A systemic exploration of the external risk factors impacting SMEs survival in South Africa

Chimenya, Tinashe

A systemic exploration of the external risk factors impacting SMEs survival in South Africa

Thesis / Dissertation

2025

Publisher

University of Cape Town

Department

Department of Construction Economics and Management

Faculty

Faculty of Engineering and the Built Environment

Abstract

Small and Medium Enterprises (SMEs) in developing countries have a high failure rate, and South Africa is no exception with most SMEs failing within their early years of commencement. Notwithstanding efforts to support SMEs in South Africa, the failure rate has remained high, and despite ongoing research, most SMEs are likely to fail. While research has been conducted in South Africa, few studies have identified the risk factors affecting SMEs, with none focusing on the interrelations of these factors. As a result, this research aimed to explore the key risk factors affecting the survival of SMEs in South Africa and to determine their interrelations using Interpretive Structural Modelling. This objective was addressed through the following research questions. a) What are the key risk factors affecting the survival of SMEs in South Africa? b) What is the relationship between the identified key risk factors? c) What is the root cause of the identified key risk factors? Interactive Management (IM), a systems thinking methodology, was used in the study. This approach was most suitable because of its applicability in addressing complex issues in a pluralistic environment. The IM methodology introduced a collaborative learning framework that enhanced research on the risks faced by SMEs in South Africa. This approach acknowledges the intricate and often chaotic nature of the SME business environment, characterized by rapid changes and unpredictability. By fostering collaboration among stakeholders, the IM methodology enhanced deeper insights for more effective strategies to be formulated for SMEs to thrive amidst the threatening presence of risks. The research was conducted through the four IM stages, namely, idea generation, idea clarification, idea structuring, and model interpretation. A total of 15 risk factors were selected for idea structuring by participants through voting for the most critical risk factors. The 15 risk factors were structured through a pairwise comparison activity to produce a digraph that shows the interrelations of the risk factors. Amongst these risk factors, skills shortages and natural disasters proved to be the core risk factors affecting SME survival in South Africa and, consequently, these two risk factors aggravate the other risk factors in the model.