The Determinants of Successful Small Medium Micro Enterprises (SMMEs) in Construction Sector: A case of Mpumalanga

This study sought to evaluate the determinants of successful Small Medium Micro Enterprises (SMMEs) in construction sector in Mpumalanga Province. The study employed quantitative research approach to collect data using a survey questionnaire. A sample size of 150 participants was extrapolated using stratified random sampling.  The questionnaire was distributed to target participants comprised of the quantity surveyors, directors, project managers and line supervisors whose construction SMMEs are operating in Mpumalanga The findings of the study were that technical know-how, good cash flow, flatter organisational structure, good record keeping, qualified personnel, sound capital, innovation, managerial expertise and location were determinants for successful construction SMMEs. It was recommended that construction SMMEs should adopt these determinants for them to grow and survival. Keywords: SMMEs, Determinants, Construction Sector, Mpumalanga Province DOI: 10.7176/EJBM/12-24-08 Publication date: August 31 st 2020


INTRODUCTION
In many countries, the recent growth of Small, Micro and Medium Enterprises (SMMEs) has made the sector to become key economic engine. Many studies have concurred to this claim that SMMEs are the fuel to economic growth (Tshikhudo, Aigbavboa and Thwala, 2015;National Department of Tourism., 2017;Radebe, 2019). In creating economic growth, the key roles played by these enterprises include: creation of employment, reduction of poverty and reduction of levels of inequality (Sha, 2006). The positive success made by SMMES is more evidenced in developing countries such as South Africa (SBP, 2013).This is because they tend to reduce poverty through generating income which enhances income distribution. In construction sector, SMMEs are said to be crucial contributors to the economy as they are regarded as catalyst in the reduction of unemployment in South Africa (Thwala, 2014).There has been a high concern of the rise of failure of construction SMMEs in South Africa despite the support they receive from the Government. It is reported that over 75 percent of the SMMEs die in their infant stage (National Treasury, 2016). This study seeks to bring out the determinants of successful SMMEs in Construction sector in Mpumalanga. The study begins with literature overview of determinants of successful SMMEs, followed by research methodology, presentation of findings and discussions, conclusion and finally, recommendations.

Problem Statement
The researcher agrees that SMMEs are the key players in the national economy. They act as a catalyst in the reduction of economic challenges. It is disheartening however to realise that most of the SMMEs fail in their infant stage. Their failure is due to many business challenges they experience as they will be in their mushrooming stage. The researcher has therefore seen it fit to investigate and suggest solutions to the challenges. The objectives of the study are to 1) investigate the challenges of SMMEs owners in Mpumalanga and 2) Suggests determinants on making them to succeed.

Significance of the Study
The study is of significant importance for the implementation of policies that are geared at enhancing the performance of the SMMEs in the construction industry. Clear understanding of the challenges faced by SMMEs should be unearthed and consequently understood so as to search for relevant solutions to foster their continuous growth and sustainable survival. Even though several researches have been conducted in the SMMEs broad sector, it is of paramount importance to focus on the construction sector since it absorbs a huge number of skilled, semi and unskilled labour force.

LITERATURE REVIEW 2.1. Classification of Survivalist, Micro, Small and Medium enterprise
The abbreviation SMMEs according to the act of 1996 of South Africa's National Small Business it means Survivalist, Micro, Small and Medium enterprise (Constitution of the Republic of South Africa, 1995).

Survivalist Enterprises
This class of enterprises consists of entrepreneurs who are unemployed and they usually look for capital to venture in the industry of their chose. Most often, they venture into the industry where they do not possess any experience or technical knowhow (Thwala, 2014). This often makes them to fail to survive when the competition becomes stiff.

Micro Enterprise
This type of class is usually very small and usually family owned business. They usually do not formal legalities of operating business in terms of paying tax, trading licences and sometimes they can just operate from home. In most cases they lack finances and just base on their skills (Olusegun and Clinton, 2018). The level of income they earn depends of the nature of the industry.

Small Enterprise
This type of business is formally registered with the government. They usually operate in designated areas of operation. They pay taxes and obtain trading licences. It is very difficult to classify this group in terms of assets and turnover as it depends on the sector. Manufacturing enterprises seem to employ many employees as compared to construction firms, which can have high assets. Their employees can range from 5 to fifty (Fortuin, 2004).

Medium Enterprises
These enterprises are owned through shareholding. Capital to be invested should be in the range of R5 million (Thwala, 2014). They are usually controlled by the owner. In addition the employees who are on the payroll can range up to 200 (Fortuin, 2004).

Small, Medium and Micro Enterprises in the Construction Industry
SMMEs in the construction fraternity usually consist of skilled and unskilled partakers. They are usually family owned businesses which normally employ when a need arises. They usually operate within the national boundaries and they do not export their expertise (Dlungwana et al., 2002).Hence; this is their major drawback in global competition. They usually survive through joint venture and partnering.

The Importance of Construction SMMEs
The importance of SMMEs in South Africa cannot be ignored due to its contribution to the economic growth. This has been evidenced by the reduction in high rate of unemployment and unequal distribution of income (National Development Plan 2030. SMMEs help in the economy uplifting. BANKSETA (2013) estimated that SMMEs are providing 60 per cent of the labour force in South Africa and also 50 per cent of the Gross Domestic Product. Moloi (2013) further concurred that the SMMEs in the United States of America contributed 50 per cent in the private sector employment. The author also revealed that in Morocco, about 93 per cent of its industries were under SMMEs. Similarly, in New Zealand, the same study found that 93 per cent industries were falling under SMMEs. Topping on the list was Ecuador, which showed that 99 per cent of its companies were under SMMEs. In a study carried out by Tinarwo (2016), the author pointed out that SMMEs contributed to 70 per cent of the Zimbabwe's Gross Domestic Product (GDP) and they could improve the country's employment. Saravanan and Rao (2016) also pointed out that SMMEs should be seen as economic drivers for employing workers. They are the bedrock for the country's economic growth. Several studies have pointed out that most countries, such as UK, Malaysia and South Korea managed to grow their economies through the establishment of SMMEs (Lekhanya, 2016;Ivanov, 2018). On that note Saxena (2012) made a list of major roles of SMMEs in any given country as:  SMMEs provided personal service and they could be very flexible to the customers and this helps to improve the life of the citizens;  SMMEs allowed for innovation and this gave room to technical inventions;  SMMEs gave more room for competition as they introduced many players in the market and creating a free market; and  SMMEs produced big industry players in the market in future as they grow. SMMEs under construction industry played a significant role in the national socio-economic development .They also helped in providing infrastructure and services. Thwala (2014) pronounced that the government was the major beneficiary of construction firms. It is still evident that SMMEs render services that are offered by big firms through sub-contracting due to their flexibility and this has enabled SMMEs to survive for many years under big players as they will get support from big construction companies (Lekhanya, 2016). Hlengwa (2018) have acknowledged factors that have inhibited the survival and growth of SMMEs to lack of planning, poor marketing strategies and poor or failure to conduct market research and also lack of technical knowhow. Tshikhudo, Aigbavboa and Thwala (2015) and Bhorat et al. (2018) added that failure of technical entrepreneurs to blend with managerial operations and functions have also added to the failure for construction SMMEs to grow. This usually manifested in poor accounting practices. The growth of SMMEs also faced environmental challenges such as regulatory laws from the government which they failed to interpret and ended up in courts of laws or paying fines for failure to observe them. Corruption effects cannot be underestimated as the SMMEs were be too small to be trusted and recognised in tendering procedures (Ramukumba, 2014).
In developing countries they usually fail to stand global competition from established companies is another factor which inhibits their survival (Shakouri et al., 2017). (Meghana, Beck and Demirgüç-Kunt, 2003) also pointed the failure to acquire latest technology and information as one of the hindrances. (Kim, 2010) added out the shortage of support services as another factor which brings inefficiency SMMEs as construction SMMEs often fail to secure training costs to improve their workers' knowledge and upgrading of their skills. All these have contributed to the failure of construction SMMEs in their initial stage. SMMEs contractors should be aware of the determinants of their success for them to survive and grow into bigger enterprises so that they can fully realise their position in the country's economy. Kusar et al. (2004) suggested that SMMEs need to fulfil customer needs in terms of quality and features. This was also supported by Al-Mahrouq (2010) who acknowledged six factors that had a positive impact in industry's survival, these were: customer orientation, quality products, efficiency, good environment, good marketing strategies and sound capital. In addition, sound managerial competencies are the key to success. Thwala and Mvubu (2008) in their survey in Malaysia advocated that financial and marketing were not the only skills needed, but managerial competency were critical in running the industry.
The exploitation of technological innovation techniques the areas of construction is considered to be another driver for construction SMMEs growth (Tshikhudo, Aigbavboa and Thwala, 2018). This, according to authors, is evidenced in the production, design, marketing and delivering of products. Innovations can bring an added advantage in enhancing quality and efficiency in output.

Construction SMMEs in South Africa
Construction SMMEs are essential backbone for the growth and development of high quality infrastructure (Adendorff, Appels and Botha, 2011). It has been noted that, every country that needs timeous production and delivery of infrastructure should invest in the construction SMMEs (Tshikhudo, Aigbavboa and Thwala, 2015). The authors proceeded to explain that construction SMMEs ignited the economic activity in all other sectors. Inspite of the considerable success, growth and contribution that construction SMMEs were making, they were facing unbearable challenges (Dlungwana et al., 2002). These challenges negatively impacted the quality and the performance of the construction SMMEs. The construction industry in South Africa grew and prospered following the awarding of the FIFA World Cup hosting in 2010, which was further extended to the 2014 budget to enable the stimulation of further economic growth, which in turn had the multiplier effect on other economic sectors. Construction SMMEs were applauded for the estimated contribution of 13% to the GDP between 2007 and 2012 (Statistics South Africa, 2015). During 2013, construction industry had a further increased contribution of 2.3%. This contribution by the construction SMMEs though, it comes from all contractors, the Construction Industry Development Board's register shows that, about 95% of the registered contractors were classified as SMMEs levels 1-4 (CIDB, 2004;. These levels were used in the industry in determining the values of the construction contracts each level could tender for (CIDB Act, 2010).
The many problems that South African construction SMMEs faced with construction projects resulted poor quality work and poor project performance (Dlungwana et al., 2002). The deliverables for the construction SMMEs were significantly contrary to the expectations of the clients, which were value for money (Barry and Sebone, 2009). The consistent delivery of poor quality construction projects resulted in low success rate (Adendorff, Appels and Botha, 2011). On the similar note, Ofori and Toor (2012) observed that, even though all SMMEs faced impediments, but the construction SMMEs were confronted by additional unique challenges such as: low bargaining power; diverse nature of project-based work and the method of payment for work completed all of which hindered effective cash flows for effective service delivery.

Construction SMMEs in Mpumalanga
Mpumalanga Province is to the east of Gauteng, with vibrant cities and towns that carry a wealthy history. The province is also rich in wildlife and nature resources and attractions. The province also has the national attractions like Kruger National Park, botanical gardens and chic shopping malls. The well-established economy of the province consistently achieves higher growth rates when compared to other provinces of South Africa (Thwala, 2014). The province is strategically positioned to exploit strong national, regional and international linkages and contribute hugely to the South African economy. Mbombela and Nelspruit are the largest cities of Mpumalanga province, and they have retail, commercial, industrial and services centres. These cities therefore, form a commercial hub for the region which encroaches into Mozambique and Swaziland. The position of Mpumalanga has enabled the province to enjoy the 2010 FIFA World Cup economic benefits. Several construction projects have been completed recently in the province and these include big projects, like the Maputo Development Corridor Project, the Transfronteir Park, the Mpumalanga International Airport and the Mpumalanga Investment Initiative (Aigbavboa and Thwala, 2014). Amongst the key strategic goals are the provisions of sanitation and water and of other services to the citizens. Through the provision of these services, constructions SMMEs are invited to provide quality, speedy and cost effective services infrastructure. It has however been noted that most of the contracts undertaken by the construction SMMEs have been rated as floppy and shoddy due to poor quality and delays.
These challenges have necessitated the need to assess success factors for Construction SMMEs in Mpumalanga.

Determinants for Successful SMMEs
The success of construction SMMEs manifests in the effectiveness and the ability to execute projects within the success parameters of the triple constraints of projects which are time, quality and cost (Aigbavboa and Thwala, 2014). Construction SMMEs should ensure that their daily operations are successful for them to succeed in the face of competition. The dynamic nature of the construction industry requires that SMMEs should apply technologies, novel business methods and appropriate strategies to make SMMEs competitive and successful. Several determinants have been identified as critical to the success of construction SMMEs. These include enterprise's characteristics; manager's characteristics, application of information technology and innovation; and maintenance of accurate records. These factors have been discussed in the following section.

Manager's characteristics
The manager's competence of running the SMME successfully was crucial (Arslan and Kivrak, 2008). Without the strategic management competences construction SMMEs failed or underperformed. Competences in technical knowhow is key to dealing with issues of practical issues like designing, negotiating, pricing, contracting, and compliance among other things which are critical to the success of the SMME (Saleh and Ndubisi, 2006).
The success characteristics of the owner/manager included: level of education, family background, age, gender, human and social capital, personal and behavioural qualities. They determine the successful performance of construction start-up, growth and survival (Hampel-Milagrosa, Loewe and Reeg, 2013;Barbosa, 2016).
Good cash flow management is an essential skill that should be coupled with practical financial management experience to aid in the development and growth of the construction SMMEs (Stefanovic, Prokic and Rankovič, 2010). The manager/owner is obliged to possess a sharp cash flow skills to account and report the business performance (Shakantu, Zulu and Matipa, 2002). The owner manager should also have the quest to acquire requisite skills for managing their business.

Firm's characteristics
The firm related determinants for survival included age of the SMME, its size, its location, capacity and ability to sustain its development and growth of the SMME (Hampel-Milagrosa, Loewe and Reeg, 2013). Agreeing to this claim, (Ganyaupfu, 2013)added that marketing strategy, human resource management and source of capital were other determinants for the sustainability of construction SMMEs in a competitive market. Cited as important also was the number of shareholders forming the SMME and the amount of capital they contributed into the SMME (Olusegun and Clinton, 2018). The authors warned that without funds, the growth, development and survival of the construction SMME was threatened.
The organisational structure assumed by the construction SMME had an impact on its development and growth (Al-Mahrouq, 2010). The structure of the construction SMME reflected the efficiency of organisational management. Tall and hierarchical structures caused major business failures.

Location of the Construction SMME Business
Failure to strategically locate the construction SMME has negative impact on the performance of the business. The location or environment of the SMME determined the marketability of the SMMEs. The construction SMMEs should be located in places which are not difficult to support marketing efforts of the company. The firm should be located where it gives easy access to its customers. Both the location and the ambience of the office and its surrounding environment should assist in marketing the firm's products and services. To enhance faster development and growth, construction SMMEs should conduct a market research to determine who their target markets are and locate where they can easily patronise (Anga, 2014).

Application of innovation and information technology
It is difficult for an SMME to survive without applying new technologies in their operations and activities. The use of technology and innovation provides convenience in the provision of services and products. (Anga, 2014)observed that construction SMMEs using innovative technological solutions in their operations had greater chances for growth and survival. Shakantu, Zulu and Matipa (2002) has confirmed that technology was the key driver in the transformation for construction SMMEs. Information technology developments have facilitated information flow in every aspect of construction industry from design, decommission, construction, deployment, sales and marketing, accounting and finance. Technological change is instrumental to change in the construction industry.

Keeping accurate records
The other key determinant to success in the construction SMMEs was the ability to efficiently and effectively maintain accurate accounting records and manage personnel (Stefanovic, Prokic and Rankovič, 2010). Good record keeping involved maintaining simple and good records about daily business (April, 2005). Good record keeping will provide the owner/ entrepreneur with information on the performance of the business, at the same time highlighting areas of poor performance so that corrective action can be taken. This study examines the determinants of successful SMMEs construction sector in Mpumalanga.

RESEARCH METHODOLOGY
Quantitative research was used for this research study. The researcher used questionnaires which were distributed to small and medium industry operating in Mpumalanga Province in South Africa. The questionnaires were targeted to quantity surveyors, project managers, line supervisors and directors. Relevant participants were sampled using stratified random sampling. The Raosoft online sample calculator was handy in ascertaining the ideal sample size for the study. The questionnaires were distributed to 150 participants. Out of 150 questionnaires 135 were returned which gives a 90 percent the response rate.
The questions from the questionnaire were ranked on a 5 point Likert scale. It ranged from 1-5. 1 -Strongly disagree, 2-Disagree, 3-Neither Agree or Disagree, 4-Agree and 5-Strongly Agree. The scale was then transmitted to a mean score for each determinants success of SMMEs. Ranking method was used applying each index and mean score was then calculated The respondents were classified into age groups of Over 55 years with 45.3 percent, 43-55 years with 24 percent and 30-42years 23 percent. The majority of the respondents had relevant educational background of construction ranging in Architecture, engineers and quantity survey degrees only few had doctorates. Most of them were holders of class 4 contracts and few had grade 3.The industry is dominated with males 65% as compared to females 35%.

FINDINGS
The findings from the survey shows that 16 per cent of the respondents were the managing Directors and 76 percent were part owners. The respondents were holding high qualifications however some of the qualifications were not matching with their position. This is one of the major failures of SMMEs in construction as it requires quoting of jobs and keeping of accurate accounting records and now when it is done by employees who are incompetent in those areas. It has resulted in construction SMMEs failing to grow. Tasks such as pricing and quoting require competent personnel. Good relationship with customers such as repeat business will see the business flourishing.
The findings are in agreement with Anga (2014) who argued that innovation is a major determinant for successful construction SMMEs. Similarly, the findings were in agreement with Saleh and Ndubisi (2006) who indicated that technical knowhow was a key determinant. This was followed by finding about the good cash flows were critical as was stated in the literature by Stefanovic, Prokic and Rankovič (2010.All these when blended together helps in the smooth running of the business and progress and challenges can easily be noticed and corrected before the SMME collapses. The findings also agreed with the literature from Al-Mahrouq (2010) which indicated that organisational structure was a success determinant. Anga (2014) was also supported by the findings on the importance of locating the construction SMME strategically. Anga (2014) also stated that innovative technological solutions enhanced growth and survival of construction SMMEs. Shakantu, Zulu and Matipa (2002) were supported by the evidence in the findings which confirmed that information technology was the key driver in the transformation of construction SMMEs. The findings were also in agreement with Stefanovic, Prokic and Rankovič, (2010) that good record keeping was key.

CONCLUSIONS AND RECEMMENDATIONS
The study was set to show the determinants of successful SMMEs in construction in Mpumalanga in South Africa. Literature also revealed that technical know-how, good cash flow, organisational structure, good record keeping, qualified personnel, sound capital, innovation, managerial expertise and location. It is recommended that construction SMMEs in Mpumalanga should adopt these determinants for them to be successful and follow on a sustainable growth trajectory.