroad. He is a leading tourism commentator in South Africa, and sought after by the media for commentary on tourism issues. Junior Mabiza-ma-Mabiza holds a Master of Technology (Hydrogen and Fuel Cell Technology) (cum laude) from the University of Johannesburg (UJ), South Africa. He has a BSc in Physics and is a PhD candidate in heuristic and systems thinking developments on fossil fuels. He is currently a lecturer at the University of Johannesburg in Quality and Operations Management, School of Mechanical Engineering, Faculty of Engineering and the Built Environment. He serves as an MBA research supervisor, and is the author of several publications in life cycle inventory and impacts assessments of manufacturing processes, quantification of equivalent carbon dioxide emissions, and determination of environmental CO2eq impacts. Sibonginkosi Mazibuko is the associate professor in the Department of Development Studies at Unisa. His research interests include global political economy, development planning, governance and development theory. His work experience includes research with major South African research institutes. He also publishes in international journals and presents research papers at both national and international conferences. Nthabeleng Mmako is a MCom Business Management graduate from Unisa. She is currently a senior lecturer in Entrepreneurship in the Department of Applied Management. Before joining Unisa, she served as the chairperson of the Marketing and Communication Student Society for the Faculty of Economic and Management Sciences at the University of Pretoria. She is currently pursuing her PhD, focusing on the JSE AltX as a springboard for migration to the JSE Main Board. Oageng Juliet Mokoka is a junior lecturer in the Department of Applied Management at Unisa. An entrepreneur at heart, her passion lies in equipping students with knowledge, skills and motivation to encourage entrepreneurial success in their chosen ventures. She currently lectures Business Plan to third-year students and is pursuing her MCom degree in Entrepreneurship. Her research focus is entrepreneurship education and innovation capacity. Adolph Neethling is a lecturer in the Department of Business Management at Stellenbosch University specialising in entrepreneurship and innovation management, having previously lectured at Free State University and Vista University. He has extensive knowledge of the small, medium and micro-enterprises (SMME) sector, having gained experience as a manager and entrepreneur, and earned accreditation as a business mentor before embarking on an academic career. He is a past associate member of the Institute of Business Advisors (AIBA). He started specialising in the field of entrepreneurship in 2005, and has conducted workshops on topics associated with this field. Collins C. Ngwakwe is a professor in the MBA programme at the Turfloop Graduate School of Leadership, University of Limpopo, South Africa. He lectures on integrated accounting and corporate governance in the MBA programme, and financial management in the executive management programme. His research focus is on sustainability accounting and management. 6 The late Simon Radipere was an associate professor in the Department of Applied Management at Unisa. He contributed immensely towards the entrepreneurship qualification at Unisa, and served as chair of the Department for Applied Management from July to October 2017. With over 15 years of university and academic experience, he served as an external examiner at different universities, and contributed chapters in various academic books. He had a specific interest in the business plan, and passed away in 2017 while working on a chapter on this topic for this book. Mamoloko F. Rangongo is a senior lecturer in the Turfloop Graduate School of Leadership, University of Limpopo. Her main focus is management, human resource management, organizational behavior and research methodology. She has also lectured in entrepreneurship, career psychology and psychometrics. Wise Sambo is a senior lecturer at Unisa, and possesses an MPhil in Entrepreneurship, an MTech in Education, two other degrees, and a diploma in Business Management. He has been a consultant with the Small Enterprise Development Agency (SEDA) together with the United Nations Development Programme (UNDP), and received an accreditation as a specialist by the UN body in 2016. He is highly involved in SMME development programmes, and has published and presented both locally and internationally at conferences and in accredited journals with topics in the field of entrepreneurship and small business development. He is a recipient of a special distinction award from the University of Warsaw in Poland for the best paper at a conference in November 2017. He has authored and contributed chapters in books in the field of entrepreneurship and small business development, and is a reviewer of the Journal of Contemporary Management accredited by DHET. Winnet Sami is a lecturer in the Department of Applied Management at Unisa on entrepreneurship and small business management. She holds a MCom degree in Business Management focusing on small business strategy. She currently lectures on entrepreneurship, management and strategy, including supervision of postgraduate students in entrepreneurship. Her research interest is in small business management. Richard Shambare is an associate professor within the School of Business and Finance at the University of the Western Cape. He has published and presented papers at international conferences in the disciplines of entrepreneurship, consumer behaviour and the entrepreneurship–marketing interface. His research focuses on the areas of consumer behaviour, sustainability of micro enterprises and, in particular, how these businesses (and entrepreneurs) utilise mobile-based technologies to leverage their marketing practices. Portia Pearl Siyanda Sifolo has prodigious knowledge in the tourism and education industries. She is currently an academic in the Department of Tourism Management at Tshwane University of Technology. She is a research supervisor and an examiner for various institutions. Her doctoral studies focused on local economic development, supply chain and tourism. She was an Entrepreneurship of The Year Adjudicator (ETEYA) for the National Tourism awards in South Africa from 2015–2018. She has passion for entrepreneurship and tourism supply chains in Africa as economic development initiatives. She has co- authored different books, published research papers in academic journals and participated in both domestic and international conferences. Amorie Taljaard is a lecturer in Entrepreneurship in the Department of Applied Management at Unisa. For a number of years she has been involved as facilitator and mentor at the University of Pretoria’s Enterprises Entity in collaboration with government focusing on entrepreneurship development programmes, job creation and skills development initiatives. She is involved in entrepreneurship community development projects under Unisa’s Entrepreneurship-Hub. Her teaching and research interests are in entrepreneurship, innovation and entrepreneurial competencies. She holds an MPhil in Entrepreneurship (University of Pretoria) and is pursuing her PhD. Louise van Scheers obtained a doctorate in Commerce from Unisa. Her research interests include small and medium enterprises (SMEs), spaza shops, marketing issues and the economies of developing countries. She is a full professor at the Marketing and Retail Department of Unisa, and has published in various international journals. She is the project leader of the Global Alliance in Management Education (CEMS) community 7 engagement project – SME managerial skills transfer. This project aims to empower SME owners with managerial and marketing skills to enhance their knowledge and improve their overall performance with the aim of contributing to the National Development Plan (NDP). Awie Vlok lectures in entrepreneurship and innovation management at the Business Management Department of Stellenbosch University, where he focuses on innovation programmes at undergraduate and postgraduate levels, as well as the business school. Prior to joining academia he held senior management and functional specialist positions in the automotive, information and communication technology (ICT), building and construction research and development sectors, as well as multidisciplinary research, and science-, engineering- and technology-related innovation. He has pioneered award-winning innovation capacity- building programmes and gained international experience as a facilitator of cross-boundary innovation strategies, knowledge fusion, creativity and innovation processes. His PhD research investigated innovation leadership competencies on which he has presented at international conferences. 8 Contents SECTION A THE ENTREPRENEURIAL IDEAS AND CONTEXTUAL NATURE OF ENTREPRENEURSHIP Chapter 1 The business case for entrepreneurship and small businesses in emerging economies 1.1 Introduction 1.2 The definition of emerging economies 1.3 Small business development and entrepreneurship: the South African perspective 1.4 Challenges facing small and medium enterprises in South Africa 1.4.1 The informal sector and local economic development 1.4.2 The role of entrepreneurial education 1.5 Entrepreneurship and African integration 1.5.1 Entrepreneurs and Ubuntu values 1.6 The South African position within Brazil, Russia, India, China, South Africa (BRICS) 1.6.1 Arguments for South Africa’s inclusion in BRICS 1.6.2 Arguments against South Africa’s inclusion in BRICS 1.6.3 Economic power and what it means 1.6.4 Opportunities and challenges of emerging economies – the BRICS perspective 1.6.5 Regional imperatives 1.7 Policy implications for entrepreneurial development within South Africa 1.8 Conclusion Review questions References Chapter 2 Small business start-ups in emerging economies 2.1 Introduction 2.2 Defining small businesses in emerging economies 2.3 Factors contributing to start-up failure in emerging economies 2.4 The role of small-business start-ups in the emerging South African economy 2.5 Ideas for small-business start-ups in emerging economies 2.6 Small-business start-up categories 2.6.1 Different categories of ownership 2.7 The macro environment of start-up businesses in emerging economies 2.7.1 The macro environment 2.7.2 Strategies to overcome macro environmental challenges 2.8 Conclusion Review questions References Recommended websites Chapter 3 Feasibility analysis for small businesses within emerging economies 3.1 Introduction 3.2 Product/service feasibility analysis 3.2.1 Concept test 3.2.2 Concept statement 3.2.3 Prototype and usability testing 3.3 Industry and market feasibility analysis 3.3.1 Types of industries 3.3.2 Attractive industries 3.3.3 Nature of competition 9 3.3.4 Profitability of the industry 3.3.5 Market factors 3.4 Technical and legal feasibility 3.5 Financial feasibility analysis 3.5.1 Capital investment 3.5.2 Estimated earnings 3.5.3 Return on investment 3.6 Organisational feasibility analysis 3.6.1 Management aspects 3.6.2 Organisational structure 3.6.3 Resource sufficiency 3.7 Conclusion Review questions References Recommended websites Chapter 4 Essential success factors in entrepreneurship for emerging economies 4.1 Introduction 4.2 The uniqueness of an emerging market for an entrepreneur 4.2.1 Untapped abundant resources 4.2.2 Business value exists in low-income communities 4.2.3 Government institutions offer opportunities 4.2.4 Competition among entrepreneurs 4.2.5 Distinct political institutional establishments 4.3 Opportunities and challenges of entrepreneurship in South Africa 4.3.1 Expanding consumer market 4.3.2 Youthful demography of the African market 4.3.3 Apparent risk with alluring returns 4.3.4 Business climate 4.4 Entrepreneurial management and leadership 4.4.1 Management and leadership knowledge 4.5 The resource dependency theory and relationship management 4.6 Networking and collaboration/partnership essentials 4.6.1 Motives for collaborations 4.6.2 Who to collaborate with 4.6.3 Formal collaborations 4.7 Negotiation skills and relationship management 4.8 Conclusion Review questions References Chapter 5 Challenges of starting a business in an emerging economy 5.1 Introduction 5.2 General challenges for starting a business in a developing economy 5.2.1 Challenges inhibiting small-business growth 5.2.2 Globalisation of markets and production globalisation challenges 5.2.3 Poor infrastructure challenges 5.2.4 Limited protection from corruption challenges 5.2.5 Cultural risks 5.2.6 Challenges in recruiting qualified staff 5.2.7 Crime 5.3 Financial challenges for starting a small business in a developing economy 10 5.3.1 Access to capital 5.3.2 Financial-support challenges 5.3.3 Government financial initiatives to support small businesses 5.4 Managerial skills challenges for starting a small business in a developing economy 5.4.1 Technical skills 5.4.2 Conceptual skills 5.4.3 Interpersonal skills 5.4.4 Communication skills 5.4.5 Decision-making skills 5.4.6 Analytical skills 5.4.7 Administrative skills 5.4.8 Problem-solving skills 5.5 Marketing skills challenges for small businesses in a developing economy 5.5.1 Social-media platforms 5.5.2 Building customer loyalty 5.5.3 Low product demand 5.5.4 Poor locality 5.5.5 Ineffective marketing of products and lack of market knowledge 5.5.6 Product pricing 5.6 Challenges when evaluating a new business opportunity in an emerging economy 5.6.1 Self-analysis 5.6.2 Prior business experience 5.6.3 Market research 5.6.4 Risk assessment 5.6.5 Support from family and community 5.6.6 Competitor analysis 5.7 Conclusion Review questions References Recommended websites Chapter 6 Entrepreneurial strategies for small businesses within emerging economies 6.1 Introduction 6.2 Entrepreneurship 6.3 Entrepreneurial strategy 6.3.1 Definition 6.4 Entrepreneurial variables 6.4.1 Innovativeness 6.4.2 Risk taking 6.4.3 Proactiveness 6.4.4 Competitive aggressiveness 6.4.5 Autonomy 6.5 Entrepreneurial strategy matrix 6.6 Conclusion Review questions References Chapter 7 Strategic planning 7.1 Introduction 7.2 Definition 7.3 Strategic-planning types 7.3.1 Strategic planning in small businesses 11 7.3.2 Strategy as practice (S-A-P) 7.3.3 Strategic-planning template 7.3.4 Strategic-planning issues 7.4 Planning the implementation 7.4.1 Strategy implementation challenges 7.4.2 Evaluation and control 7.5 Conclusion Review questions References Chapter 8 Entrepreneurial skills 8.1 Introduction 8.2 Entrepreneurial skills defined 8.3 Entrepreneurial tasks 8.4 Skills, expertise and aptitudes 8.5 Entrepreneurial competencies 8.5.1 Main groups of skills required by entrepreneurs 8.6 Management skills for entrepreneurs 8.6.1 Technical skills 8.6.2 Conceptual skills 8.6.3 Interpersonal management skills 8.7 Management functions 8.7.1 Skills learning versus skills “doing” 8.7.2 Entrepreneurial leadership and skills 8.8 Networking 8.8.1 Reciprocity and maintenance 8.8.2 Guidelines for networking 8.9 Emotional intelligence (EQ) 8.10 Conclusion Reflection activity Review questions References Recommended websites Chapter 9 Creativity and innovation 9.1 Introduction 9.2 Entrepreneurs as value creators 9.2.1 Causes of entrepreneur reluctance to innovate 9.3 What is innovation and why it matters 9.3.1 Innovation economy perspectives – global and local 9.3.2 Innovation myths and misconceptions 9.3.3 Sourcing ideas 9.3.4 Innovation types 9.3.5 Innovation defined 9.4 Ambidextrous entrepreneurship 9.4.1 Dual role of entrepreneurs over time 9.4.2 The operations cycle of business 9.4.3 The innovation cycle of business 9.4.4 Creativity as a process 9.4.5 The human brain as an operating system 9.4.6 Innovation is a team sport 9.5 Creativity and innovation tools 12 9.5.1 Imagination is more important than knowledge 9.5.2 Tools for creative thinking 9.5.3 Facilitation for creativity and innovation 9.6 South African national innovation ecosystem 9.6.1 The business sector 9.6.2 Pitching for stakeholder engagement or support 9.7 Leading and managing innovation 9.7.1 People innovate – leadership matters 9.7.2 Absorptive capacity and innovation funnels 9.7.3 Business models for value creation and value realisation 9.7.4 Innovation management frameworks and audits 9.8 Conclusion Review questions References Chapter 10 Ethics, governance and sustainability 10.1 Introduction 10.2 Ethics in business 10.2.1 Environmental pollution 10.2.2 Conflict of interest 10.2.3 Quality control 10.2.4 Discrimination in hiring and promotion 10.2.5 Misuse of company information and assets 10.3 Corporate governance 10.4 Sustainability 10.5 Stakeholder engagement 10.5.1 Cross-border stakeholder management 10.6 Conflicting interests 10.7 Intellectual property rights 10.8 Conclusion Review questions References SECTION B ENTERPRISE FUNCTIONS Chapter 11 Small-business marketing 11.1 Introduction 11.2 The South African small-business marketing environment 11.2.1 The marketing environment of the South African small business 11.2.2 The SWOT analysis 11.3 The marketing concept of the South African small business 11.3.1 Production-oriented concept 11.3.2 Sales-oriented concept 11.3.3 Marketing-oriented concept 11.3.4 Consumer-oriented concept 11.3.5 Relationship-marketing concept 11.4 The marketing mix for South African small businesses 11.4.1 Product or service of the small business 11.4.2 Price 11.4.3 Promotion 11.4.4 Place (distribution) 11.4.5 Benefit of the marketing mix 13 11.5 Developing a marketing strategy for a small business 11.6 Marketing plan for a small business 11.6.1 Marketing-plan planning 11.6.2 Components of the marketing plan 11.7 Conclusion Review questions References Recommended websites Chapter 12 Communication and building relationships with stakeholders for the small business within developing economies 12.1 Introduction 12.2 Small-business stakeholder communications and building relationships 12.2.1 Customer relationship management in the context of the small business 12.3 Small-business stakeholder marketing communications 12.3.1 Marketing communication methods 12.3.2 Promotion 12.3.3 Sales-promotion techniques 12.3.4 Advertising 12.3.5 Advertising mediums 12.4 Public Relations 12.5 Internet marketing and social media for the small business 12.5.1 Internet marketing and social-media tools 12.5.2 Is internet-marketing usage crucial for small businesses? 12.5.3 Small-business challenges adopting internet marketing and social media 12.6 Conclusion Review questions References Recommended websites Chapter 13 Human resources management 13.1 Introduction 13.1.1 What is human resources management? 13.1.2 The phases of human resources management 13.2 Attracting Human Resources and staffing organisations 13.2.1 Strategic human resources planning 13.2.2 Job analysis and design 13.2.3 Recruitment 13.2.4 Selection 13.3 Maintaining employees 13.3.1 Onboarding and orientation 13.3.2 Performance management and appraisal 13.3.3 Training and development 13.3.4 Compensation and employee benefits management 13.3.5 Health and safety 13.4 Employment termination 13.5 Challenges of HR for SMMEs in emerging economies 13.6 Conclusion Review questions References Chapter 14 Entrepreneurial finance 14 14.1 Introduction 14.1.1 The concept and distinctiveness of entrepreneurial finance in emerging economies 14.1.2 The nature of entrepreneurial finance in South Africa 14.2 Financing sources for an entrepreneur 14.2.1 Internal financing sources (or financial bootstrapping) 14.2.2 External financing sources 14.3 Financial planning for an entrepreneur 14.3.1 The importance of financial planning 14.3.2 Determining financial needs 14.3.3 Financial-planning problems 14.4 Entrepreneurial finance valuation 14.4.1 The role of time value 14.4.2 Risk and return 14.4.3 The cost of entrepreneurial capital 14.4.4 Capital budgeting techniques 14.4.5 Leverage and breakeven 14.5 Conclusion Review questions References Recommended websites Chapter 15 Entrepreneurial growth 15.1 Introduction 15.1.1 Market domination 15.1.2 Differentiation 15.1.3 Product leadership 15.1.4 Flexibility 15.1.5 Innovation 15.1.6 Orientation towards the future 15.1.7 Export activity 15.1.8 Related growth 15.2 Types of growth 15.2.1 Newness of the product and of technology 15.2.2 Internationalisation 15.2.3 High growth ambitions 15.2.4 Finance for entrepreneurial activity 15.3 Stages of growth 15.3.1 Stage 1: Pre-start-up (incubation) 15.3.2 Stage 2: Start-up (infancy) 15.3.3 Stage 3: Breakthrough or growth 15.3.4 Stage 4: Maturity 15.3.5 Stage 5: Decline/rejuvenation 15.4 Barriers to entrepreneurial growth and how to manage them 15.4.1 Institutional barriers 15.4.2 Barriers internal to the firm 15.4.3 Financial barriers 15.4.4 Social barriers 15.5 Dealing with the barriers to entrepreneurial growth 15.6 Strategic planning 15.7 Entrepreneurial growth strategies 15.7.1 Internal growth strategies 15.7.2 External growth strategies 15 15.8 Conclusion Review questions References Recommended websites Chapter 16 Enterprise development 16.1 Introduction 16.1.1 Definition of enterprise development 16.1.2 The concept of enterprise development 16.1.3 The life cycle of an enterprise 16.2 The SME environment in emerging economies (Brazil, India, China and South Africa) 16.2.1 Introduction 16.2.2 Small-business policies in South Africa, India and Brazil 16.3 Small-business support 16.3.1 South Africa 16.3.2 India 16.3.3 Brazil 16.3.4 Comparison 16.4 Promotion of entrepreneurship by governments 16.4.1 Financial support 16.4.2 Funding agencies in South Africa 16.5 Small-business incubation 16.5.1 Purpose of business incubation 16.5.2 Different incubation programmes 16.5.3 Benefits of using business incubators 16.5.4 The incubation process 16.5.5 The basic model for SME incubation 16.6 Clusters 16.6.1 Benefits of operating in a cluster environment 16.6.2 ASP cluster benefits 16.7 Growing an entrepreneurial venture 16.7.1 Characteristics of a growing firm 16.7.2 Different growth strategies for an enterprise 16.8 Listing on the stock exchange markets 16.8.1 Brief summary of the stock exchange market 16.8.2 The history and role of the JSE in South Africa 16.8.3 Listing categories 16.8.4 Requirements for listing 16.9 Migration from AltX to the Main Board 16.9.1 The merits of migrating from the AltX to the Main Board 16.9.2 Listing time frame 16.10 Conclusion Review questions References Recommended websites SECTION C TYPES OF BUSINESS FOCUS Chapter 17 Tourism 17.1 Introduction 17.2 Definition of tourism 17.3 The tourism system 16 17.4 Tourism product offering 17.5 Nature and characteristics of tourism services for entrepreneurs in emerging economies 17.5.1 Intangibility 17.5.2 Perishability 17.5.3 Heterogeneity (variability) 17.5.4 Inseparability 17.6 The role of people in the tourism production process 17.7 Why tourism and entrepreneurship? 17.7.1 Balance of payments 17.7.2 Foreign-exchange earner 17.7.3 Sharing of infrastructure 17.7.4 Fragmentation and the cross-cutting nature of the tourism industry 17.7.5 Taxation of non-residents 17.7.6 Improved national image 17.7.7 Tourism resilience 17.7.8 Improving international ties and a force for peace 17.7.9 Wealth distribution 17.7.10 Local beneficiation 17.7.11 Smokeless industry 17.7.12 Trade barriers 17.7.13 Labour-intensive jobs 17.7.14 Promotes entrepreneurship and low barriers to entry 17.7.15 Growth sector 17.7.16 Tourism multipliers 17.7.17 Tourism increases happiness and quality of life 17.8 Critical success factors 17.8.1 Transformation 17.8.2 Government support 17.8.3 Safety and security 17.8.4 Visa facilitation 17.8.5 Aviation access 17.8.6 Institutionalisation of the habit of holidays 17.8.7 Place marketing 17.8.8 Reducing leakages 17.8.9 Skills development 17.8.10 Embracing technology and the Fourth Industrial Revolution 17.8.11 Establish a Tourism Red Tape Initiative® (TRTI) 17.9 Conclusion Review questions References Chapter 18 Franchising 18.1 Introduction 18.2 Franchising as a form of business 18.2.1 Categories/forms of franchising 18.3 Types of franchises 18.3.1 What can be franchised? 18.4 Definitions 18.4.1 Business-format franchising 18.4.2 Franchise 18.4.3 Franchise operation 18.4.4 Franchisor 17 18.4.5 Franchisee 18.4.6 Franchise contract 18.5 Advantages and disadvantages of franchising 18.5.1 Discussion of advantages 18.5.2 Discussion of disadvantages 18.6 Opportunities 18.7 Franchising in Africa – social and economic factors 18.7.1 Non-quantitative factors in valuing a business 18.8 How to establish a franchise business operation 18.9 Developing the franchise package 18.9.1 Operation manuals 18.9.2 Franchise agreement 18.9.3 Disclosure document 18.9.4 Marketing the franchise package 18.9.5 Financial aspects of franchising 18.10 Conclusion Review questions References Recommended websites Chapter 19 The family business 19.1 Introduction 19.2 Definition of a family business 19.3 Family business theories/models 19.4 Family business dynamics in emerging markets 19.4.1 Competitive advantage of a family business in an emerging economy 19.4.2 Prospects for family businesses in emerging economies 19.4.3 Challenges facing family businesses in emerging economies 19.4.4 Succession 19.5 Family business in the African context 19.6 A South African perspective 19.6.1 Challenges of a family business in South Africa 19.6.2 Prospects going forward 19.7 Conclusion Review questions References Chapter 20 Corporate entrepreneurship 20.1 Introduction 20.2 Understanding corporate entrepreneurship 20.2.1 Definition of an entrepreneur 20.2.2 Definition of a corporate entrepreneur 20.3 Reasons why established organisations consider or pursue corporate entrepreneurship? 20.4 Differentiating between start-up entrepreneurship and corporate entrepreneurship 20.5 The changing domain of the corporate environment 20.6 Setting up the corporate entrepreneurial environment 20.7 Corporate entrepreneurial mindset 20.7.1 Characteristics of an entrepreneurial mindset 20.8 Exploring the dimensions of entrepreneurship within an established corporation 20.9 Entrepreneurial intensity 20.10 Corporate venturing as a way to manifest entrepreneurship in the organisation 20.10.1 Advantages of corporate venturing 18 20.10.2 Pitfalls of corporate venturing 20.10.3 Corporate venturing as a strategy 20.11 Conducive climate for corporate entrepreneurship 20.11.1 Encouraging intrapreneurial thinking 20.12 Entrepreneurial leadership 20.12.1 Essential qualities of entrepreneurial leadership 20.13 Challenges of corporate entrepreneurship in traditional large corporations 20.14 Overcoming the challenges of corporate entrepreneurship in traditional corporations 20.14.1 Make the organisation’s sense of purpose tangible 20.14.2 Provide more flexibility in work roles and responsibilities 20.14.3 Establish innovation tools and processes 20.14.4 Adjust rewards and recognition approaches to promote a more innovative company mindset 20.14.5 Communicate vision and actions 20.15 Firm’s entrepreneurial audit 20.15.1 Step 1: Assessing the firm’s entrepreneurial intensity (EI) 20.15.2 Step 2: Diagnosing the climate for corporate entrepreneurship 20.15.3 Step 3: Create an organisation-wide understanding of the corporate entrepreneurship/innovation process 20.16 Conclusion Review questions References Chapter 21 Social entrepreneurship 21.1 Introduction 21.2 The concept of social entrepreneurship 21.3 Defining social and commercial entrepreneurship 21.3.1 Social entrepreneurship 21.3.2 Social entrepreneurs and for-profit entrepreneurs (traditional entrepreneurs) 21.4 Differences between social and traditional entrepreneurs 21.5 The importance of social entrepreneurship 21.5.1 Social entrepreneurship in the South African context 21.5.2 Driving forces of social entrepreneurship relevant to South Africa 21.5.3 The social enterprise and resources 21.6 Vision for social entrepreneurship 21.7 Social entrepreneurship case study 21.8 Conclusion Review questions References Recommended readings SECTION D PLANS AND CASE STUDIES Chapter 22 The business plan 22.1 Introduction 22.2 Benefits of writing a business plan 22.3 Objectives when developing a business plan 22.3.1 To obtain funding 22.3.2 To serve an internal purpose 22.3.3 To be used as a tool for reducing risk 22.4 Types of business plans 22.4.1 Business plan to obtain a loan 22.4.2 Business plan for investors 19 22.4.3 Business plan for a manufacturing venture 22.4.4 Business plan for service venture 22.4.5 Business plan for high-technology ventures 22.4.6 Business plan for retail ventures 22.5 Guidance on writing a business plan 22.6 Limitations in business planning 22.7 The format and layout of a standard business plan 22.7.1 Cover sheet 22.7.2 Table of contents 22.7.3 Summary/executive abstract 22.7.4 Business and product or service description 22.7.5 Marketing plan 22.7.6 Operations plan 22.7.7 Management plan/the team 22.7.8 Sustainability plan 22.7.9 Financial plan/critical risks 22.7.10 Appendix 22.8 Identify potential investors 22.8.1 Eight guiding principles to find the right investor 22.8.2 Alternative sources of funding 22.9 Pitching to investors 22.10 Business principles for leading in the Fourth Industrial Revolution 22.11 Resources for writing a business plan 22.12 Conclusion Review questions References Additional resources Chapter 23 Business cases in the African context 23.1 Case 1: From a law firm to transport business-diversification in action 23.1.1 Introduction 23.1.2 Motivating factors to start an own business 23.1.3 Challenges 23.1.4 Diversification 23.1.5 Where to from here? 23.2 Case 2: Tshepiso Semenya: The Calculating Entrepreneur 23.3 Case 3: Business Success and poverty alleviation through a poultry business 23.3.1 Introduction 23.3.2 Journey to redemption 23.3.3 Challenges and lessons learned 23.3.4 Future prospects and opportunities 23.4 Case 4: Gagasini Brokers – fast-growing financial services and product insurance providers 23.4.1 History and background 23.4.2 Shareholders 23.4.3 Challenges faced 23.4.4 Achievements 23.5 Case 5: Cassper Nyovest: the musical entrepreneur 23.6 Case 6: Mokgwadi Upholstery Clinic (MUC) – family business case study 23.6.1 Critical decisions to be made 23.6.2 Family business challenges 23.6.3 Way forward 23.7 Case 7: From just rubbish to a professional recycling business 20 23.7.1 Introduction 23.7.2 First opportunity 23.7.3 Support and partnership 23.7.4 Challenges faced 23.7.5 Achievements and future prospects 23.8 Case 8: Emerging motor mechanic 23.8.1 Introduction 23.8.2 Succession 23.8.3 Support and networks 23.8.4 Mentorship and training 23.8.5 Where to from here? 23.9 Case 9: Intrapreneurship as a growing trend 23.9.1 What Little Masters offers 23.9.2 Challenges 23.9.3 Internal initiatives and opportunities 23.10 Case 10: Richard Maponya: the man behind Maponya Mall 23.11 Case 11: Shingie Chivizhe: the serial entrepreneur 23.11.1 Background 23.11.2 The beginning Annexure A Financial tables Index 21  SECTION A The entrepreneurial ideas and contextual nature of entrepreneurship 22  1 The business case for entrepreneurship and small businesses in emerging economies G.E. Chiloane-Tsoka & S.G. Mazibuko LEARNING OUTCOMES After you have studied this chapter you will be able to ▪ explain the concept “emerging economies” ▪ discuss the characteristics of emerging economies ▪ discuss challenges facing small and medium enterprises in South Africa ▪ discuss the role of entrepreneurship education and small business in South Africa ▪ outline the state of the informal sector and local economic development ▪ understand Ubuntu as a value for entrepreneurs in conducting business ▪ discuss why South Africa forms part of BRICS ▪ outline the opportunities and weaknesses of BRICS ▪ explain the concept of unemployment in BRICS ▪ discuss the benefits and barriers to regional cooperation in SADC ▪ differentiate between developed and emerging economies ▪ discuss the policy implications facing policy makers in South Africa. 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 1.1 INTRODUCTION Entrepreneurship and small business development are vital determinants of economic growth particularly in emerging economies. They are acknowledged as engines of economic growth, competitiveness and job creation (Wennekers, 2004). The 21st century is, however, the century of the emerging economies, both in market growth and in changes to business strategy. The 2010 gross domestic product (GDP) statistics published by both the International Monetary Fund (IMF) and the World Bank indicate that the traditional BRIC countries (Brazil, Russia, India and China) are now counted among the largest economies in the world respectively. While the newest member of the BRICS, South Africa, is among the top 30 economies in the world (PwC, 2015), it is further predicted that by 2050 the economies of Brazil, Russia, India, China and South Africa will be accelerating more greatly than that of the G6 (the US, Japan, the UK, Germany, France and Italy (Wilson & Purushothaman, 2002)). The BRICS countries are important drivers of economic growth and that is why they are considered as efficiency-driven economies. The prosperity of a country refers to the overall development of the total number of production units that prevail in that economy. An emerging economy or emerging market is a specific type of economy that is entrepreneurial at its core. Thus Schumpeter (1912) emphasised the role of entrepreneurs as a prime cause of economic development. Van Praag and Versloot (1934: 352) assert that entrepreneurs have a very specific function in the economy. In their view, entrepreneurs create employment and productivity growth, and produce commercialised high-quality innovations. Small businesses contribute not only to employment but 23  are also a barometer for social and political stability as they offer innovation and competitive power to matters of policy makers, job creation, economic growth and international competitiveness in global markets (Carree, Van Stel, Thurik et al., 2002). The Global Entrepreneurship Monitor (GEM) of 2013 indicates that growth expectations and aspirations of early-stage entrepreneurs are key factors in determining the entrepreneurial impact and also policy objectives that will help create more jobs. It is further established that the entrepreneurial activity rate (TEA) per country is based on innovation-, orientation- and factor-driven scales, as discussed below. It is indicated in the 2013 GEM report that countries such as Japan, Korea and China showed a high degree of innovative orientation and a high level of economic development as seen through their innovative products and services. These countries were closely followed by entrepreneurs in North America and the European Union (EU). With the exception of South Africa, the sub-Saharan economies and European economies outside the EU reported lower proportions, while emerging nations such as Colombia, Chile, Taiwan and South Africa offered products or services that are new to their customers and experienced few local competitors. Efficiency-driven economies (economies that focus on improving production efficiencies to drive growth) include Russia, Brazil, India, China and South Africa, as well as the BRICS countries mentioned previously. Factor-driven economies, where countries compete primarily on the use of unskilled labour and natural resources, revealed the lowest level of international customers on average. Often companies in these economies compete on the basis of price as they buy and sell basic products or commodities. Schwab (2012) categorises countries such as Iran, Egypt, Angola and Pakistan as factor-driven. 1.2 THE DEFINITION OF EMERGING ECONOMIES Scholars give many different interpretations of the concept of emerging economies. Child, Faulkner and Tallman (2011) define emerging economies as complex environments in which traditional and modern institutions are embedded, often seen in a combination of bureaucratic and market-based economies. PwC (2015) see emerging economies as those searching for growth opportunities and experimenting with new business models even as they build on and extend traditional approaches to strategy and management. It is important to note that all the countries referred to as emerging economies are located in the “Global South” known as Asia and the Pacific and they were at some stage colonised by some Western powers. Their strengths vary from very strong, for example China and India, to very weak, such as Sudan and Bolivia. These issues are better understood politically since these countries are seen as having been underdeveloped by colonialism: colonial powers used them as sources of raw materials and markets for finished products. There was never an attempt to develop them as independent economies but they are therefore “emerging” as they struggle to catch up to the Western world, in a sense, “emerging” from the shadows of colonial domination. Urbonavicius (2015) defines emerging economies as the transitional economies of Central and Eastern Europe, Asian nations (China, India, Vietnam and others) that are increasing their free-market systems; countries in Central and South America; and finally, countries in Africa. Each of these regions face unique challenges. Emerging economies are those economies in search of growth opportunities and offer new products and services to their customers locally or internationally. Such economies are marked by unique challenges of culture, values and infrastructure limitations. They may experience challenges with the acceptance of new, nontraditional business models. (See Figure 1.2.) As mentioned, these countries are emerging from the shadows of their colonial pasts. At some stage their economies served only the interests of the Western colonial powers with little regard for local development. Consequently, the concept of an emerging economy is a reflection of historical economic–political factors. Colonies were sources of primary raw materials as well as markets for the products finished by European 24  colonial powers. All infrastructural improvements were effected in colonies for the sole purpose of taking goods to the harbours and out of the colonies. The minimal education offered was also meant to ensure a labour force literate enough to execute colonial instructions rather than provide sustainable skills. “Emergence” then means successfully coming out of these conditions. The term “emerging economy” represents those newly industrialising economies or countries (NICs) which today include the BRICS and their showing in international forums such as the World Trade Organization (WTO) (Pieterse, 2009: 1–3; Palat, 2009: 39–60). Nowadays it is loosely applied to all the global South. These countries have also been called the “developing world” or “developing economies”. It is also important to understand that the evolution of the term has been informed by both economic and political narratives. However, the choice of the term “emerging economies” shows clear concentration on the economic front rather than the political one. This emergence is reflected in the postulated view that China and India in particular stand to overtake the leading Western economies in terms of GDP in the near future. Thus it is necessary to understand the characteristics of emerging economies. In the definitions below, Pieterse (2009: 15–28) simplifies the characteristics of emerging economies as follows: Trade: there is a growing trend to redefine the geographies of trade among developing countries as they prefer to trade among themselves. Finance: the hegemonic role of money lenders (the IMF and the World Bank, both of which are dominated by Western leadership) is declining as developing countries choose to finance their own economies along East Asian–Latin and American–African lines (hegemony refers to the dominance of one state or body over another). Institutions: the policies of the IMF, World Bank and the WTO have resulted in large debt burdens and prescriptive policies for countries in the South. Hegemony: the Global South has distanced itself from the West and is pursuing South-friendly policies in response to, for example, the primarily Western Group of Seven (an informal bloc consisting of Canada, France, Germany, Italy, Japan, the UK and the US). Growing inequality: there is clear growth of inequality in developing countries as compared to developed ones, as seen in shrinking agricultural produce, the often-negative role of multinational companies and rising slums. 1.3 SMALL BUSINESS DEVELOPMENT AND ENTREPRENEURSHIP: THE SOUTH AFRICAN PERSPECTIVE Entrepreneurship is the dynamic process of creating incremental wealth. It involves vision, change and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. The Global Entrepreneurship Monitor (2015) showed that small businesses created more than 50 percent of all employment opportunities in South Africa, while contributing more than 45 percent of the country’s gross domestic product (GDP). According to Zulu (Brand South Africa, 2015), South Africa’s high rate of unemployment, poverty and extreme inequality called for bold and far-sighted interventions aimed at ensuring that small enterprises grow into thriving businesses. Government initiatives are also geared towards providing financial and non-financial support to small businesses in order to reduce obstacles of doing business. Given this high unemployment rate, Kingdon and Knight (2004: 392) argue that one would expect a large informal sector to absorb this surplus labour, but South Africa has a relatively small informal sector. There are a number of possible explanations for this phenomenon (Banerjee, Galian, Levinsohn, McLaren & Woolard, 2008; Rodrik, 2008). The South African government has implemented various strategies to encourage entrepreneurs and small businesses without much success (Herrington, Kew & Kew, 2009; Urban, 2010). South Africa performs very poorly in international entrepreneurship surveys and has consistently been ranked near or at the bottom of the Global Entrepreneurship Monitor (GEM) (Amoros & Bosma, 2014). Furthermore, Herrington 25  (2013) affirms that South Africa’s rate for new-business and early-stage entrepreneurs is still significantly lower than for other sub-Saharan countries. He indicates that a worrying trend is the low number of established small businesses in the country. The established business rate in sub-Saharan Africa is high at 13 per cent, but South Africa comes in well below the norm at 2.9 per cent. Undoing the legacy of apartheid necessitates bringing more South Africans into the mainstream economy, but the large corporate sector cannot absorb all the surplus labour. This means that entrepreneurial activity must be an important cornerstone of any economic strategy. Nonetheless the South African Banking Association Annual Review (2016), indicates that small-and-medium enterprises (SMEs) have been identified as productive drivers of inclusive economic growth and development in South Africa and around the world. In South Africa, SMEs make up 91 per cent of formalised businesses, and provide employment to about 60 per cent of the labour force, while total economic output accounts for roughly 34 per cent of GDP. SMEs contribute significantly to the economy, by fostering diversification through their development of new and unsaturated sectors of the economy. In addition, innovative and technology-based small-and-medium enterprises can provide a platform for local, regional and international growth, especially in the BRICS economies. 1.4 CHALLENGES FACING SMALL AND MEDIUM ENTERPRISES IN SOUTH AFRICA Altman (2013: 205–206) and Juma (2015: 68–69) identified some of the challenges that South African SMEs face, namely lack of access to capital lack of skills training crime capital-intensive structure of the formal economy that makes it difficult for the small business to find its own niche the regulatory environment, which makes it difficult for the small business to be sustainable high unemployment levels that may have a bearing on the demand for goods reliance on exporting primary raw materials lack of understanding of market needs lack of support for research and development. Piracy and illicit trade could also be added to this list. South Africa has become very exposed to global economic challenges to which it was less vulnerable pre-1994. Opening the economy comes with its own challenges. Piracy, especially in the arts industry, destroys emerging artists and this means they cannot live sustainable lives. The SAB (2013: 63) further shows that mentoring is lacking within the small-business sector. Linking emerging businesses to large experienced partners could help ensure better skills transfer and technological innovation. This initiative has the following advantages for SMEs: Prevention of corruption and assistance with measures to prevent crime Provision of appropriate technology Improved production capacity (includes access to electricity) Improved management skills A supply of a skilled labour force Access to finance and ability to obtain credit Access to markets and developing relationships with customers Recognition by large companies and government bureaucracy Transfer of knowledge from large, experienced partners to SMEs Provision of support and assistance with regulatory compliance 26 1.4.1 The informal sector and local economic development According to the Quarterly Labour Force Survey (2012), 2.1 million people in South Africa are active in the informal economy and the sector contributes 28 per cent of South Africa’s GDP (Salga Network, 2012). The informal sector plays a crucial role in job creation and poverty alleviation. In South Africa, the informal economy forms a key component of strategies to address unemployment and poverty and support the creation of sustainable livelihoods. National policies on Local Economic Development (LED) or on small and medium- sized enterprise development set important frameworks and guidelines for all actors involved in this field. Public funding and support structures at national, provincial or local level also set powerful incentives. Government has a particular role to play in LED by ensuring that it leads to job creation, sustainable rural development and urban renewal. LED interventions are meant to benefit disadvantaged and marginalised people and communities within municipal boundaries through an inclusive and redistributive approach to economic development. Figure 1.1 South African local economic development network Source: Adapted from http://www.SAnews.gov.za (2015) Figure 1.1 provides the networks and functions of the LED while addressing job creation. It highlights the different networks and their responsibilities. 1.4.1.1 Main functions of local economic development and related issues Local government is responsible for creating a favourable environment for business development and success. By its nature, local economic development is a partnership between the business sector, community interests and municipal government. Government agencies such as the Sector Education Training Authorities (SETAs) and SEDA (Small Enterprise Development Agency) all have a potential role to play in supporting LED initiatives. 27  Foreign donor organisations have a specific focus on LED issues; the most important of which in this country is Germany, whose main focal sectors are local government and good governance. The EU has also played a significant role in provinces such as Kwa-Zulu-Natal, the Eastern Cape and Limpopo. There are currently more than 30 local economic development agencies (LEDAs), across South Africa, operating at the district and local municipality level. However, they have had very different levels of success. There is not always agreement among the various LEDA role players as to exactly how these agencies should operate and how their mandate should differ from, and be integrated with, the local economic development responsibilities of the local authority. Although government initiatives are stimuli for creating a sustainable environment for business and job creation, it is necessary that challenges facing the South African government be outlined and their role defined, especially with regard to education. 1.4.2 The role of entrepreneurial education Entrepreneurship is one of the means to alleviate poverty in emerging economies and transitional countries by increasing the number of entrepreneurs and creating employment and innovation in individuals. In South Africa, the following should be addressed in order to achieve national goals in stimulating entrepreneurship and small business in education. 1.4.2.1 Technical and vocational education and training (TVET) colleges Business must work with government to adapt the school curriculum, in particular the curricula of technical and vocational education and training (TVET) courses, so that young people leave school ready for work. Training programmes must be tailored to demand. If this does not happen, government will be spending money in vain. Rewrite the syllabi of TVET colleges to meet the industry’s needs thereby fostering an enabling environment that will result in an increase in the percentage of graduates who find jobs. Financial incentives should be provided to SMEs, as well as to big businesses that promote student internships. 1.4.2.2 Universities Universities should play a critical role in redesigning the curricula to meet the needs of student entrepreneurs through theoretical and practical initiatives for skills development. Promote an entrepreneurship ecosystem that stimulates entrepreneurship through the intervention of curricula design. Mapping the entrepreneurial landscape by collectively addressing the triple challenges of poverty, unemployment and inequality by looking into the role of entrepreneurship education. An education system should equip the youth with the necessary tools to reduce high dropout rates, which severely undermines skills building and employability. Education systems should unleash the potential of student entrepreneurs; this will significantly alleviate poverty and unemployment and give students the skills to create employment. Develop the interdisciplinary skills that lead to the development of an “entrepreneurial mindset” as a result of access to facilities such as: ideation centres, entrepreneurship incubators, mentors, support and funding. Meaningful learning happens through engagement with students since everyone has things to learn. The curriculum becomes nothing more than words on a page if students do not have the opportunity to actually engage with it. Hands-on experiential training is beneficial. 28 1.5 ENTREPRENEURSHIP AND AFRICAN INTEGRATION 1.5.1 Entrepreneurs and Ubuntu values One of the characteristics of Ubuntu is caring. Entrepreneurs should be encouraged to have a sound understanding of their impact on others and acknowledge others’ interests as being valid and as significant as their own. Embracing this particular value would dramatically change the way they do business. Allis’s (2012) start-up guide for entrepreneurship and small business shows how to conduct business using the values of Ubuntu. Allis (2012) identified the following characteristics of Ubuntu in the indigenous knowledge production paradigm: Acceptance: recognise the unique humanity of those with whom one does business; the stakeholders. Action: understand that deliberate and careful actions can be agents of change. Adaptation: maintain the ability to flow, learn and modify yourself to fit new surroundings or adapt to new circumstances. Analysis: analyse what you do and do not do, and attempt to define and derive inherent laws, axioms, tenets and guideposts based on the effects of these actions and inactions. Best effort: put forth full and best effort within the boundaries of proper physical and mental health. Challenge: regularly challenge and step outside your comfort zone to reach worthy goals. Commitment: uphold commitments and always underpromise and overdeliver. Communication: make it a priority to learn and communicate extremely well with others. Confidence: always be confident and optimistic, and set realistic but ambitious goals. Honesty: be honest and forthright in all representations and deliberations with yourself and others. Integrity: act with integrity and in alignment with what you say you will do. Perseverance: do not give up nor give in too soon, as long as a goal is worthy of the effort Work ethic: work both hard and intelligently and do not leave for tomorrow what can be done today. The practical application of Ubuntu values in emerging African economies contributes to new business methodologies and profit making, which is one of the main objectives of a business. 1.6 THE SOUTH AFRICAN POSITION WITHIN BRAZIL, RUSSIA, INDIA, CHINA, SOUTH AFRICA (BRICS) The BRICS countries are said to have a lot in common in terms of population, GDP and unemployment. The invitation of South Africa’s participation into BRICS is to provide a gateway to Africa. According to DIRCO SA (2014), the formation of BRICS is an effort by its members to foster cooperation in order to meet global challenges, especially those faced by emerging economies. There are arguments regarding why South Africa should be included in BRICS and opposing arguments regarding why South Africa should not be included. These arguments are summarised below. 1.6.1 Arguments for South Africa’s inclusion in BRICS According to Naidoo (2012), the reasons that South Africa should be included in BRICS are: South Africa accounts for approximately one-third of domestic product in sub-Saharan Africa. It is seen as able to provide BRICS members with improved access to Africa’s 800 million consumers. It has minerals and other resources that cannot be ignored with regard to accelerating new growth. South Africa has a mature economy and sound corporate governance structures. It has a strong regulatory framework, which can attract investors seeking a secure investment. 29  South Africa is also the platform, through the JSE, on which investment throughout the continent is established. Many South African companies do business in Africa and are also therefore well placed to provide information to BRICS nations looking to invest in Africa. South Africa has an excellent infrastructure, established corporate footprints and a culture of innovation. It has easy access to finance for business, a stable macro- and micro financial climate. There is an advanced banking system and functioning regulatory frameworks. According to DIRCO SA (2014), South Africa is also the most developed country in sub-Saharan Africa and serves as a gateway to Africa. 1.6.2 Arguments against South Africa’s inclusion in BRICS The following represents the argument by Neill (2010) against South Africa participating in BRICS despite it being a gateway to Africa. South Africa is by far the smallest in economic output. South Africa has therefore too small an economy to justify its inclusion in the group. It has an economy of $286 billion, less than a quarter of Russia’s, the smallest of the original four BRIC nations, and its population of 50 million is far below Russia’s 142 million and Brazil’s 191 million. Many commentators have indicated that Nigeria would have better represented the African continent since it is thought to have an economy larger than that of South Africa as well as the largest population on the continent. South Africa is far too small to be in the top 20 global economies, and is not even a member of the N11 (the “Next 11” emerging economies with promising outlooks). Even on the African continent, South Africa’s growth prospects are anticipated to be only 2.7 per cent in 2016 to 2017, while the average for the rest of Africa, in the short-tomedium term, is expected to be 7 per cent. South Africa is also losing out in terms of foreign investment to Nigeria, a country with a population of 155 million (Naidoo, 2012). However, arguments for the inclusion of South Africa in BRICS indicate that what South Africa lacks in demographic and economic clout, it is said to make up by representing Africa at BRICS. Table 1.1 indicates the geographic position of BRICS nations. It shows that Russia is the biggest country, at 17.1 million square kilometres (km2). Due to its large area, it also has more administrative regions than all the other BRICS members. The second largest country is China at 9.5 million km2, followed by Brazil (8.5 million km2) then India (3.3 million km2). South Africa has the smallest area at 1.2 million km2 and the smallest number of administrative regions. According to the South African Institute of International Affairs (SAIIA), the BRICS countries collectively account for over a quarter of the world’s land area (CIA, 2013). 30  Figure 1.2 Levels of entrepreneurial activity (TEA) categorised by motivating factor and BRICS country Note: Necessity-based TEA indicates entrepreneurial activity that is prompted by the entrepreneur being unable to find work elsewhere, and therefore needing to start a business to support him or herself. Opportunity-driven TEA indicates entrepreneurship that is driven by the availability of business opportunities. Improvement-driven TEA indicates entrepreneurial activity that arises when an entrepreneur is not driven by need to embark on a new business venture, but is driven by the potential of increasing his or her income, or by the benefit of being independent. Source: GEM Global Report (2014) 31  Table 1.1 Geographical position of BRICS Country National flag Total area Capital city Administrative regions Brazil 8 514 877 Brasilia 26 states and 1 federal district Russia 17 098 242 Moscow 46 provinces, 21 republics India 3 287 263 New Delhi 28 states and 7 union territories China 9 596 961 Beijing 23 provinces and 5 autonomous regions South 1 219 090 Pretoria 9 provinces Africa Source: Central Intelligence Agency (CIA) (2013) 1.6.3 Economic power and what it means According to Goldman (2003), it is expected that by 2050, the four BRIC economies could be wealthier than most of the current major economic powers. China and India will become the world’s dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. Owing to lower labour and production costs, many companies also cite BRIC as a 32 source of foreign expansion opportunity and promising economies in which to invest. BRIC member countries, sometimes known as the “Big Four” are referred to as emerging economies. Although the per capita income levels remain lower than industrialised economies, the aggregate wealth of the BRIC countries will exceed that of the G6 partly due to the large populations of these countries. South Africa (now a BRICS member) is not doing well in relation to high unemployment and low growth. Unstable political climates, skills shortages due to its poor education system resulting from past policies, and corruption as well as crime, all compromise growth potential for South Africa. Nevertheless South Africa is very well positioned for high export trading and a hub or gateway for African countries is an added advantage to BRICS. 1.6.4 Opportunities and challenges of emerging economies – the BRICS perspective Table 1.2 Disadvantages and advantages of different BRICS countries for entrepreneurs (see also section 4.3) Opportunities: Brazil Challenges: Brazil Rich in natural resources (minerals, oil and gas, Social infrastructure lacking (e.g. road and rail soybeans, rainforest, water) transport systems) Diversified economy High tax burden on individuals and corporates (the Favourable labour costs highest in emerging economies) Low levels of investment in education and skills development High levels of inflation and public debt Opportunities: Russia Challenges: Russia Rich in natural resources Hit hard by 2008’s financial crisis A leading economy High levels of inflation in comparison to other Has the largest consumer class emerging economies Relatively politically stable Low levels of investment in social infrastructure Has a skilled labour force Low levels of investment in business resulting in businesses not always being competitive Lacks institutional strength and political willingness to implement serious reforms that help to sustain growth Opportunities: India Challenges: India Growing young population gives a competitive Public sector finance is poor edge and drives economic growth High levels of debt Private companies in key sectors (IT, Low spending on development outsourcing, pharmaceuticals and textiles) Poor infrastructure, low levels of internet penetration are a key asset and burdensome bureaucracy Risk-averse environment Opportunities: China Challenges: China Industrially competitive and diverse Environmental issues pose a threat to sustainable High levels of economic growth (although growth slowing) High levels of inequality lead to social tensions Strong foreign investment Factory employment is close to maximum capacity Strong levels of development with regard to The supply of cheap labour is shrinking, as urban infrastructure and technology wages rise and more people leave rural areas for urban areas Opportunities: South Africa Challenges: South Africa Gateway to Africa 33  Good natural resources Skills shortages due to a poor education system Relatively stable politically, mature economy inherited from the previous dispensation and sound corporate governance structures High levels of unemployment, poverty and inequality Good infrastructure Corruption and crime Business finance available Economically small in comparison to the other BRIC An advanced banking system countries Expanding consumer market High levels of bureaucracy and regulatory Youthful demography compliance Natural challenges, such as drought and the spread of HIV/AIDS Source: Adapted from Greater Lansing Business Monthly (2009) 1.6.5 Regional imperatives Table 1.3 shows both the benefits and barriers to regional co-operation. The Southern African Development Community (SADC) demonstrates that regional cooperation holds good prospects for participants. Table 1.3 Benefits and barriers to regional cooperation in the SADC Benefits Barriers Integration of air services Poor connectivity and high fares Harmonised regulations and legislation Fear of losing own sovereignty Gender equality and empowerment Negative traditional views of subordinating women Improved postal services Labour disputes Improved telecommunications Theft of copper cables Trade liberalisation Dumping of cheap, poor-quality goods Labour mobility Trafficking Loosening border controls Threats to sovereignty Improved tourism market Environmental degradation Population provides market Unemployment and poverty make trade difficult Cultural diversity Trade marginalises local cultures Technological transfers Patent/intellectual property rights Source: SADC (2012) 34  Table 1.3 provides a summary of benefits and barriers that countries of the SADC experience. These issues are not unique to this region. Trade among countries brings with it both positives and negatives, but with cooperation these negatives can be successfully addressed. Similarly, small businesses can benefit in the same way. Free trade means businesses can engage with little or no fear of the burden of taxation. Also, free trade means traders are relieved from the states subsidising their country’s products unfairly. One of the reasons the BRICS was formed, for example, relates to unhappiness with the manner in which the rich countries dominate the emerging economies. This means that if the emerging economies adopt policies that favour them outside the confines of the rich world, they stand more chance of doing business with each other without domination. In this regard, regional trade tends to equate countries of similar strengths and ideologies to some extent. Explaining Asia’s regional economic integration, Das (2009) highlights the following as advantages of regional integration: Coherent policy mechanisms address developmental asymmetries. Helps less developed countries take advantage of global market-access opportunities. Enhances social cohesion. Improves social infrastructure including health and education. Reduces absolute protectionism. Member countries benefit from lower prices. Development experiences get replicated. Trade barriers are removed. Labour movement is encouraged. 1.7 POLICY IMPLICATIONS FOR ENTREPRENEURIAL DEVELOPMENT WITHIN SOUTH AFRICA South Africa has a 25 per cent unemployment rate related to structural unemployment. Policy makers, government and other stakeholders need to create an enabling environment for learning. TVET colleges should be prioritised to assist the youth with technical vocational skills, while universities should create a conducive entrepreneurship ecosystem to stimulate practical learning. Financial resources could be mainstreamed to big business, which will then be used for internships. This will result in skills transfer to prospective entrepreneurs. The contribution of the informal sector, for instance street vending, should be recognised as this sector creates employment opportunities. Measures to improve access to poorly located areas due to inadequate infrastructure (in the rural areas), which limits social inclusion and faster economic growth, should be put in place. South Africa’s growth path is highly resource intensive and hence unsustainable. This can be changed by better education and training as discussed above. Corruption, which undermines state legitimacy and service delivery, should be kept in check. 1.8 CONCLUSION In this chapter the concept of an emerging economy was outlined in the context of BRICS. Emerging economies are those economies that offer new products and services to their customers locally and internationally and as such provide growth opportunities for entrepreneurs. Challenges that are sometimes faced by entrepreneurs in small business are sometimes caused by the challenges of territorial borders and 35  infrastructure. Nonetheless, in some circumstances many emerging economies are coming out from the shadows of their past colonial masters. Consequently, the concept is a reflection of historical economic- political factors. REVIEW QUESTIONS 1. Define the concept “emerging economies”. 2. Differentiate between innovation driven and factor driven economies. 3. What are the characteristics of emerging economies? 4. What are the challenges facing small and medium enterprises in South Africa. 5. Discuss the role of education in South Africa. 6. Discuss Ubuntu as a value for entrepreneurs in conducting business. 7. What are the arguments for and against South Africa’s inclusion in BRICS. 8. Discuss the opportunities and challenges facing BRICS economies. 9. What are the challenges facing economic growth potential in South Africa? 10. What are the managerial implications for South Africa as a BRICS member state? 11. What are the policy implications facing policy makers in the South African context? REFERENCES Allis, R. 2012. The startup guide. Values for Entrepreneurs. San Francisco, CA: StartupGuide. Altman, M. 2013. The challenges of employment creation in South Africa. In Pillay, U., Hagg, G. & Nyamnjoh, F. (Eds). State of the nation: South Africa 2012–2013. Pretoria: HSRC, 185–221. Amoros, J.E. & Bosma, N. 2014. Global Entrepreneurship Monitor: 2013 Global Report. Netherlands. Banerjee, A., Galian, S., Levinson J., MClarens, Z. & Woolard, I. 2008. Why has unemployment risen in the new South Africa? Economics of Transition, 16(4): 715–740. Bosma, N. & Levie, J. 2009. Global Entrepreneurship Monitor: 2009 Global Report. Available at: http://www.gemconsortium.org/ (accessed on 26 March 2016). Brand South Africa. 2015. Small business is big business for South Africa. Available at: https://www.brandsouthafrica.com/investments-immigration/business/trends/newbusiness/small-business-is-big- business-for-south-africa Carree, M., Van Stel, A., Thurik, R. & Wennekers, S. 2002. Economic development and business ownerhip: an analysis using data of 23 OECD countries in the period 1976–1996. Small Business Economics, 19(3): 271–290. Child, J., Faulkner, D. & Tallman, S.B. 2011. Cooperative strategy managing alliances, networks, and joint ventures. Oxford University Press. DIRCO SA. 2014. BRICS and Africa: partnership for development, integration and industrialisation. Papers of the fifth BRICS academic forum partnership for Development, integration & industrialisation. Gauteng Provincial Treasury. 2013. South Africa’s position in BRICS. Available at: http://www.treasury.gpg.gov.za (accessed on 24 March 2016). Goldman, S. 2003. BRIC economic powers. introduction and early writing on BRIC (accessed May 2017). 36 Goldman, S. 2013. Gauteng Provincial Treasury. BRICS and its role. SA: CIR. Greater Lansing Business Monthly. 2009. The BRIC countries. Available at: https://lansingbusinessnews.com/departmentcolumns/global-marketplace/2009/05/the-bric-countries/ Herrington, M., Kew, J. & Kew, P. 2009. Tracking entrepreneurship in South Africa: a GEM perspective. Cape Town: GEM. Hisrich, R.D. & Grachev, M.V. 1993. The Russian Entrepreneur Journal of Business Venturing, 8: 487–489. Juma, C. 2015. Enterprises as innovation schools. New African, 553. IC Publications: London. Kingdon, G.G. & Knight, J. 2004. Unemployment in South Africa: the nature of the beast. World Development, 32(3): 391–408. Kirk, D. 2014. Causes of unemployment in South Africa. The structural unemployment for South Africa. Available at: https://twentythirdfloor.co.za/2010/12/01/causes-of-unemployment-in-south-africa/ Liedholm, C. & Mead, D.C. 1998. The dynamics of macro and small enterprises in developing countries. World Development, 26(1): 61–74. Likotsi, N. 2014. Development finance institutions’ opportunity evaluation process in South Africa (Master’s dissertation). Johannesburg: Wits Business School. Available at: https://core.ac.uk/download/pdf/39675637.pdf Mazibuko, S. 2013. Understanding underdevelopment through the sustainable livelihoods approach. Community Development, 44(2), 173–187. Mazwai, T. 2013. South Africa’s embedded environmental dynamics and their impact on entrepreneurship and small business development: a critical appraisal. In Ndletyana, M. & Maimela, D. Essays on the evolution of the post- apartheid state. Mapungubwe Institute for Strategic Reflection: Johannesburg, 269–298. McIntyre, J.R. & Alon, I. 2005. Business and management education in transitioning and developing countries: a handbook, 1st ed. M.E. Sharpe Inc. Nieman, G. & Neuwenhuizen, C. 2014. Entrepreneurship: a South African perspective. South Africa: Van Schaik. Palat, R.A. 2009. Rise of the global South and the emergence of a new world order. In Pieterse, J.N. & Rehbein, B. (Eds). Globalization and emerging societies: development and inequality. London: Palgrave MacMillan, 39–60. Pieterse, J.N. 2009. Twenty-first century globalisation. In Pieterse, J.N. & Rehbein, B. (Eds). Globalization and emerging societies: development and inequality. London: Palgrave MacMillan, 1–38. PwC. 2015. Will the shift in global economic power continue? The World in 2050. Available at: https://www.pwc.com/gx/en/issues/the-economy/assets/world-in-2050-february-2015.pdf SAB. 2013. SAB entrepreneurship programme drives job creation. The Thinker, 51. Johannesburg. SADC. 2012. Towards a common future: cross-cutting issues. Available at: http://www.sadc.int/themes/economic- development/ Schwab, K. 2012. The Global Competitiveness Report, 2011–2012. Available at: http//www.weforum.org/reports Schumpeter, J.A. 1934. The theory of economic development. Boston: Harvard University Press. Sen, A. Development as freedom. Knopf: New York. 37 Smallbone, D. & Welter F. 1995. Entrepreneurship and small business development in post-socialist economies. Routledge. Statistics South Africa. 2011. Census. Available at: http://www.statssa.gov.za/?page_id=3839 Thurik, R. & Wennekers, S. 2004. Entrepreneurship, small business and economic growth. Journal of Small Business and Enterprise Development, 11(1): 140–149. Urbonavicius, S. 2015. Organisations and markets in emerging economies. Available at: http://www.om.evaf.vu.lt Van Praag, C.M. & Versloot, P.H. 2007. What is the value of entrepreneurship? A review of recent research. Small Business Economics, 29: 351–382. Wade, R.H. 2014. Globalisation, growth, poverty, inequality and imperialism. In Ravenhill, J. (Ed.). Global Political Economy, 4th ed. Oxford University Press: Oxford, 372–413. Wilson, D. & Purushotaman, R. 2003. Dreaming with BRICs: the path to 2050. Global Economics Paper 99. Goldman Sachs, New York. Xavier, S.R., Kelley, D., Kew, J., Herrington, M. & Vonderwülbecke. 2013. Global entrepreneurship Monitor: 2012 Global Report. Cape Town: GEM. 38  2 Small business start-ups in emerging economies L. van Scheers LEARNING OUTCOMES After you have studied this chapter you will be able to ▪ define a small business in an emerging economy ▪ understand how to start a small-business start-up in an emerging economy ▪ identify factors contributing to start-up failure in emerging economies ▪ describe the role of small-business start-ups in the emerging South African economy ▪ identify ideas for small-business start-ups in emerging economies ▪ discuss small-business start-up business categories ▪ explain the macro environment of start-up businesses in emerging economies. KEY TERMS ▪ Small business start-up ▪ Emerging economies ▪ Start-up failure ▪ Start-up business categories ▪ Macro environment of start-up businesses 2.1 INTRODUCTION Emerging economies create opportunities for the development of new small businesses. The enhanced spending power of the growing middle class in these emerging economies is responsible for the creation of small business. Abor and Quartey (2010) suggest that, according to statistics, more than 80 per cent of all businesses in South Africa are described as small and this large number of small businesses is responsible for about 40 per cent of all economic activity. Natarajan and Wyrick (2011) suggest that it is important to know that about 80 per cent of all new job opportunities are created in the small-business sector and that more than 70 per cent of South Africans are employed in small businesses. Small businesses therefore form the backbone of the South African emerging economy. The term “emerging economy” appeared in the 90s. It is an updated term for Third World countries. It is difficult to define and it is easier to remark that emerging economies include “all those countries not considered developed”. Emerging economies have some characteristics of developed economies, but do not meet standards to be considered developed economies yet. The characteristics of developed economies can be described: as high average income per capita and education level; with a relatively small population growth rate per year; and offering a lifestyle market economy to its population. It is clear that these characteristics do not depict a developing country like South Africa. In contrast, South Africa has an emerging (developing) economy, which suffers from: a generally low level of income per capita of the population; high unemployment levels; a large informal sector; a large small- business sector; and exports raw materials instead of processed products to developed countries, such as France. Another example of a developed economy is the Netherlands, which has a successful economy and well-established capital markets. It also shows openness to foreign ownership, ease of capital movement and efficiency of market institutions. In contrast to the Netherlands South Africa is known as an emerging economy and experiences lower income per capital, rising interest rates, an unstable sociopolitical environment, high unemployment and lower levels of business activity (Abor & Quartey, 2010). Emerging economies can be found throughout Asia, Africa and Eastern Europe whereas mature economies are those in 39  North America, western Europe and Japan. In addition to being an emerging economy, South Africa also joined the BRIC countries in 2010. Even though it has a much smaller population and economy as compared to the other BRICS countries, factors such as its vast natural resources (gold, diamonds and platinum), developed infrastructure, easy access to finance for small businesses and functioning regulatory frameworks work in its favour to be included (http://www.fairobserver.com). It is evident that China is the most dominant constituent of the BRICS, and it is also a top investor in South African banking, infrastructure, mining, transport and renewable energy. For example, Standard Bank received an investment of $4.7bn from the Industrial Commercial Bank of China (ICBC), which represents a 20 per cent share. It seems that emerging economies contribute to the world economy by becoming important areas for global manufacturing operations. In developed countries, employment is very expensive; that is how emerging economies manufacture products that will be more competitively priced. In emerging economies products are manufactured by small businesses. Therefore a significant characteristic of a flourishing and growing emerging economy is a booming small-business sector (Fida, 2008). The significant role that this sector plays in the South African economy cannot be ignored. Van Scheers (2011) argues that, although there is recognition of the important role they play in the South African economy, their development, growth and sustainability are largely constrained by a number of factors. This chapter will define small businesses; give ideas for small-business start-ups; explain factors contributing to small-business failure; note the role of small businesses; indicate different small-business categories; and finally, discuss the macro environment of small businesses in emerging economies. Next, we will define a small business in an emerging economy such as South Africa. 2.2 DEFINING SMALL BUSINESSES IN EMERGING ECONOMIES Secondary research (Phakisa, 2013) indicates that there is no universally accepted definition for a small business because what is regarded in the US as a small business would often be regarded as a medium-sized business elsewhere in the world. In South Africa, Phakisa (2013) defines an enterprise with fewer than 100 employees as a small business whereas in Egypt it is defined as having more than five and fewer than 50 employees. This can be compared to another emerging country, for example Vietnam, where they consider a SME to have between 10 and 300 employees. With regard to developed countries, the Inter-American Development Bank defines an American small business as having a maximum of 100 employees compared to the European SMEs with fewer than 250 employees (Natarajan & Wyrick, 2011). The following economies are considered to be “emerging”: Brazil, Chile, China, Colombia, Czech Republic, Hungary, India, Mexico, Russia and South Africa. As mentioned, a small business is defined in different ways with reference to the number of employees or to turnover (as in the National Small Business Act of 1996). In South Africa, a small business is officially defined in section 1 of the National Small Business Act of 1996 as amended by the National Small Business Amendment Acts of 2003 and 2004 as a separate and distinct business entity. This includes cooperative enterprises and non-governmental organisations, managed by one owner or more which, including its branches or subsidiaries, if any, is predominantly operated in any sector or subsector of the economy. The National Small Business Act categorises South African small businesses into the following distinct groups: the survivalist, micro, very small, small and medium businesses. The term “SMME” is therefore used to describe small, medium and micro-enterprises. However, in South Africa the terms “SMME” and “SME” are used interchangeably. In South Africa, the SME is defined by the number of employees per enterprise-size category combined with the annual turnover category and the gross assets excluding fixed property. The National Small Business Act 102 of 1996 provides definitions for various SMME categories as identified in Table 2.1. 40  Table 2.1 Definitions of SMEs given in the National Small Business Act Enterprise Number of employees Annual turnover Gross assets, excluding fixed size pro