CENTRE FOR SMALL BUSINESS DEVELOPMENT: FACULTY OF MANAGEMENT
WORKING PAPERS THE THIRD ANNUAL INTERNATIONAL CONFERENCE GROWING INDUSTRIES IN TOWNSHIPS AND UNDER-DEVELOPED NEIGHBOURHOODS
SOWETO CAMPUS 15–16 May 2012
Njiro Esther (PhD)1 and Thami Mazwai (PhD2) (Eds.)
ISBN: 978-0-620-52889-4
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[email protected] [email protected]
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The List of Reviewers 1. Prof. M Roberts-Lombard 2. Prof. Jane Spowart 3. Prof. Mercy Mpinganjira 4. Prof. Cecile Nieuwenhuizen 5. Dr Shepherd Dhiliwayo 6. Mrs Joyce Sibeko 7. Prof. Ferdi Van Der Walt 8. Mrs Thabile Chawane 9. Prof. Chris Rogerson 10. Mrs Magda Hewit 11. Mr Dirk Rossow 12. Ms Elmarie Strydom 13. Ms Estelle Tonder 14. Dr Adri Drotskie 15. Ms Marlene Bogards 16. Mr Collin Reddy 17. Mr Busani Dube 18. Prof. Peter Baur 19. Dr Maria Bounds 20. Ms Atta Bosch 21. Dr Thami Mazwai 22. Dr Esther Njiro
Most of these reviewers are from the Faculty of Management, University of Johannesburg.
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Introduction Since 2010, the Centre for Small Business Development of the University of Johannesburg has held annual international conferences based on the conceptual framework theme: Transforming Townships into Economic Powerhouses. The 2010 inaugural international conference focused on the situational analysis of the township businesses while the conference held in 2011 focused on Enhancing Skills and Value-add in Township Economies. The theme for this year’s conference (May 16–17, 2012) is Growing Industries in Townships and Under-Developed Neighbourhoods. This theme arose from one of the recommendations offered during the 2011 conference that the Industrial Policy Action Plan (IPAP2) should play a critical role in driving the growth of SMMEs. Township enterprises and the sectors in which they operate should be addressed as South Africa seeks ways to refine its industrial policy objectives. South Africa is developing comprehensive and fundamental policy directions as articulated in IPAP2, the New Growth Path (NGP) and the National Development Plan (NDP). These policies intend to stimulate economic growth and development: township businesses should find a niche in these policies. The following papers were presented at this third International conference 2012.
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Table of Contents Section1: Stimulating township industries Christine Nembaware & Mandy Nembaware: Chrios Trust Foundation: Stimulating a Culture of Innovation and Creativity among the Youth in Townships and other Informal Settlements
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C. W. Callaghan: Informal Development in Relatively Involuntary Work: Continuance Satisfaction, Product Offerings, Earnings and Biographical Factors
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John Ntema & Lochner Marais: The Role of the Informal Retail Business Sector in Economic Development: The Case of Mangaung Township, Bloemfontein
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N. Tayisepi & S. Mhlanga: Marula Nut Decortications Machine Development to Grow Industry and Sustain Rural Livelihoods in Chivi and Masendu Wards in Zimbabwe
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Loraine Boitumelo Mzini: Sustainability and Contribution of Agribusiness Enterprises in Sedibeng District Municipality: A Perspective of Pro-Poor Programmes
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Section 2: Marketing and financing township industries Akwasi Arko-Achemfuor: Financing SMMEs in Rural South Africa: An Exploratory Study of Stokvels in the Naledi Local Municipality, North West Province
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Busisiwe Skenjana: Reaping Profits at the Bottom of the Pyramid: Exploring Different Industries Funded by Stokvels in South Africa
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C. W. Callaghan: The Upliftment of Townships and Disadvantaged Communities through the Provision of Rental Stands and Legitimacy: Lessons from the Informal City Street Trading Context
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V.M. Mmbengwa, J.A. Groenewald, B.M. Gundidza, & A. Samie: Analysis of the Social Capital Investment for the Viability of Small, Micro and Medium Enterprises (SMMEs) in the Peri-urban Poor Communities of George Municipality in Western Cape Province, RSA
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Section 3: Management of township industries C. W. Callaghan: Informal Development and Upliftment of Impoverished Communities through Informal Activity in the Context of Xenophobia
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Ellen Nkosi & Maria Bounds: Skills Required for the Management of Small Enterprises in the Retail Sector in Soweto
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Msasanure Mercy and Mtisi Samson: The Role of Strategic Management in Enhancing the Growth of SMEs in Zimbabwe with Special Reference to Bulawayo
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V.M. Mmbengwa, J.A. Groenewald, B.M. Gundidza & A. Samie: Assessment of Internal Entrepreneurship Capacity of Small, Micro and Medium Enterprises (Smmes) in the Underdeveloped Areas of George municipality, Western Cape Province, RSA.
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Olabisi Jayeola: Assessment of Tax Incentives and Development of Nigerian Industrial Sector
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Section 4: Challenging frameworks, policies and strategies for township industries Vusi Soli Ndala: Primary Contextual Factors: Vital Determinants for Sustainable Township Businesses and Industrial Development in South Africa
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Patience Siwadi: Business Linkages as a Strategy for Marginalized Manufacturing Industries in the Townships of Gweru Zimbabwe
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Akpor-Robaro, Masoje Oghenerobaro Mamuzo & Omoyele Samuel Olufemi: The Impact of Socio-cultural Environment on Entrepreneurial Emergence: An Empirical Analysis of Nigerian Society
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Sisa Ntshona: Business Linkages as Strategies for Industries in Marginalised Areas
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Vuyo Mahlati: Township Value Chains
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Section1: Stimulating township industries Stimulating a Culture of Innovation and Creativity among the Youth in Townships and other Informal Settlements
Christine Nembaware & Mandy Nembaware: Chrios Trust Foundation
Abstract This paper looks at various ways of evoking a culture of innovation and creativity among youth in townships and other informal communities. Innovation is both a personality and a cultural issue. Economists believe that what primarily drives economic growth in today’s knowledge-based economy is not capital accumulation, as claimed by neo-classicists (Stephen & Levin 1996). Major changes in the U.S. Economy in the last 15 years have occurred not because the economy accumulated more capital to invest in bigger steel mills or car manufacturers. Rather, they occurred because of innovation. The U.S. economy developed a wide array of new technologies, particularly information technology, and used them widely. Although capital was needed for these technologies, capital was not the driver nor was capital a commodity in short supply (Audretsch & Weigand, 2000).
Methodology There is a need to breed an environment that will support and nurture youth in townships and informal communities. They should think about aspects of change, move into new orbits and be able to express their creativity. The new ideas will then be commercialized. The youth’s focus could be on how to create new forms of production, products, services and business models in order to expand wealth and improve quality of life.
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Gauteng Townships like Soweto, Evaton and Tshwane are characterized by sole proprietors running grocery stores, restaurants etc. There is a similar picture in Zimbabwean townships (Zim Report on MDGs, 2009). It should be noted that the world does not progress because of a new grocery shop, neither can industries grow from such static set-ups.(Michael et al., 1998) There is need to bring about a paradigm shift in people to enable them to think outside the box. The following solutions can be adopted.
Setting up of Satellite Resource Centres (SRC) in various townships. Their roles should cover the following:
o Educate youth on business opportunities within their neighbourhood o Encourage interactive meetings in order to identify various talents o Nurture talents, through support, and spearhead various projects. o Cater for parents and/or guardians of the targeted youth. Children thrive most when their families can secure meaningful employment that generates economic gain and community cohesion (Cohen & Cohen M, 2001) o Organise Camp Empowerment Training programmes, in which the youth will be taken away from their familiar environment and go out on camps for a week or two. Facilitators will be able to identify various skills and talents. Youth will also be encouraged to come up with innovative and creative ideas. o Carry out Business Development Training Programmes. Focus will be on the community resources, through which community development can be spearheaded. o Partner with the Financial Institutions in terms of funding.
Results/Implications
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The objective of the intervention is to strengthen capacity through market-led processes. Financial Loans should be accessible. SRC should undertake the study and design of credit products, addressing specific needs of the youth and informal communities.
Site visits These will be conducted in order to invoke the entrepreneurial spirit. In Bulawayo’s central fruit and vegetable markets, for example, we commonly see garbage piles consisting of fruits and vegetables—tomatoes, cabbages, oranges and apples. Situations like this create a business opportunity of setting up a canning industry: all excess produce can be bought cheaply and canned as tomato puree and fruit juice, for example. The large quantities of bad fruits and vegetables could be used for the production of methane gas which can then be stored in cylinders for domestic use. This results in a cleaner environment, and will also create a business opportunity for the impoverished youth. Gauteng is densely populated and generates the most wealth with its mining, technology, finance and manufacturing activities, yet it is characterised by poverty stricken youth. Site visits can enlighten them on the vast opportunities available to them. Those gifted artistically—as identified by an SRC—rather than academically can then be mentored into technical areas such as arts and craft. One of the biggest problems facing South African youth is education. South Africans have access to education, but most learners in poor areas end up dropping out, often getting involved with gangsters. They have their role model within the gangs. What these role models do is labelled as heroic and admirable rather than criminal. Violence and gangs are seen as a way of life and as a culture: the followers lack conviction and their sense of morality becomes distorted. Following a recent interview (December, 2011) with one of the teachers at Liberty Community School, an observer alluded to this. Following her 8
observations over the years she confirmed that poverty was the biggest problem. Other common factors included peer pressure, non- conducive environments, single mother family structures, child-headed families and pregnancy levels among the young girls.
Summary A culture of innovation and creativity can be created by focusing on the target group. Cultural diversities have to be taken into account since these will be instrumental in executing various policies aimed at the emancipation of the youth. There is need for an integrated approach to the immerse challenges faced by the youth. It is important for the Government to come out with an all- inclusive systematic framework that takes into account current economic challenges faced by the youth. Understanding the government’s role in this setting requires viewing the system as a whole rather than seeing the component parts individually. As policy makers they have to create a favourable climate for youth to engage in entrepreneurial practices.
Introduction The purpose of this paper is to look at various ways of evoking a culture of innovation and creativity among youth in townships and other informal communities. Innovation is both a personality and a cultural issue. Economists believe that what primarily drives economic growth in today’s knowledge-based economy is not capital accumulation, as claimed by neoclassicists. Major changes in the U.S. Economy in the last 15 years have occurred not because the economy accumulated more capital to invest in bigger steel mills or car manufacturing plants, but because of innovation. (Carlino, 1978) The success of start-ups in America sprang from the country’s tolerance of risk, individuality and reward. “Innovation is
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the specific tool of the entrepreneur, the means by which they exploit change as an opportunity for different businesses or a different service” (Drucker, 1985). The U.S. economy developed a wide array of new technologies, particularly information technology, and used them widely. Although capital was needed for these technologies, capital was not the driver and neither was capital a commodity in short supply. The emergency of such innovative practices resulted in the sprouting of small businesses, which later expanded into large multinational business empires. Small businesses play a pivotal role in the economy by utilising idle capacity as well as filling up niche markets. Entrepreneurship is closely associated with the community. There is social justification since most entrepreneurial activities are community oriented and generated. Richard Cantilon (1730), the French Economist, defined an entrepreneur as an owner or manager of a business who makes money through risk taking and initiative. The exact role and functions of the entrepreneur has always been debated, for the simple reason that the entrepreneur knows no boundaries or limits. Coming up with a unit of measure is almost impossible since entrepreneurs operate in undefined parameters. Most economists from Adam Smith and David Ricardo to modern day economists such as Mill and Marshall, agree that entrepreneurship plays an important role in developing the economy by generating wealth.
Literature review There has been limited research carried out on the topic of this paper either in Zimbabwe or in South Africa. However, recent literature on other countries across the globe provides a compelling perspective to what truly influences a successful venture for impoverished youth. Social capital is a contributor to entrepreneurial success and can be identified as linked to the long term success and sustainability of the SRC proposed in this paper. The intention of the SRC will be to embrace new business ventures for the youth. According to Honig, Lerner and 10
Raban (2006) entrepreneurs are required to leverage individual, social and human resources. Their study explored the experience military graduates had along with the ability to freely transfer knowledge to the civilian market after their military tour. The results showed, from an entrepreneurial perspective, that social capital provided the firms with networks that facilitated the discovery of new opportunities for businesses and the allocation of existing and potential resources (see Birley, 1985; Greene &Brown, 1997; Ram 1997; Lizzi 1999). Greater emphasis should be placed on understanding the entrepreneurial behaviour of foreign migrants in urban and informal settlements who choose self-employment (Masurel, Nijkamp & Vindigni, 2004). Historically, immigrants have played and continue to play a significant role in the development of the entrepreneurial activity of their adopted countries (Rath & Klooterman, 2003). They display a drive to build better lives through their willingness to act on their own resources and take charge of their financial destiny (Hunter, 2007). A major conclusion of the literature on building an enabling environment for urban youth is that entrepreneurship is a significant form of economic activity (Clark & Drinkwater 2010) and a promising spring board for social integration (Hiebert 2002) Emphasis has been placed on understanding the entrepreneurial behaviour of persons moving across national borders into different cultural and economic settings (Levent, Masurel & Nijkamp, 2003). This helps to explain the entrepreneurial capacity of creating and sustaining new business ventures (Morris, 2002). Researchers recognise that immigrant minority entrepreneurial activity cannot occur in a vacuum. It is deeply embedded in a cultural and social context (Krueger & Brazeal, 1994). In practice, the literature points to variables such as limited employment opportunities and blocked mobility, high rates of unemployment, marriage, family, being enslaved, length of time in a country, and lack of higher education as influencing the decision to be self-
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employed (Basu, 2004; Clark & Drinkwater, 2010; Collins, 2003; Hammarstedt, 2004; Hiebert 2002; Ram, 1997; Zhou, 2004).
Methodology There is a need to breed an environment that will support and nurture youths in townships and informal communities. They should think about aspects of change, move in new orbits, and be able to express their creativity. The new ideas will then be commercialized. The youth’s focus would be on how to create new forms of production, products, services and business models in order to expand wealth and improve the quality of life. The case study methodology was used in this study. Case studies over the past decades have gained considerable acceptance in business research, particularly as a method of choice for holistically examining complex phenomena in real life settings (Benbasat et al., 1987; Yin, 2003; Eisenherdt, 1989). According to Yin (2003) the case study strategy is most suitable when research involves why and how questions. It is at this juncture that we ask: “Why is it that an innovative and creative culture is non-existent among the youth in townships and informal communities?” This is, from an observational perspective, a big problem. We ask: “How will this problem be solved?” This brings in the research objective of implementing a model that can be channelled through the government, policy makers and educational institutions, in which the youth will be equipped with tools to be productive and to create jobs. Case studies tend to generalize findings when multiple techniques of inquiry and appropriate data validation methods are used (Oliveira & Rozenfeld, 2010; Bader, 2008; Bhaskaran & Jenkins, 2009). An Interactive Process was used in collecting and analyzing data. Evaluations have been based on Economic Publications; these have been used in triangulating the information. 12
Techniques applied Before any research is carried out, we at Chrios Trust Foundation (CTF) examine our position, values, beliefs and perspective. Reminding ourselves that the founding of the organization came about because we have a deep desire to improve our fellow human beings’ lot in life, if at all possible. According to our mission statement, we desire to empower, educate, identify latent talent, instil self-worth and pride in work well done, rescue and reestablish (Nembaware, 2010). In-depth interviews were conducted to achieve the theoretical saturation suggested by Eisenhardt (1989). We interviewed urban youth leaders at Pots & Pans Employment Agency in Bulawayo, Zimbabwe over a period of two years. The findings have been extrapolated and used in this paper. Small businesses are the driving force in most economies. Their growth orientation creates approximately 85% of new jobs in the world. A study, “Entrepreneurship & Small Businesses” by Michael et al., (1998) found that entrepreneurs make more money for their employees than big businesses or corporations do. They increase consumer buying power. Mullin (1997) outlined that even in developed industrialized economies, it is the innovative entrepreneurs, and the small to medium enterprise sector that are the largest employers as compared to the multinationals. Small business operations contribute tremendously to the country’s Gross Domestic Product (GDP) and Gross National Product (GNP). This stimulates growth as effective entrepreneurship ventures foster the creation of wealth in a nation. In China, SMEs contribute 70% of GDP and in Ghana 92%. In South Africa 91% of the formal business entities are SMEs and they contribute 52 to 57% of the country’s GDP and their SMEs represent over 90% of the private businesses that give employment to over 80% of the population. It is in the light of this backdrop that the following questions can be posed. 13
How can such a business culture be activated among the youth? Why is there no significant correlation between having a good, sound educational background and having a successful business? How can one explain that the economic success of any country is not related to the number of people in that country who have university degrees, acknowledged professions and even Masters of Science Degrees in Business Administration, and Doctorates? How come most people who posses these academic credentials rarely excel to high levels in the business world, while some people who do not posses any formal qualifications in business succeed in starting and managing highly successful businesses? There could be many reasons to explain why many academically qualified people never become highly successful people or never become extremely successful in business matters. Some of these matters may be to do with the Y-factor—the psychological factors and background of the individual, but there are universals that apply to this global phenomenon. Yes, education is vital but how or what you do with that education influences one’s destiny in life. Paradoxically, it seems as if once individuals acquire education, the more sceptical and risk-averse they become. People rather shelve their potential to pursue their ambitions and in turn find security through employment where they are prepared to work tirelessly and over impress to keep their jobs so as to earn higher salaries and elevation to better posts. If only these misdirected efforts could be harnessed and focussed in entrepreneurial activities, the world could be different. There is a global illusion that knowledge is power, and that one succeeds simply by possessing some knowledge. The truth is that knowledge cannot be considered as power, unless it is put into some useful form. Knowledge is simply potential power. Knowledge becomes power only if it is effectively applied. The effect of knowledge on a human being can be linked to how a computer works. One can store a computer program like Microsoft Word on a computer. This program is of no use to anyone as long as it is just stored in the computer. The only useful thing one can do with the program is to share it with 14
others but still, it will be useless to them for as long as it is stored in their computers. The computer program will become useful only when it is installed so that it becomes part of the operating system and only then when someone uses the program (Conway & Charles, 2001). Similarly, many people with a good education, and any other form of knowledge, have it in their brains. It is stored there. They can recall part of it and share it with others. The knowledge needs to be stored in their nervous systems so that it influences their patterns of thinking and behaviour. Ultimately this will alter their mind-sets resulting in the creation of patterns of thinking and behaviours that are congruent with their business knowledge (Bok, 2003). The big challenge is not acquiring knowledge and storing it in the brain. The challenge is installing the essence of this knowledge into our nervous systems so that it influences our patterns of thinking and behaviour. Very few people know themselves well enough and even fewer understand and appreciate their capabilities. In the end, the best they do is pump more and more knowledge into their brains in the hope that they will succeed more. In reality, success comes from one’s ability to identify capabilities and develop them into realisable value, by taking chances that present themselves, as well as maximising opportunities. It is a real paradox that employment levels continue to skyrocket, companies continue to close and economies continue to collapse at a time when the world is experiencing gargantuan increases in people who acquire and possess excellent educational qualifications. In light of this, it is imperative to note the efforts being made by Junior Achievement International. The organisation has come up with programmes that equip youth with entrepreneurial skills so that, upon their completion of their education, they do not become only academic giants, but socially acceptable, innovative and self-reliant individuals. Junior Achievement Zimbabwe goes further by imparting these skills to school pupils at a very 15
tender age to foster entrepreneurial skills in them at an early stage, and also by training school drop-outs and equipping them with life and business management skills. This has proved to be a very powerful poverty alleviation tool in the rural community set-ups of Zimbabwe. Considering the tightly contested world markets, entrepreneurs need to think outside the box in order to survive and succeed in this harsh competitive world. Global entrepreneurs thus need to engage with Blue Ocean Strategies so as to come up with innovative ideas and tap into new markets and virgin territories (Carlsson, 2003). Africa is a repository for these opportunities. With vast resources and readily available human labour, global entrepreneurs in the manufacturing sector have the opportunity to establish operations in Africa and enjoy the benefits of economies of scale. Africa also has a huge market. Gone are the days when world production and marketing used to focus on European markets as well as on those of more economically developed countries, neglecting the African markets as being Bottom of the Pyramid Countries. Tables have changed! Africa now possesses some of the best potential markets. Thanks to globalisation, consumer tastes and preferences tend to move at a uniform pace. Africa also has proven to be highly adaptive to new technologies, and the digital divide between Africa and more economically developed countries is fast closing. On a global scale, entrepreneurs need to identify the emerging markets since these represent huge opportunities in growth and profitability (Carlsson, 2003). Venturing into these markets is a good investment to entrepreneurs: as they establish businesses they are assured of prosperity as long as their mission, vision and marketing strategies are not myopic. Having foresight enables entrepreneurs to plan ahead and keep abreast of changes in the global environment as well as seize and capitalise on opportunities. It is in view of these changes in the economic global framework that the mind-sets of both the rural and urban youths can be reset to enable them to generate small businesses in their respective environments. 16
A wave of protests erupted in townships across South African in July 2009 over shoddy housing and public services, while protests in Eastern Mpumalanga resulted in shops owned by foreigners being looted and burned (Mail & Guardian Online July, 2009). This goes to show the rigidity and lack of foresight in coming up with innovative and creative business practices that can alleviate the youths’ poverty. Expression of fury at the economic challenges faced should instead invigorate new business ideas to overcome them. Gauteng townships like Soweto, Evaton and Tshwane are characterized by sole proprietors running grocery stores, restaurants etc. There is a similar picture in Zimbabwean townships. It should be noted that the world does not progress because of a new grocery shop, neither can industries grow from such static set-ups (Zhou, 1992). As mentioned earlier SRCs are part of our proposed solution.
Results/Implications The objective of the intervention is to strengthen capacity through market-led processes. Financial Loans should be accessible. An SRC should undertake the study and design of credit products, addressing specific needs of the youth and informal communities. An excellent example can be obtained and practised from the followings Case Studies.
Enterprise Works Worldwide El Salvador The initiative was to help small-holding coffee farmers increase the volume and value of the coffee they grow. Farmer cooperatives were helped to provide extension services, upgrade and build processing facilities, improve quality control, and access more profitable markets. The project operated a revolving credit fund for small farmers (Mencia, 1995; Arturo, 2000). Project Achievements: 1568 small-scale coffee owners and workers each earned at least US$20 in additional income in the 1998/9 production year. The project created a profitable 17
coffee marketing company with a progressive decline in costs (Kapila & Mead, 2002; Stosch & Hyman, 2002).
Enterprise Works Worldwide Zimbabwe oil press project This sought to build a new industry from small, rural oilseed processing plants in Zimbabwe. Project activities included developing and disseminating five oil press models, producing and distributing improved planting seed, training manufacturers, repair artisans and new oilprocessing enterprise managers, establishing commercial system to distribute oil presses and peanut butter mills, providing credit to promote purchasing the new processing equipment. The project has generated employment for 4150 people in oil press enterprises and permitted 6000 farmers to increase their production of sunflowers. Benefits in 1998 were delivered to 18421 producer participants (categorized as press owners and their workers, press sales outlets, repair artisans, filter manufactures, oilseed and peanut butter processors, press and seed sales agents, and farmers growing oilseeds for sale to processors (Dawson, 2002)
Intermediate Technology Development Group (ITDG) light engineering project in Zimbabwe This project sought to increase the availability of tools and equipment to small manufacturing enterprises. In addition to working with small-scale engineers to increase domestic capacity to manufacture new and appropriate machines, the project helped to establish marketing systems through which these capital goods could be bought or hired by small enterprises (Dawson, 2002 )
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Mennonite Economic Development Associates (MEDA) ASOMEX Project in Bolivia This provided marketing services to link small farmers of edible beans with export markets for their products (Rawlinson & Fehr, 1999).
Seeds’ Ornamental Fish Project in Sri Lanka This project helped small-scale producers to establish and operate ponds to raise ornamental fish and linked those small producers with traders who purchased the fish for export, with smaller amounts for sale on the local markets (Yu, 2002; Weerakoon, 1998).
Techno Serve Cereal Storage: Processing and Marketing Project in Ghana This project helped small-scale farmers to increase the benefits they received from their crops by improving grain marketing. It permitted farmers to store grain either for later consumption or later sale, when prices were more favourable than at harvest (Dawson, 2002). These Case Studies identified market opportunities which were tied to subsectors perceived to offer good prospects for small enterprise income and employment. Support services offered included business development services.
National Budget: education Gauteng youth have to take advantage of the Government’s assertiveness in response to their dire educational needs. The 2012–2013 National Budget is biased towards education, which has been given the lion’s share as is reflected by the diagram below.
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With Government expenditure on education set at R207.3 Billion this constitutes 19.6% of the total budget. This is a reflection of Government Policy geared towards empowering youth.
Recommendations In view of the South African Government’s commitment to education, High Schools should adopt an education curriculum that incorporates extensive training in the precepts of commerce and industry, and in business techniques and skills without undermining the current focus of the educational system and its syllabi. The Government should adopt policies that accommodate, foster and nature good governance and prosperity, thus encouraging youth development initiatives in both the urban and rural areas. The adoption of the SRC model will facilitate the growth of youth initiatives, which can result in the establishment of strategic relationships with the global village. The facilitation and enhancement of small and micro scale enterprises (SMEs) and their growth into Medium Scale Enterprises (MSEs) should be enacted. This has been the 20
foundation of most of the world’s larger economies. India, for example, is now the world’s third largest economy; it vigorously deregulated its economy, which resulted in its evolution from informal to formal sector economic activity and thus motivated entrepreneurism. The enactment of tax concessions for youth projects will foster growth. The establishment of industrial and trading parks with requisite operational facilities, and nominal rentals for all newly established youth businesses will also foster growth. The Government should be urged to offer subsides for activities that help to develop the capacity of private providers of Small Business Initiatives (SBI) in both urban and rural areas. An SRC should spearhead research programmes that focus on methodologies for the design and delivery of high-impact, cost-effective practices for small producers. An SRS in collaboration with Government should facilitate technical change and build knowledge and skills among the rural youth small-scale producers. They can also develop pilot projects for both urban and rural youth that establish businesses by providing credit and business training. Rural youths represent an important segment of the market that is removed from market opportunities, both geographically and culturally. For these segments there is a need for more comprehensive and longer term interventions, by both the Government and an SRC, if appropriate businesses are to be developed. See, for example, the townships in the Eastern Cape which are centres for livestock such as sheep, angora goats and cattle. Full advantage should be taken of the emergence of industries biased towards their competitive advantage in these sectors. The same will be true for Free State rural youths, where the Province’s agricultural strength covers crops such as potatoes, maize, sunflower seed, wheat and sorghum. The Limpopo Province is also characterized by agricultural activities covering vegetable produce. 21
The above entrepreneurial activities evoke the notion of clusters both in the product and service industries. Adoption of this concept would result in positive outcomes. Clusters are groups of interrelated industries that drive wealth creation. The economies of the various provinces show the divergence of an individualist approach towards one of geographic concentration of inter connected youth activities. Encouraging cluster development initiatives among the youth has the following advantages: They reduce the cost of doing business. They foster high levels of productivity and innovation. Positive spill-over occurs across complementary economic activities. The presence of strong clusters in townships enhances growth opportunities in other industries. Clusters enhance competitiveness.
Conclusion A culture of innovation and creativity can be created by focusing on the target group. Cultural diversities have to be taken into account since these will be instrumental in executing various policies aimed at the emancipation of the youth. This study may not provide a comprehensive picture of the current situation and trends nor a baseline, but it outlines proactive suggestions on how to prepare the youth’s future at a tender age. No deeper analysis is provided: there is a need for further studies, based on the current economic status, to be done. The study cannot provide extensive proposals for economic solutions or policy changes. The South African Government should take advantage of the proposed idea of Satellite Resource Centres by offering specific training programs which teach and train the youth in small business ownership and entrepreneurship. Such a model will bring in Government Policy makers and educational institutions. Implementation of this model is 22
likely to be an added bonus to the country’s economic development. Close collaboration among the Government, the business community, the educational sector and the youth is essential to economic growth. The major research objective would be to come out with an extensive report facilitated by teams of specialists including economists, financial experts, educationalists, gender specialists, captains of business and agriculturists.
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Shan. (2005). Economic Development Through Entrepreneurship. Cheltenham UK.: Edward Elgar Publishing Limited. Shane, S. (2003) A General Theory of Entrepreneurship: The Individual Opportunity Nexus. Cheltenham, UK & Northampton. MA. USA: Edward Elgar. South African Budget 2012–2013 www.mazars.co.za/Home/News/Our-publications/Budget-Book-2012-2013 South African Townships www.saweb.co.za/townships/index.html Saxenian, A. & Edulbehram, J. (1998) Immigrant Entrepreneurs in Silicon Valley. Berkeley Planning Journal,12, 33–40. The Sunday Mail Zimbabwe (Dec 11–17 2011) Securico Wins Africa. Zhou, M. (1992) Chinatown: The Socio-Economic Potential of Urban Enclava. Philadelphia: Temple University Press.
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Informal Development in Relatively Involuntary Work: Continuance Satisfaction, Product Offerings, Earnings and Biographical Factors
C. W. Callaghan
Abstract According to the development and entrepreneurship literature the informal sector has a role to play in the upliftment of communities and townships because it offers a form of employment that, despite its relatively impoverished nature, is accessible to unemployed people and those unable to find employment in the formal sector. However, a fundamental differentiation of this sector from the formal sector might be taken to exist on the basis of the inherently involuntary nature of much informal employment. It is argued that this differentiation is reflected in the entrepreneurship literature: informal sector participants have been classified as ‘survivalist’ versus ‘opportunity oriented’. Inasmuch as many of the street traders who work in the sector might have no other option but to work in this sector, the relationships around continuance satisfaction, or the satisfaction of such traders with continuing in street trading are considered to be especially salient in this context. For example, if certain individuals are forced to work in this sector because they have no other choice, their satisfaction or dissatisfaction with continuing in this sector is expected to be associated with other aspects of their work. Theories on the influence of intrinsic motivation predict certain associations in working contexts. It is argued that despite much literature that relates to the relationships around satisfaction in other contexts, a deficiency exists in the informal literature that relates more specifically to the influence of continuance satisfaction upon the structure of relationships around informal trading, and more specifically in relation to informal outcomes such as earnings. This research therefore tests theory that predicts 25
associations around the relationships between continuance satisfaction and informal contextual factors and outcomes. Using data from a street trader upliftment research project undertaken in 2008, 2009 and 2010, of about three hundred respondents in each case, data relating to continuance satisfaction and certain outcome and contextual factors is tested using an exploratory descriptive correlational research design. Pearson parametric and Spearman non-parametric correlation tests are used to test relationships predicted by theory. Hierarchical linear regression is used to establish the extent to which earnings contributes to continuance satisfaction in this context. Findings indicate that continuance satisfaction is positively related to age. Years spent in Johannesburg, the operation of a rental stand and the provision of services, such as hair-braiding, are found to be associated with continuance satisfaction in certain of the samples. Earnings are found to dominate the relationship between continuance satisfactions with covariates controlled for. Traders who earn less, who are the most vulnerable to a context of relatively involuntary work, are found to be the most dissatisfied with continuing in street trading.
Keywords: continuance satisfaction, entrepreneurship, informal street trading, informal trading, involuntary work, upliftment of impoverished communities through informal work
Introduction Southern Africa is exposed to a broader context of globalisation, characterised by deindustrialisation and tertiarisation (Ligthelm, 2006). As a result of these changes, on a global scale, the structural changes in economies have resulted in a change to more service-oriented economies, which have led to an effective decrease in the demand for unskilled labour (Ligthelm, 2006). Globally, the era of tripartite alliances between business, labour and the state has typically been supplanted by a focus instead upon more localised relationships based 26
upon partnerships and reflexive self-organisation, as the era of Keynesian welfare national state polices has been superseded by the Shumpeterian workfare postnational regime (Jessop, 2002:460). However, the context of Johannesburg remains a paradox. According to Schoeman, Botha & Blaau (2010) the influence of high levels of labour market regulation have produced a paradoxical context in which positive economic growth co-exists with reasonably low interest rates and reasonably low levels of inflation yet also with relatively high levels of unemployment. It is within this context that these effects combine to the disadvantage of the unskilled individual in such a society. While in South Africa ‘labour’ and ‘government’ might dominate the societal landscape in a manner that is counter to Jessop’s (2002) posited global trends, it has been argued that interventionist policies such as heavily regulated labour markets significantly reduce the structural capacity of the economy to employ people, especially unskilled people (Schoeman et al., 2010). A further disadvantage faced by such people is the global trend toward tertiarisation and de-industrialisation which has seen a marked decrease in the demand for unskilled persons as work becomes more service-oriented (Ligthelm, 2006). Such changes have been compounded by shortages of skilled workers in South Africa because the national education and training system has failed to deliver such skills (Rasool & Botha, 2011). Faced with the difficulties associated with finding work in the formal sector, and faced, also, with the prospect of unemployment, one of the few options available to such unskilled individuals is work in the informal sector. Estimates of the size of the informal sector suggest that about five million people are supported by people working in the sector (Ligthelm, 2006). Informal work is therefore an important component of work within the Southern African economy. Despite controversy about the informal sector and its fundamental nature, seminal theorists have argued that the sector has a role: individuals can develop entrepreneurial skills and develop their enterprises into formalised ventures (De Soto, 1989). Notwithstanding debates about the fundamental 27
nature of the informal sector, one aspect of the experience of informal work is clear and uncontested: for many informal participants informal work is an involuntary form of work. It is argued in this research that the involuntary nature of such work presents an atypical context, in which the predictions of theory developed in, and tested in, formalised work contexts, are not necessarily generalised into such a context. Informal sector work, in this study, is framed as ‘involuntary work’ because of the large proportion of traders who are ‘marginalist’ and for whom there is no other employment alternative, in a context of high unemployment (Callaghan & Venter, 2011). It is acknowledged that it is not, strictly speaking, involuntary in nature, since these traders also have the option of not working at all. However, the term is used here in order to differentiate this form of work from other forms of work. From a normative perspective, it is further argued that research into satisfaction in such a context of ‘involuntary’ work is imperative since the burden on the people who work in this sector in terms of working conditions is incommensurable with that of formal work and the protections typically afforded to the latter (Bendix, 2001). The research problem is introduced as follows.
Research problem This research seeks to investigate specifically how satisfaction can be increased for individuals who work in this context of relatively ‘involuntary’ work in the Johannesburg inner city street trading context. Continuance satisfaction, in this context, is defined as the satisfaction that an individual has with continuing in street trading. Given that informal employment comprises a significant portion of economic activity in South Africa (Ligthelm, 2006), a significant portion of the country’s population therefore is exposed to informal work. As the economic hub of the country, the Johannesburg context reflects this dynamic. About 1.6 million South Africans are active in the informal sector on either a full-time or a part-time 28
basis (Ligthelm, 2006), and about 5000 to 8000 traders are estimated to ply their trade in and around Johannesburg (O’Reilly, 2004; Van Rooyen & Antoniedies, 2007). To the extent that such work is involuntary for many informal participants, what is not clear is the extent to which continuance satisfaction, or the satisfaction of a street trader with continuing in street trading, contributes to informal outcomes or what antecedents predict or shape this satisfaction in this context. While extensive literature exists that relates satisfaction to behaviour in the formal context (see, for example, Chen, Ployhart, Thomas & Bliese, 2011 Organ, 1977; Organ 1988), absent from the literature is theory or empirical evidence that relates to the relationships of continuance satisfaction in this specific context associated with involuntary employment. This deficiency in the literature is addressed in this research. The study fundamentally follows the perspective of Chen et al., (2011) who stress that satisfaction ‘momentum’ or the changes in satisfaction over time are an increasingly important aspect of current research in this field, in that a longitudinal perspective is preferable to the static relationships investigated in much of satisfaction research. This study will attempt to demonstrate the current status of the structure of relationships around satisfaction in this context. Theoretical and practical recommendations will be derived from the analysis. Therefore the objective of this research is to test theory that relates satisfaction to certain work related contextual factors in this specific context and therefore to extend theory into this context for testing. The aim of this research is to extend knowledge that relates to individuals working in potentially involuntary contexts, and to contribute to the upliftment of these people through the extension of such knowledge. This study aims to make a contribution to knowledge through testing theory and providing evidence for practice. The problem addressed by this research is therefore the provision of further insight into the relationships continuance satisfaction, in the absence of literature that relates contextual factors (that capture aspects of the experience of street trading) to satisfaction in the specific Southern 29
African informal context. An exploratory quantitative research study is therefore undertaken. The research question posed by this investigation is: What informal street trading factors potentially influence continuance satisfaction in the inner city street trading context? Three sub-ordinate research questions are derived from this core research question:
What is the relationship between categories of product sales and continuance satisfaction?
What is the relative contribution of earnings to continuance satisfaction over time in this context?
What is the potential influence of biographical factors upon continuance satisfaction in this context?
Objective of the research By addressing these research questions this research seeks to add value to the informal literature and contribute to an improved understanding of satisfaction and the relationships around it in what might be an atypical work context. Further, as already indicated, it is argued that insight into satisfaction is particularly salient in this working context because it is one of few contexts into which unemployed people can enter work itself. The overarching objective of the research, therefore, is to investigate the potential causes of dissatisfaction for informal street traders in the Johannesburg informal street trading context. The specific objectives of this research are to test theory that relates continuance satisfaction, or the satisfaction of a trader with continuing in street trading, to product provision; to earnings; and to certain biographical factors in this context. The rationale behind such variables tested is that earnings are the extrinsic counterpart to the intrinsic aspect of trading that is represented by satisfaction. The paper is structured as follows. First, relevant theory and empirical findings from the broader literature are considered and hypotheses are derived. Then, the research methodology applied is discussed. Thereafter, the results are reported and discussed with 30
specific reference to the hypotheses. The paper concludes with an outline of the findings and recommendations for theory, practice and further research are offered. Theory and evidence from the literature is considered as follows.
Theory and hypotheses Theory and research findings have established that job satisfaction is typically negatively associated with intentions to not continue in jobs, or turnover (Chen et al., 2011). If a street trader faces few alternatives to continuance, then continuance satisfaction or the satisfaction with continuing in street trading might be a salient aspect of street trading practice, since a component of such continuance is therefore not entirely voluntary.
Satisfaction, type of work and earnings If certain segments of this sector do indeed undertake such enterprise as ‘involuntary’ or as a survivalist enterprise then the satisfaction dynamics of such a context might not conform to theory and research evidence derived from other contexts. According to the seminal satisfaction literature certain characteristics of the job can be associated with motivation and higher levels of effective job performance (Hackman & Oldham, 1976; Herzberg, 1966). According to the predictions of such theory differences in the type of work an individual engages in will be expected to reflect in differences in individual motivation and job performance. Therefore satisfaction differences (which are expected to reflect an individual’s morale, or satisfaction with continuing in street trading at a point in time) in individuals working in formal sectors will be expected to be associated with differences in their type of work. The extent to which these predicted relationships generalise into this context is, however, unclear. According to Herzberg (1966) the factors associated with a type of work are primarily differentiated into ‘hygiene factors’ and ‘motivators’ or motivator factors. The 31
former refer to factors that are essentially more extrinsic to the job, such as working conditions and remuneration, and the latter refer to factors that have a more intrinsic influence upon the individual, and that are more likely to be associated with satisfaction and motivation (Herzberg, 1966). The extent to which work is less repetitive and more varied, with a greater range of tasks, or job enlargement, such work might be more likely to be associated with satisfaction (Herzberg, 1966). According to activation theory the effect of job enlargement upon work processes will be expected to be associated with higher levels of job performance and positive affect (Scott, 1966). The implication of this is that variety or complexity associated with the task itself might have an intrinsic influence upon productivity and satisfaction that is greater than the influence of external or extrinsic factors (Scott, 1966). In terms of repetitive work, individuals have been found to respond to chronic states of under activation in work contexts through a process of arousal-enhancing behaviours (Scott, 1966). However, such behaviours have also been found to be associated with negative effects on work effectiveness (Scott, 1966). According to Scott (1966) performance can decrease on monotonous tasks and increase on more complex tasks in ways associated with the nature of the task itself. To the extent that certain of the jobs of street trading might be less or more complex, this body of theory predicts that performance is expected to be associated with higher levels of job enrichment or enlargement associated with a certain job. Higher levels of positive affectivity and morale will be expected to be reflected in measures of continuance satisfaction. Therefore the following hypothesis is offered: Hypothesis 1: There is a positive and significant association between product sales category and continuance satisfaction. However, what is unclear in this context is the extent to which remuneration, or earnings, which represents an extrinsic factor, following Herzberg’s (1966) logic, contributes to continuance satisfaction, which is a factor that is expected to be more associated with intrinsic factors. This research also provides a test of Herzberg’s (1966) theory, in that the 32
extent of the contribution of earnings (essentially a hygiene factor) to continuance satisfaction in this context is empirically tested. The following hypothesis (Hypothesis 2) is therefore also offered: There is a significant association between earnings and continuance satisfaction. In terms of understanding the associations of continuance satisfaction in this context, literature relating to changes in levels of satisfaction along different loci suggests that satisfaction levels are not constant over age, but change over an individual’s lifetime, or stage of life. A positive association between age and different loci of satisfaction have been found in different contexts (Blanchflower & Oswald, 2008; Kallenberg & Loscocco, 1983). Hypothesis 3 is therefore tested: Continuance satisfaction is significantly and positively associated with certain biographical factors.
Human capital, age and satisfaction Human capital measured along the dimension of education has been found to be associated with increased earnings, and also employability, and if returns to human capital are higher in larger organisations (Becker, [1964] 1975) the formal sector would be expected to offer higher returns to education than the informal street trading context. A greater endowment of education would be expected to enable street traders to exit the sector for other opportunities, including formal sector work to a greater relative extent than other traders. To the extent that traders with relatively higher levels of education are aware of their relatively greater opportunities in formal sector employment, such traders are expected to have lower levels of satisfaction with continuing in street trading. Hypothesis 3(a) is therefore proposed: There is a significant association between continuance satisfaction and levels of formal education. According to Kallenberg & Loscocco (1983) job satisfaction is lower in the middle ranges of age, with higher levels of job satisfaction being found at the extremes. The association between job satisfaction and age, if represented graphically, displays a ‘u’ shape, where job 33
satisfaction is plotted on the vertical axis and age on the horizontal axis (Kallenberg & Losocco, 1983). Similarly, Blanchflower & Oswald (2008) offer empirical evidence that psychological well being or satisfaction can be represented as a u-curve over age, over the world. In American males, happiness is at its lowest part of the ‘u’ curve in the early fifties; in American females, in the late thirties; yet for European men and women is lowest at about the mid-forties (Blanchflower & Oswald, 2008). According to Blanchflower & Oswald (2008) the minimum value of this curve for South Africans in general is found to be about 42 years of age. Age has also been found to be positively associated with life satisfaction (Ardelt, 1997). Because of the evidence of a ‘u’ shaped relationship for satisfaction according to different foci of satisfaction over age in different contexts (Blanchflower & Oswald, 2008; Kallenberg & Loscocco, 1983), hypothesis 3(b) is therefore offered: There is a significant association between age and continuance satisfaction. The methodology of the study is considered as follows.
Research methodology This study applies an exploratory cross-sectional research design applied to data from three different years. Chen et al. (2011) stress that satisfaction ‘momentum’ or the changes in satisfaction over time are an increasingly important aspect of satisfaction research because cross sectional research on satisfaction cannot indicate whether satisfaction is trending upwards or downwards at such a point in time. According to Chen et al. (2011) the nature of the satisfaction relationships might be substantively different between these two orientations—an upward versus a downward trend. This research therefore applies this principle, and a longitudinal perspective is obtained from the use of three samples from the years 2008, 2009 and 2010. Three data sets from the Street Trader Upliftment Programme, a research programme focused on collecting extensive data for street trader research, are used. 34
These data sets represent data sampled in 2008 (n=339), 2009 (n=308) and 2010 (n=303) from the Johannesburg inner city street trading population. The core inner city trading context was differentiated from surrounding areas, and delimited to the area between Plein, End, Faraday and Sauer streets. Using random number tables, about a ten percent sample of the 228 blocks was demarcated and the traders on the corner of these blocks were counted. This enabled an estimation of this inner city street trading population, of about five thousand traders. A sample size calculation was used. On the basis of the sample size calculation, three hundred respondents were set as a targeted number of respondents for these three studies. Ethical principles were followed. Any indication of potential refusal was respected. Because of the refusal rates experienced in piloting, claims are made only on the basis of convenience sampling. Continuance satisfaction was measured in the form of five-point Likert-type scales. The Cronbach Alpha scores for Continuance satisfaction were .906 for 2008, with two items, .742 for 2009, with three items, and .936 for 2010, with three items. Correlation analysis is used to test the significance of associations between continuance satisfaction and informal sector outcomes and contextual factors. Statistical tests include Pearson’s correlation testing as a parametric measure of associations and for the purposes of increased validity Spearman’s rho measures were also taken. Hierarchical linear regression analysis was used to investigate the contribution of earnings to the variance associated with continuance satisfaction whilst controlling for a range of covariate factors. The findings are reported and discussed as follows.
Table 1 Comparative Descriptive Statistics: Means by Sample Variables
2008
2009
2010
GYB/Other training*
0.17
0.175
0.09
35
Gender*
0.57
0.67
0.62
Age (years)
32.7
31.4
34.1
Years in Johannesburg*
9.7
9.3
10.7
SA origin*
0.44
0.40
0.41
Johannesburg origin*
0.12
0.14
0.08
Hours worked per day
10.2
10.5
10.7
Days worked per week
6.19
6.36
6.4
Initial Investment (R) **
428
398
1181***
Tertiary Education*
0.12
0.10
0.15
10.17
9.9
Total years of Education Experience**(years)
4.23
5.9
6.4
Rental Stand*
0.41
0.47
0.41
Continuance Satisfaction
4.28***
8.97
6.77
Earnings per day (R)**
161
262
352***
Notes: * indicates binary variable. ** indicates upper limit to measure ***indicates different upper limit to measure therefore not comparable to other data sets
Discussion of the findings in relation to the hypotheses In Table 1, comparative means are shown for the 2008, 2009, and 2010 data, for a range of informal factors that relate to the broader street trading literature. The results of the hypothesis testing are discussed as follows under the headings relating to each hypothesis.
Results and discussion Null-hypothesis 1. is proposed: There is no significant association between continuance satisfaction and product provision. 36
According to Hackman & Oldham, the nature of an individual’s work can predict an individual’s satisfaction with such work. Hair braiding as a category of work is found to be significantly associated with higher levels of continuance satisfaction. Product provisions of lower capital intensity, however, are found to be associated with lower levels of continuance satisfaction. The relationships around one particular category of product provision, which reflect a clustering of traders of foreign origin, are particularly salient since this category is associated with the highest capital intensity of all the product categories. For the 2008 sample traders selling clothes are found to differ significantly according to levels of continuance satisfaction. These traders are found to be relatively more dissatisfied than other traders, according to Mann-Whitney tests (p
