The Effects of Entrepreneurial Quality on the Success of Small, Medium and Micro Agribusinesses in Kwazulu-Natal, South Africa

Abstract

This paper estimates a logit model of the effects of entrepreneurial quality on business success in a stratified random sample of 44 small, medium and micro enterprise (SMME) agribusiness owners financed by Ithala Development Finance Corporation, using loan repayment as a proxy for success. These owners were surveyed during October 2003-February 2004 and asked to score four components of entrepreneurial quality identified by Guzman and Santos (2001) : preference for working as selfemployed, motivation type, energizer behaviours, and personal and external factors. The results show that strong energizer behaviours (such as current and planned business expansion and staff training), more business experience, and family assistance to become an entrepreneur, promote loan repayment, while lack of access to electricity (proxy for lack of access to services) negatively affects loan repayment.Policymakers and public and private financial institutions could give more attention to these factors when implementing policies to promote access to finance by, and the growth of, agribusiness SMMEs. INTRODUCTIONRogerson (1999) and a World Bank Task Team (2000) assert that the promotion of small, medium and micro enterprises (SMMEs) is a key area of non-farm employment generation, and that a substantial share of new job creation in South Africa (SA) could be provided by agricultural processing and nonagricultural employment in SMMEs. Recent statistics, however, show that most SMMEs in SA are at the low end of the enterprise size scale, and exist primarily as black survivalist firms with little capacity for sustained survival or growth (Business Referral and Information Network, 2003). Guzman (1994) views the entrepreneurial quality of an SMME owner as a critical factor affecting an SMME's ability to overcome barriers to survival and achieve sustainable growth. A lack of access to finance has also been identified as a KwaZulu-Natal, Pietermaritzburg, South Africa. Agrekon, Vol 44, No 3 (September 2005) Darroch & Clover 322 major constraint to SMME survival and growth in SA (Rogerson, 1998;Naude, 1998; Gemini Survey, 2001;Nieuwenhuizen and Kroon, 2003). Research on the components of entrepreneurial quality, and how these components affect loan repayment and hence access to credit, could, therefore, provide policymakers, local and provincial government institutions, and the private sector with information to help develop appropriate policies to promote the sustained growth of agribusiness SMMEs in KwaZulu-Natal (KZN). For example, it may help formal financial institutions to reduce adverse selection problems (borrowers turn out to be a greater risk than believed when granting a loan) and agency costs incurred in structuring, administering and enforcing loan contracts (Barry et al, 1995) when financing SMMEs.This paper, therefore, analyses whether entrepreneurial quality affects the success of agribusiness SMMEs by surveying a stratified random sample of these clients financed by the Ithala Development Finance Corporati...

The Impact of Government Support Initiatives on the Growth of Female Businesses in Tshwane South Africa

“…Darroch and Clover (2005) have identified eight dimensions of constraints on agribusiness SME survival and growth: a lack of access to services, funding constraints at start-up, lack of management capacity, in the enterprise, access to tender contracts, compliance costs associated with Vat and labour legislation, liquidity stress, lack of collateral and lack of institutional support. It is evident from these factors that they are in line with the broad classification in the literature of the factors as being internal and external (Morrison et.…”

A Conceptual Model for Entrepreneurial Quality among Students of Higher Education Institutions (HEI) in Malaysia

“…al., 2009;Hvide, 2009). In addition, other researchers have looked at the entrepreneurial quality from the psychological perspectives (Valtonen, 2007;Krauss, Frese, Friedrich & Unger ,2005;Darroch & Clover ,2005) and skills and competency perspective (Bath, Smith, Stein & Swann, 2001).…”

“…Thus, with the consideration of the definitions by the previous researchers, this paper defined entrepreneurial quality as essential characteristics that lead to entrepreneurial success. To date, there are studies conducted on entrepreneurial quality (Darroch & Clover, 2005;Shuhairimi, Azizi, Ku Halim & Saaodah, 2009;Cumplido & Linan, 2007;Valtonen, 2007;Litunen ,2000, Cumplido & Alcalde, 2002Sambasivan, Yusop & Mohani, 2009;Valtonen ,2007;Gurol & Atsan ,2006;Kuip & Verheul ,2003;Koh 1996 ). Most of the previous research on entrepreneurial quality focused on Small Medium Enterprise (SME) and Small Medium and Micro Enterprise (SMME) (Darroch & Clover ,2005;Cumplido & Alcalde, 2002;Sambasivan et.…”

“…The literature review and the Model of Entrepreneurial Quality were the basis in developing the conceptual framework in this study as the model is said to have a comprehensive explanation of entrepreneurial quality (Darroch & Clover 2005). The existing entrepreneurial quality model was adapted to the graduate entrepreneur context.…”

“…Global environment factors are the external factors that are unavoidable and out of individual entrepreneurs control (Cumplido & Linan 2007). However, there are many studies in entrepreneurship that have been looking at the external factors of the entrepreneurs rather than the personal factors of the entrepreneurs (Darroch & Clover 2005;Ma & Todorovic 2009;Cumplido & Linan 2007). Therefore, this study looked at different perspectives from the previous model.…”