1. University of Johannesburg
School of Tourism and Hospitality
Department of Tourism Management
Challenges to tourism SMMEs: The case of Alexandra Township,
Johannesburg
By: Susan Akerele
215049827
BA Honours Tourism Development
TDM8X02
Supervisor: Mrs M. Adinolfi

2. Declaration on Plagiarism
• I understand the plagiarism means presenting the ideas and words of
someone else as my own, without appropriate recognition of the source.
• I confirm that the work that I submit for assessment is my own, except where I
explicitly indicate otherwise.
• I have fully acknowledged all words, ideas and results from other sources that
I have used in this assignment through a generally accepted style of quotes
references.
• I am aware that the University views plagiarism as a serious offence
punishable by disciplinary committee.
Signature: _____________________ Date: _______________________
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3. Table of Contents
Table of Contents.......................................................................................................................3
ABSTRACT................................................................................5
CHAPTER 1 – INTRODUCTION...............................................................7
2.1 What are SMMEs?.........................................................................................................10
2.2 Classification of SMMEs...............................................................................................12
2.2.1 Survivalist enterprises................................................................................12
2.2.2 Micro enterprises .......................................................................................12
2.2.3 Very Small enterprise.................................................................................12
2.2.4 The small enterprises.................................................................................13
2.2.5 Medium enterprises....................................................................................13
2.3 SMMEs in Vietnam........................................................................................................14
2.4 SMMEs in China............................................................................................................15
2.5 SMMEs in Nigeria.........................................................................................................16
2.6 Tourism SMMEs in South Africa..................................................................................17
2.7 Institutional Framework for SMME Development in South Africa...............................21
2.8 Township Tourism in South Africa................................................................................22
2.9 Demographic and Geographical Map of Alexandra Township......................................24
2.10 Pro-poor Tourism in Alexandra Township..................................................................25
2.11 The Challenges of Tourism SMMEs in Townships and Conceptual framework of the
challenges of Tourism SMMEs in Townships.....................................................................26
2.12.1 Intrinsic and individual level challenges...................................................28
2.12.2 Lack of Access to Finance.......................................................................29
2.12.3tLack of Access to information..................................................................30
2.12.4 Demographics of the operators of SMMEs..............................................30
2.12.5 ‘Relationship’ level challenges. ...............................................................31
2.12.6 Community level challenges of SMMEs...................................................31
2.12.7 Crime and Corruption...............................................................................32
2.12.8 Society level challenge of Tourism SMMES............................................32
CHAPTER 3 – RESEARCH OBJECTIVES & METHODOLOGY.....................34
3.1 Problem Statement.........................................................................................................34
3.2 Significance of the study................................................................................................35
3.3 Aims and Objective of Research....................................................................................35
3.4 Research Methodology...................................................................................................35
3.4.1 Research Design and Methodology...........................................................36
3.4.2 Study Population .......................................................................................36
3.4.3 Study Sampling..........................................................................................36
3.4.4 Semi-structured Interviews.........................................................................37
3.4.5 Snowballing Technique..............................................................................37
3.4.6 Procedures used for data collection...........................................................38
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4. 3.4.7 Data analysis and interpretation.................................................................38
3.5 Limitation of the study...................................................................................................39
CHAPTER 4 – RESULTS & DISCUSSIONS.........................................................40
4.1 Introduction ...................................................................................................................40
4.2 Socio demographics of respondents...............................................................................40
4.3 Emerging themes of the Study.......................................................................................41
4.3.1 Issues of gender inequality and poor status of women in the society.......41
4.3.2 Security situations in Alexandra and improper response by law
enforcement agent...............................................................................................43
4.3.3 Poor potential for networking and linkages of SMMEs and Multinational
tourism companies..............................................................................................44
4.3.4 The seasonal Weather conditions affect tourism SMMEs market. ...........45
4.3.5 Inadequate credit facility with poor capital base was a major factors
militating against the growth of tourism SMMEs in Alexandra............................45
4.3.6 Government have a great role to play in growth of tourism.......................45
4.4 Summary........................................................................................................................46
4.5 Discussion......................................................................................................................46
CHAPTER 5 – CONCLUSIONS & RECOMMENDATIONS...............................................49
ACKNOWLEDGEMENT
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5. I will like to recognise the immense contribution of my supervisor; Mrs M. Adinolfiwho
mentored me and gave me the necessary support and guidance that eventually
culminated into this present form of my research. Her incisive comments were well
appreciated
I would also like to thank my family members’ especially my husband Dr Akerele who
also gave useful suggestions and support during the writing of this project.
And I also wish to appreciate all my friends and colleagues whom we discussed
together. I thank you all because your constructive criticism helped me to develop
confidence to pursue the research with all my energy.
I also wish to appreciate God almighty for giving the inner strength, wisdom and
good health to carry through the research.
ABSTRACT
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6. Since the advent of the multi-racial democracy in South Africa, Tourism has
blossomed in the country. One of the emerging tourism genres in South Africa is
township tours that became popular because of the historical socio-political
importance of some suburban towns like Alexandra. However, there have been
concerns that most of the revenue accruing from tourism in South Africa does not
impact on the lives of the majority of South Africans.
Also, Small, Medium and Micro Enterprises (SMMEs) contribute immensely to the
economic growth of several countries. The encouragement of the involvement of
SMMEs in the tourism industry may aid the domestication of the benefits of tourism
in the country. However, there have been concerns about the high rate of mortality of
SMMEs in developing countries due to multiple constraints. There is a paucity of
data focusing on the constraints and challenges of tourism SMMEs in South Africa.
This research therefore aims to determine the challenges of tourism SMMEs in
Alexandra, South Africa to assist policy makers.
The research was a qualitative study that utilised both purposive and snowball
sampling techniques to identify 7 consenting respondents. In-depth interviews were
conducted and several themes emerged after data analysis. The study revealed that
the majority of the tourism SMME operators were male and most of the respondents
had at least secondary education but few had certification in tourism. Also, majority
of the operators were black. Gender inequality, lack of adequate knowledge of the
industry together with a poor capital base was the major factors militating against the
growth of tourism SMMEs in Alexandra. It was also found that there were poor
linkages between the SMMEs and established multinationals and extremes of
weather also hamper the smooth running of the Tourism SMME businesses in
Alexandria. Violent attacks on the businesses of the tourism SMMEs with
respondents’ perceived poor response by the law enforcement agents also
negatively affected the growth of Tourism SMMEs in Alexandria. Government was
perceived by most respondents to have a great role to play at providing the
necessary enabling environment for the tourism SMMEs to thrive in Alexandria.
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7. In conclusion, most of the constraints affecting tourism SMMEs in Alexandra are
multi factorial and are related to the intrinsic attributes of the individual business
owners, community and government initiatives. Most of the constraints can be
tackled at the level of government policy and regulations. Also, the promotion of
collaboration between the established tourism companies and the tourism SMMEs
will go a long way to develop the industry for the good of the poor.
CHAPTER 1 – INTRODUCTION
According to the World Tourism Organisation (WTO), tourism is one of the fastest
growing sectors of the global economy which produces about one-third of the world’s
service trade revenue (UNWTO 2015).The tourism industry also generates
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8. substantial benefits to the economies of developing nations, through foreign
exchange earnings, creation of job opportunities, improvement in the Gross
Domestic Product (GDP), the boosting of sales of different commodities such as
agricultural products and handicrafts, as well as cultural entertainment that is usually
performed by the locals. The tourism sector has the capability of causing improved
socio-cultural environments and livelihoods for local people (Lansing & De Vries,
2007).
The growth in revenue accruing from tourism is very apparent in developing
countries like South Africa (UNWTO 2015). The dawn of the multi-racial democratic
dispensation in South Africa in 1994 has led to a tremendous growth in the country’s
tourist arrivals (South Africa Tourism, 2015; Butler 2010). This has greatly impacted
on the socio-cultural and economic development of the nation (Butler 2010). Little
wonder, the Statistics South Africa (Stats SA 2015) stated in 2013 that the
international tourist arrivals of the country have grown by 300% between 1994 and
2013 (South Africa Tourism, 2015). Also, the United Nations World Tourism
Organization (UNWTO) stated that South Africa was Africa’s second largest country
of destination for international tourists with about 9.5 million arrivals in 2014(UNWTO
2015)
Although there has been an increase in the GDP due to tourism among some Low
and Medium Income Countries (LMIC) like South Africa, it is currently posited that
most of the revenue generated from tourism does not necessarily translate to
reduction in poverty levels or improvement in the social status of the local dwellers
living around the tourist sites (Yilmaz and Bititci 2006). Also, evidence has shown
that most of the revenue generated from tourism in the developing countries are
being ploughed back to the developed countries by the major practitioners in the
tourism industry. This has led to a phenomenon called “back leaks” or capital flight of
the revenue generated (Mitchell & Ashley 2007; UNEP 2008).
Capital flight occurred in the Tourism industry of developing countries because most
of the major players in those countries are foreign nationals and thus most of the
revenue generated is repatriated to their home countries(Mitchell & Ashley 2007;
UNEP 2008). Also, most of the services and infrastructure that are being utilised by
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9. these foreign operators are sourced from the foreign countries thereby resulting into
great loss of foreign exchange to the developing Countries (UNEP 2008; Lengefeld
2007). The tourism business is highly competitive and capital intensive. It also
requires international structure and networking (Lengefeld 2007; UNEP 2008). Thus,
local investors in the developing countries may not have the means to set up a
thriving and well recognised tourism business except in partnership with the foreign
companies (Lacher & Nepal 2010; UNEP 2008). At the formation of such
partnerships there is usually disequilibrium of power and revenue sharing that
favours the foreign companies despite the fact that the core business and tourist site
is situated in developing countries(Mitchell & Ashley 2007; UNEP 2008). In the same
vein, the increased revenue from tourism in South Africa has little impact on the
livelihood of locals where those tourist sites are located. This is also true because
the majority of the high profile tourism companies in South Africa are still being
owned and managed by the White South Africans and foreigners (Rogerson, 2008).
Most governments of developing countries like South Africa have recognised this
gap and have started putting policies in place to support local investors in the
tourism industry (Yilmaz& Bititci 2006). Sustainable tourism programs were therefore
initiated to make the citizens of the receiving countries of the tourists to gain
maximally from the tourism activities going on in their environment (Yilmaz & Bititci
2006; Lacher& Nepal 2010). More so, poverty reduction and alleviation of inequality
and inequity has been one of the central concerns of the government and people of
South Africa since the end of apartheid era in 1994 (Agupusi, 2007). One of the
goals of sustainable tourism programs of developing countries is to provide an
enabling environment to indigenous SMMEs to be able to carve a niche in the
tourism industry for the overall socio-economic improvement of the populace
(Lacher& Nepal 2010).
The importance of the SMMEs in the overall socio-economic growth of a country
cannot be over-emphasised. Both developed and developing countries have
recognised the roles of SMMEs in poverty alleviation and job creation (Agupusi,
2007).SMMEs provide about 50% of the revenue of most developed countries and
they provide employment for about 60%-80% of people in most developing countries
(Ilegbinosa & Jumbo 2005; Adebisi& Gbegi 2013). The growth in tourism has also
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10. benefited from the activities of SMMEs. SMMEs have the potential to supply core
and non-traditional tourism services at usually reduced rates. Hence, the tourism
industry in most destinations should be dominated by SMMEs (Mahembe, 2013;
Lacher & Nepal 2010). They provide guesthouses, hotels, restaurants, cafes,
transportation services, clothing, food, souvenirs, cultural materials and semi-skilled
manpower (Mahembe 2013; Lacher & Nepal 2010).The integration of the activities
of tourism SMMEs into the mainstream tourism process to form a unified system can
engender the stimulation of cooperation and partnership between communities and
can act as a major driver for economic development in marginal or deprived regions
(Mahembe, 2013). Thus, linkages in the services provided by the SMMEs and
established tourism companies are currently being vigorously pursued (Lacher &
Nepal 2010).
The advancement of the SMMEs has been promoted since 1995 in South Africa
(Berry, Blottnitz, Cassim, Kesper, Rajarotnam and Seventer, 2002). Many
researchers have had numerous debates about the extent that SMMEs have been
able to alleviate poverty, and reduce the rate of unemployment in South Africa (Berry
et al, 2002, Rogerson 2005). However, it has been stated severally that the mortality
of SMMEs in developing countries within 5 years of establishment is as high as 60%
(Adebisi& Gbegi 2013). Several intrinsic and extrinsic reasons have been presented
for this poor performance (Adebisi& Gbegi, 2013). Such reasons include poor
financing, inadequate management skills, lack of infrastructure, high or multiple tax
rates, etc (Adebisi & Gbegi 2013) However, it is not clear if the same challenges are
encountered in the same magnitude by tourism SMMEs. This study therefore
explores the various challenges faced by the operators of tourism SMMEs in a sub-
urban area of South Africa so as to inform policy change and improve service
efficiency.
CHAPTER 2 – LITERATURE REVIEW
2.1 What are SMMEs?
Thomas (2004) states that the definition of tourism SMMEs is open to debate and
therefore not clear cut. Thus, several countries, organisations and researchers utilise
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11. several benchmarks in the definition of SMMEs (Thomas 2004; Aremu & Adeyemi
2011; Agupusi, 2007; OECD, 2005). Hence, what constitutes the size and
classification of a business entity differs from one country to the other (Agupusi,
2007). Some definitions are based on the number of employees, capital or asset
base of the company and sometimes the annual turn-over of the company
(Dasanayaka,2009; OECD, 2005,) However, the underlying principles of each
definition is dynamic and it changes with prevailing situations that can be related to
inflation; changes in the ethos, economic or technological advancement of the
country.( Dasanayaka,2009). In terms of number of employees, the United States of
America (USA) which is an example of a developed nation, business enterprises that
employ less than 500 workers are classified as SMMEs(OECD, 2005; National
Credit Regulator (NCR) 2011), while in South Africa as an example of a developing
nation, the number is considerably smaller and it is less than 200 employees
(National Credit Regulator 2011)
Some countries define SMMEs as companies with total assets less than R200,000
(National Credit Regulator 2011; Dasanayaka,2009 ) In 1990, the Nigerian
Government defined SMMEs for the purpose of accessing loans as business entities
with annual turn-over of less than #500,000 (equivalent of about R34,000)( Adebisi
& Gbegi, 2013). Such definition is likely to have changed considering inflation and
other economic development activities. This further goes to show that the definitions
of SMMEs varied by region, organisation and economic activities (Umar, 1997;
Adebisi,& Gbegi, 2013; Dasanayaka,2009).
According to the South Africa’s National Small Business (SANSB) Act 102 of 1996,
SMMEs are defined as “a separate and distinct business entity, including co-
operative enterprises and non-government organizations, managed by one owner or
more persons, including its branches or subsidiaries, if any, is carried on in any
sector or subsector of the economy and which can be classified as a micro- a very
small, a small or a medium enterprise”(Tustin, 2001: 9).. This definition appears
subjective and it is open to several interpretations, unlike the definition by the
National Board of the Small Scale Industries (NBSSI) of Ghana that stated that
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12. SMMEs are companies with not more than 9 employees and have machineries that
are worth less than 10million cedis (Dawuda & Azeko 2015).
2.2 Classification of SMMEs
According to Tustin (2001), there are five classes of SMMEs in South African .They
are: a) survivalist enterprises; b) micro enterprises; c) very small enterprises; d)
small enterprises; and e) medium enterprises.
2.2.1 Survivalist enterprises
Survivalist enterprises often imply those enterprises that are providing income to its
owners below the poverty index level. These groups might be considered to be pre-
entrepreneurial and examples include: hawkers, household industry and some
vending business. Income generated from these activities falls short of minimum
income standard. There is generally no skill or training that is required to function in
this business genre. Also, the capital that is required to start the business is usually
very small (Tustin 2001),
2.2.2 Micro enterprises
Micro enterprises are considered as businesses which often involve the owner,
and/or some family member(s) with one or two employees. They include most metal
workers, spaza shops, furniture makers, and minibus-taxi and so on. Most of these
initiatives have a limited capital base and job skills among their operators. These
businesses lack formality in terms of business license and value-added tax (VAT)
registration. Micro enterprises form the majority of SMMEs and are the major source
of livelihoods for majority of people on a daily basis in South Africa (Tustin 2001),
2.2.3 Very Small enterprise
The very small enterprise refers to self-employed individuals and enterprises that
employ a limited number of employees. Their type of business operates within the
formal sector. Their activities can be monitored. Such businesses are found in the
engineering industry as a form of outsourced work. Examples of such very small
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13. enterprises in engineering are the specialised software developers that produce
computer codes that large companies will incorporate into their production chain.
Other examples of very small enterprise includes software developers that produce
small parts of a car and then supply the car manufacturer who then incorporate it in
their production chain (Tustin 2001; Laporte, Alexandra and Renault 2008).
2.2.4 The small enterprises
The small enterprises are generally well-organised and more established category
as compared with the very small enterprises. They fulfil the conventional requirement
of registration and are tax registered. Their contribution to the GDP can be easily
quantified (Tustin 2001).
2.2.5 Medium enterprises
Medium enterprises are controlled by the owner(s) and there is a broad based
management structure that is more complex than the previous types of SMMEs.
Some businesses can be suppliers of goods and services and in some other
scenarios, the same business can become consumers of goods and services. Large
established tourism companies usually offer services to tourists. These companies in
turn utilise some services during the course of their own service delivery. Such
goods and services that are utilised by the established tourism companies can be
supplied by SMMEs. South African SMMEs thus have great potential for utilising
human capital thereby providing employment (Berry et al, 2002). This leads to
substantial contribution to the GDP (Tustin; 2001). It is however noted, that a lot of
SMMEs are survivalist and micro enterprises, having the strength for improvement in
their business endeavours. In townships such as Alexandra, there are challenges of
high and growing number of unemployed people. Due to some restructuring that is
going on in the mine industry in South Africa, some workers were retrenched. These
less skilled individuals can be employed in the tourism SMMEs to still make a living
(Bhorat, 2001; Chandra & Nganbu, 2001).
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14. Several Nations have recognised the roles of SMMEs in driving the economy and
therefore have initiated some policies to encourage the establishment and growth of
such enterprise. Vietnam, China, Nigeria, had developed policies and models to
encourage SMMEs and there have been successes recorded by some countries
(Blackburn & Schaper, 2012; Lui, 2008).
2.3 SMMEs in Vietnam
Vietnam’s economy has had a significant growth after economic reform in 1986. The
reforms triggered the transition of the country’s economy from being centrally
controlled to a veritable market and export oriented economy (Blackburn & Schaper,
2012). Currently, economy of Vietnam is still one of the fastest growing in Southeast
Asia with an increasing direct foreign investment. It is also ranked as one of the
fastest growing economies in the world with an annual average GDP growth rate of
6.3% in 2014(Asian Development Bank (ADB) 2015). The tourism industry in
Vietnam was established much later after most other developing countries have
established a viable tourism industry. The tourism industry in Vietnam is also reputed
for contributing substantially to the revenue of the country (ADB 2015). Thus, tourism
was also a major source of foreign exchange for the country.
Vietnam has a comparative advantage for tourism development because of its exotic
natural resources such as lakes, mountain ranges, forests, beaches and cultural
heritage (Blackburn & Schaper, 2012). Despite the empirical increase in investment
in tourism in Vietnam, it has not translated to improvement in the activities and
impact of SMMEs on the economy of the country. The justification presented for this
lack of impact by the SMMEs is because SMMEs lack the requisite capital for
competitive production of goods and services (Blackburn & Schaper, 2012). There is
also restricted access to financial instruments and lack of information and
communication technology (ICT) to aid the operations and efficiency of SMMEs in
the country (Blackburn & Schaper, 2012). All these aforementioned were stated as
the major obstacles to the growth of SMMEs in Vietnam by the Vietnam Chamber of
Commerce and Industry after a survey that was conducted (VCCI, 1999). It was
further identified by the VCCL that lack of adequate protection by the government
and harsh loan facilities affected greatly the activities of SMMEs in Vietnam (Harvie
& Boon-Chylee, 2002). It was also recognised that there should be investment in the
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15. human capital in the industry so as to improve efficiency of the SMMEs. Thus, skill
acquisition programs were being initiated to assist them. The low levels of education
among the Vietnamese population are also a reason for the poor performance of
SMMEs (VCCI, 1999; Harvie & Boon-Chylee, 2002). There is therefore the need for
their government to implement measures that will improve the business environment
of the SMMEs.
2.4 SMMEs in China
In the last sixty years, the People’s Republic of China has had an economic
transition from a centrally planned system to a social market economic system. Also,
SMMEs are seen as a major force of social and economic growth. The number of
SMMEs grew from 2.2 million in 980 to 42 million towards the end of 2009 and this
accounted for about 99.8% of the country’s enterprises, 60% of exports and 75% of
new job opportunities (Li 2010, Wang 2004). SMMEs in China are owned by various
economic entities such as collectively owned and state owned enterprises, joint
stock companies and individual and family businesses.
Since 2000, the SMME sector in China has been witnessing rapid development. In
2001, there were 29.3 million SMMEs employing 174 million people (AI & Zhu 2001).
These enterprises therefore contributed about 50.5% of China’s GDP (AI & Zhu
2001).The government established a promotion policy that supports and promotes
SMMEs. Moreover, the state allocates substantial parts of the annual budget to
make credit and direct financing opportunities to be readily available to SMMEs (Lui,
2008). The government also assisted SMMEs to improve their market access by
helping them enhance their skills and networking with other enterprises. Also, the
government procurement system in China was designed to favour products and
services that are produced by SMMEs. Despite all these efforts by the Chinese
Government, there are still reports of inadequate access to favourable financing
especially bank loans (Lui, 2008).
Invariably, the Chinese experience has shown that a deliberate investment in the
development of SMMEs can be a major catalyst to socio—economic growth
especially in developing and emerging economies. Thus, government should
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16. continue to acknowledge the significance of SMMEs in the socio-economic systems,
and therefore continue to conduct research and review their policies to favour the
growth of SMMEs (Blackburn & Schaper, 2012).
Likewise, in most African nations, SMMEs are widely recognized as leading
contributors to national economies (Dzansi, 2004; Aremu & Adeyemi, 2011).
SMMEs’ social benefits were also recognised to vary from job creation, stimulation of
economic growth, and development of innovations to attract customers and
employees in the local community (Dawuda & Azeko , 2015). The job creation can
help to solve some of the numerous negative socioeconomic problems such as
criminal behaviour, unemployment and poverty.
2.5 SMMEs in Nigeria
Nigeria is usually called the “giant of Africa” because of its considerable population of
over 180 million people and its economic potential (cometonigeria.com). The country
has several natural resources like crude oil, mineral resources, coal and fertile arable
land for agriculture. The country also boasts several tourist sites like the Lekki Beach
in Lagos, Yankari Games reserve in Bauchi state, the Ikogosi waterfalls, etc
(cometonigeria.com).. The country is also better positioned to serve as a marketing
hub for the West African sub region and an international tourist destination
(cometonigeria.com). Despite this potential, Nigeria is still designated as a lower
middle income-earner by the World Bank (World Bank 2015). There are numerous
SMMEs in the country but their contribution to the country’s GDP is estimated to be
less than 10%(Ilegbinosa and Jumbo, 2005). This reported low revenue accruals
from SMMEs may be a biased estimate since most of the SMMEs are informal and
their activities may not be well captured by the economic indicators and the national
statistical offices of the country.
Nevertheless, some factors have further been identified as reasons for the poor
impact of SMMEs on the economy of Nigeria (Ilegbinosa and Jumbo , 2005 ;
Adebisi, ,Aremu and Adeyemi 2011; Gbegi 2013: ). One reason is corruption. Other
reasons include: lack of assess to modern technology, poor management skills by
the operators, lack of an enabling environment, poor funding and frequent change in
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17. government policies (Ilegbinosa and Jumbo , 2005 ; Adebisi, ,Aremu and Adeyemi
2011; Gbegi 2013). Furthermore, Onugu (2005) showed that some factors like poor
accounting, management and marketing styles can affect the growth of SMMEs in
the country. Unforeseen disasters, stiff competition, poor requisite infrastructure,
high and multiple tax rates were also shown by Onugu (2005) and other authors
(Ilegbinosa and Jumbo , 2005 ; Adebisi, Aremu and Adeyemi 2011; Gbegi 2013) to
be responsible for the poor impact of SMMEs in Nigeria.
The policy makers of the country recognised that the SMMEs can be used to
harness the economic potentials of the country. Thus, several policies have been
initiated to promote the development of SMMEs in the country. However, studies
have shown that a significant proportion of SMMEs in Nigeria are non-functional
within five years of existence. Hence, only around five to ten percent of young
SMMEs survive and mature to a durable brand in the country. The reasons that gave
way for this trend have been multi factorial (Ilegbinosa & Jumbo , 2005 ; Adebisi,
Aremu and Adeyemi 2011; Gbegi 2013).
Furthermore, challenges facing the SMMEs in Nigeria includes problems related to
raw materials sourcing, poor policy implementation, reversals and shocks, fuel
crises, restricted market access, uneasy access to funding, irregular power supply,
infrastructural inadequacies (water, roads etc.) unfavourable fiscal policies, multiple
taxes, levies and rates together with policy inconsistencies (Onugu, 2005).
2.6 Tourism SMMEs in South Africa
South Africa also recognises the central role that SMMEs play in the development of
any developing country’s economy. It is also found that small business units like the
SMMEs can be initiated with low capital outlays, and powered by basic energy
resources that are frequently available in local fields (Butler 2010). However,
Apartheid had negatively impacted on the socio-economic status of Black South
Africans who were in the majority (Butler, 2010). Kingdon & Knight (2005) stated that
an economy characterized by a low level of investment and high inflation with poor
growth rate for many decades was inherited by the post-Apartheid government.
Thus, there is a high level of poverty in South Africa. About 50% of South African
17

18. households are classified as poor and mostly live in rural areas such as Alexandra
(Butler,2010, HSRC, 2005) Although South Africa is classified as being an upper-
middle income nation in terms of per capita income (World Bank, 2015), poverty
among its predominantly Black population is prevalent (Butler, (2010), HSRC, 2005)
. Many who live in rural areas are faced with overcrowding, ill-health and
environmental degradation such as in the case of Alexandra. Other markers of
poverty include racial and gender discrimination and the unequal distribution of
resources (May, 1998). Furthermore, the Human Sciences Research Council’s
(HSRC, 2005) published data on poverty and inequality showed that about 57% of
South Africans are living below the poverty line. Of this figure, about 95% are blacks.
International leisure travel in South Africa is a very important aspect of the tourism
and cultural development of the country. Since the advent of multi-racial democracy
in South Africa in 1994, there has been tremendous growth in the country’s tourist
arrivals with its expected associated socio-cultural and economic development.
According to Statistics South Africa (StatsSA, 2015,), the international tourist arrivals
have grown by 300% between 1994 and 2013. Also, the UNWTO stated that South
Africa was Africa’s second largest country of destination for international tourists with
about 9.5 million arrivals in 2014 (UNWTO, 2015:).
All these statistics will no doubt impact on the way the government of South Africa
viewed the role of tourism in the cultural and economic life of the country. As
described by McCormick and Besculides (2002), international leisure travels are
expected to enhance cultural assimilation and thereby lead to development. They
further stated that as locals are getting regularly exposed to courteous tourists who
showed interest in their culture and way of life, they are likely to be tolerant of the
tourists. Such interactions uplift the sense of self-worth of the people thereby
encouraging them to aim at preserving and conserving their cultural heritage.
Multiple visits to rural tourist centres in the country can also reduce rural-urban
migration since income will be generated for the community through their provision of
accommodation, feeding, transportation and other basic amenities for the tourist
(Briedenhann, 2004; Gannon, 1994). Those services offered to the tourists by the
rural dwellers will usually be provided by SMMEs.
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19. Thus, efforts are being geared towards improving the current tempo of tourist
attractions to the country. South Africa has got a very rich cultural history and some
awe-inducing history of struggle for independence after a long apartheid rule
Goeldner and Ritchie (2006: 265). Such cultural and political histories are potential
sources of tourist attraction to the country (Goeldner and Ritchie, 2006: 265).
Furthermore, there are several natural exotic sceneries in South Africa like the
various beaches near the adjoining Oceans, deserts, mountainous regions and
game reserves. Most of these tourist sites are in the rural areas and they are
expected to serve as business opportunities for indigenous SMMEs. Several tourists
who would usually have some restrictive movement during the Apartheid rule
because of suspicion by the ruling government now have relatively “unfettered”
movement to those sites of cultural and political significance (Butler 2010). The
tourism industry in South Africa can appeal to different people of different races. This
is because South Africa is at a vantage position in Africa to attract tourist of varying
races because of its multi-racial population. The promotion of international leisure
travels to South Africa is expected to improve how nationals of other countries
understand the rich cultural diversity and dynamics in South Africa thereby
engendering cooperation and rapid economic growth. All these expected benefits
should percolate to the rural dwellers and locals living at the various tourist sites in
the country.
However, Lack of education, poor skills, inadequate capital, poor knowledge of the
tourism industry, poor tourism entrepreneurship and gender discrimination are some
of the major factors militating against the full participation of Black South Africans in
the development of the flourishing tourism business in the country since the end of
the apartheid era about 20 years ago (May, 1998 Butler 2010). Thus, most of the
tourism businesses in South Africa are controlled by White South Africans and
foreigners who have the expertise and capital that is required in the industry Butler
2010. Invariably, the majority of South Africans are yet to reap the dividends of
increasing revenue accruals from the tourism industry.
19

20. To put the foregoing in proper perspective, the South Africa minister of Tourism, Mr
Derek Hanekom while making preparation to attend the November 2014 annual
World Travel Market (WTM) tourism trade fair that was held in London stated that:
“Our tourism sector has a strong base from which we can grow further. Since the
advent of democracy 20 years ago, South Africa has recorded truly impressive
growth in international tourist arrivals. Our challenge is to do even better. We want to
grow the tourism industry in a way that creates more opportunities for all our people
and is sustainable well into the future” (South Africa.info 2014).
Hence the government openly declared their support for the industry and further
recognises that despite increased revenue from tourism, more needed to be done for
the generality of South Africans to benefit from the growth going on in the industry.
Thus, government is initiating policies geared towards standardizing tourism
services, so as to ensure fairness to all participants in the industry (either as
consumers (tourist), providers or the host community) (FTTSA, 2014). Thus, the
current paradigm in tourism development in developing countries like South Africa is
known as sustainable tourism development. This form of initiative aims to promote
local content in the various stages of provision of goods and services in the tourism
industry. Such initiatives are geared towards improving the livelihoods of the locals
through tourism thereby reducing foreign capital flight in the industry. In order to
have an all-encompassing tourism industry in South Africa, the needs and
peculiarities of all the various niches of tourism operators including SMMEs must be
investigated and accommodated. This will help to accelerate the development of the
industry.
Programs aimed at an all-inclusive tourism business development in South Africa
that will involve every stakeholder have the potential to unite several activities and
streamline them under a single theme to enhance efficiency. This can engender
entrepreneurial opportunity by allowing tourism SMMEs to thrive through provision of
auxiliary services and products in the tourism industry (Carlson, 2003). It was
observed that there are peculiar needs of tourism SMMEs in South Africa. Such
needs included lack of market access, ICT infrastructure, requisite skills, and
financial support (Rogerson, 2005). Thus, adequate specific support for the tourism
20

21. SMMEs in the post-apartheid South Africa will go a long way in properly integrating
all South Africans in the country’s tourism industry.
2.7 Institutional Framework for SMME Development in South Africa
The South African government in collaboration with researchers, policy maker’s,
non-governmental organisations (NGOs), and other private sector and global
economic development agencies have formulated several laws and instruments to
provide a conducive enabling environment for the development of SMMEs (Agupusi,
P. (2007). Some institutions have also been created and designated for the purpose
of growing the SMMEs. All these activities are coordinated by the Department of
Trade and Industry (DTI) The Small Enterprise and Development Agency (SEDA)
and the Khula Enterprise Limited were established by government to assist SMMEs
(Agupusi, P. 2007). A list of Government agencies that performed assistance
towards the growth of SMMEs are as stated in table 2.1 below. However, the impact
of these organisations in providing the enabling environment for SMMEs to grow is
still low. Some Cooperate Body Organizations (CBOs) and Non- Governmental
Organizations (NGOs) have also assisted in creating programs aimed at improving
the growth of SMMEs. However, the combined efforts of these organisations have
not yielded the desired result of sustainable development in the tourism industry
(Agupusi (2007)
Table 2.1: SMMEs Support Institutions in South Africa and their Duties
INSTITUTIONS SERVICES OFFERED
SEDA Offers a range of commercial enterprise
growth services. It offers non-financial
services through integrated support
agencies across the state with more
than 284 Enterprise information centres
in the municipalities across the land.
KHULA ENTERPRISES Facilitates access to finance for small
jobs. Has various financing products
and works with major commercial banks
and private systems such as Business
partners. Its operations involve loans
21

22. and credit guarantees through
commercial banks and also offers
mentorship programs.
NATIONAL EMPOWERMENT FUNDS Offers various start-ups for small
businesses, rural and township
community transformations. Its financing
capacity ranges from R250.000 to
R10million. Places its focus on
disadvantaged people.
INDUSTRIAL DEVELOPMENT
COOPERATION (IDC)
Generates its funds independently of
the regime. Offers various focused
financing products ranging from
R1million with specific focus on SMMEs
and empowerment.
SOUTH AFRICA MICRO FINANCE
APEX FUND (SAMAF)
Provides loans for up to R10.000 to
micro and survivalist enterprises in poor
areas. Its principal focus is poverty
alleviation.
GAUTENG ENTERPRISE
PROPELLER (GEP)
A Gauteng provincial Government
(GPG) agency established under the
aegis of the Department of Economic
Development to provide no-financial and
financial livelihood and to coordinate
stakeholders for the benefit of SMMEs
in Gauteng.
Source: (Agupusi, 2007:6).
2.8 Township Tourism in South Africa
Townships in South Africa are usually regarded as suburban regions that were
carved out by the apartheid law for the Black population. Thus, such locations
usually do not have adequate amenities like the urban areas where the White South
Africans historically lived. Some of the houses there were typically built as hostels to
provide accommodation for unskilled black miners and thus there was no opportunity
22

23. for any mixture of the races. Also, shanties and make shift buildings are prevalent in
those areas.
However, the lifestyles in those townships are close to nature history with less
mechanical distortions. Most of the Anti-apartheid leaders lived in the townships and
they were able to organise other fellow blacks from those locations. Several anti–
apartheid demonstrations also took place in those places. The two common
townships with potential for tourist attractions because of their historical link to the
apartheid struggle are Soweto and Alexandra (Rogerson, 2004).
Township tourism is a recent phenomenon in South Africa which came into existence
since the beginning of the multi-racial democracy in 1994 (Leonard & Dladla, 2015).
Township tours of Alexandra and Soweto have grown considerably and by 2003
there were several registered operators who escort visitors on organized tours
through the townships. As far back as 2003, it was estimated that Soweto had
already been receiving an average of 107,000 international visitors per annum
(Rogerson, 2004). Potentially new opportunities are offered by township tourism for
entrepreneurs to be engaged in a range of activities. Such activities include tour
guiding, the provision of accommodation, food, services and local entertainment in
these ‘new tourism spaces’ of sub-urban South Africa (Nxumalo, 2003; Totouwe,
2003). These aforementioned services can be provided by well-motivated indigenous
SMMEs.
Tourists that wish to have a feel of the apartheid struggle are attracted to township
tours. Most of such tourists may want to have insights into the post-apartheid
progress and developments. Thus, township tourism is growing rapidly as
international tourists are eager to see how South Africa have progressed since 1994
by coming to associate and reflect on the past and present human experiences of
the apartheid era. Those famous townships (such as Soweto and Alexandra)
symbolise political freedom and the legacy of pain and violence. Some of the
common places of interest to tourists that visit Soweto are the Chris Hani
Baragwanath Hospital (which is the world’s largest public hospital), a local Shebeen,
the home of Winnie Madikizela-Mandela and the former homes of apartheid struggle
activists such as Archbishop Desmond Tutu and Walter Sisulu (City of
Johannesburg, 2001; Davie, 2001). The Soweto township tours offer indigenous
23

24. SMMEs the opportunity for entrepreneurial tourism that focuses on the historical
attractions of the Mandela Museum, the Hector Petersen Memorial, traditional
healers (Sangomas), Art and craft markets together with traditional wedding
ceremonies and church services (Rogerson, 2004).
The central theme of township tours in Alexandra is the cultural history and heritage
of black South Africans. Other sources of attraction in Alexandra include visits to
shebeens, jazz centres and the traditional craft market. For many years the township
tourism is associated around the apartheid government and history of resistance
struggle.
2.9 Demographic and Geographical Map of Alexandra Township
Alexandra Map – Google Search accessed 23-7-2015.
The township of Alexandra is one of the most populated and the poorest township in
South Africa. It is located close to Johannesburg (Leonard & Dladla, 2015). As in
24

25. other townships of Johannesburg, the poverty level in Alexandra is high. It was
stated that about 60% of the more than 350,000 inhabitants of the town are
unemployed (Bozzoli, 2004; Rogerson, 2006). In contrast, Alexandra is very close to
the wealthiest and most prosperous locations in Johannesburg. Such towns include
Wendy wood, Kelvin, and Sandton. The number of informal settlements and shanties
in Alexandra is estimated to exceed 20 000. These Shanties are home to over 7000
people (Agupusi, 2007). The paradox that occurred in which Alexandra is reputed to
be one of the poorest settlements while the neighbour settlement of Sandton is
reputed to be the richest location in South Africa easily awaken the inequity and
inequality that was perpetuated by the Apartheid regime that still persists to date.
Thus, tourists that want to see such historical effect of apartheid will easily be
attracted to Alexandra. This also confirms that Alexandra is potentially a major
source of revenue for tourism. Thus, it is expected that minimal capital will be
required to organise township tourism in Alexandra. Such relatively friendly business
environments can easily appeal to SMME investors. Therefore, Alexandra was
chosen for this study because of its historical antecedents and potential opportunities
for SMMEs investors.
2.10 Pro-poor Tourism in Alexandra Township
Pro-poor tourism is “tourism that generates net benefits to the poor and seeks to
“ensure that tourism growth contributes to poverty reduction”. An essential
component of pro-poor tourism is support for tourism SMME development (Ashley
and Haysom, 2004). Currently, efforts are geared towards promoting township
tourism in Alexandra as part of the Pro-Poor Tourism initiatives in South Africa. The
main thrust of this pro-poor initiative is to develop a system of linkages between
tourism business in Alexandra and the tourism growth in Sandton. Such linkages can
occur between tourism SMMEs in Alexandra and established tourism centres in
Sandton like big hotels. The linkages could be in the Agupusi, P. (2007 tourism
SMMEs in Alexandra supplying some products and services to the hotels in
Sandton. Such services can include food, agricultural products and cultural artefacts.
Township entrepreneurs can be relied upon to supply craft objects and big tourism
sites and hotels at Sandton can also help tourism entrepreneurs in Alexandra to
market the locally produced goods to their affluent customers. Such locally made
25

26. goods that are of interest to tourists include beaded key rings, and other arts and
crafts. The Tourism SMMEs at Alexandra can also assist the big companies in the
general recruitment of local unskilled and semi-skilled staff from Alexandra. Also,
some tourist that lodged at neighbouring Sandton may be interested in visiting
Alexandra. A linkage can also occur between the hotels in Sandton and the SMMEs
at Alexandra to provide tour guides that will assist the tourists to travel to Alexandra
and back to Sandton seamlessly.
However, some of the concerns of the large companies about going into such
linkages or partnership with smaller SMMEs include lack of consistency and
continuity, lack of integrity and poor business ethical practices, and poor
maintenance of quality assurance on the part of the SMMEs (Rogerson 2008).
Community needs in Alexandra in relation to tourism are multi factorial and this
includes tourism market knowledge, and provision of employment.
2.11 The Challenges of Tourism SMMEs in Townships and Conceptual
framework of the challenges of Tourism SMMEs in Townships
SMMEs generally face multiple challenges that militate against their growth and
development. Also, there are likely to be peculiar challenges that are related to the
tourism industry. Furthermore, a special type of tourism in the township like
Alexandra may also present with its own peculiarities. In order to properly grow
township tourism in a sustainable way which will ultimately be responsive to the
needs of tourists, tourism operators and the locals, research needs to be conducted
on the challenges facing tourism SMMEs. This will also assist in the formulation of
policies.
Since the challenges facing tourism SMMEs can be complex and multifactorial, a
social ecological model McLeroy KR, Bibeau D, Steckler A, Glanz K (1988) can be
adapted to propose a simple model of the multi factorial nature of the challenges.
The social ecological model states that factors or determinants of a problem can
occur at the individual level, relationship level, community level, and societal levels
each of the levels is nested in the other. See Figure 2.1 below.
26

27. Figure 2.1. Social Ecological Model (McLeroy et al. 1988)
Briefly explained, the individual level problems are related to intrinsic issues like
gender, demography, educational qualification, standard of living or income. The
relationship level includes some closely related people and partners like parents and
siblings and friends that can affect the individual’s behaviour and performance. The
‘community’ level will include the influence or challenges from the neighbourhood
while ‘societal’ are influences related to the whole community like government
policies and cultural distinctiveness. Proposed conceptual framework of the
challenges of tourism SMMEs can be related to the above mentioned four
corresponding levels of challenges after thorough review of the literature. They are
individual (intrinsic) challenges, ‘Relationship’ with other big tourism companies, the
societal values or community level challenges and lastly governmental policies and
interests (see Figure 2.2 below).
27

28. Figure 2.2 Schematic diagram of the multi-factorial level of challenges of Tourism
SMMEs
2.12.1 Intrinsic and individual level challenges.
These are problems that militate against the growth of tourism SMMEs that are
related to the inherent characteristics of the individual operators. It can also relate to
the inherent operational difficulty of an SMME. Such factors relating to the operators
include the gender (male or female), the race (White, Blacks, coloured, Asians,
foreigner), educational qualification or lack of necessary skills and training in
township tourism, and lack of capital for the business.
28
Government policies (financial
aids, tax policy, infrastructure
provision, security provision
Intrinsic and
demographi
cs of SMME
operators
(gender,
education
etc)
Relationship with
others(linkages to multinational
companies) transport,
telecommunication
Society (knowledge
and perception of
tourism, behaviour to
tourist, crime)
Challenges of
TOURISM
SMMEs

29. Factors related to the intrinsic operations of the SMME has to do with management
style that are usually one man business, low annual turnover, inability to absorb
shock of business, inability to build trust of the customers, poor branding, poor
business ethical standards, lack of continuity and excessive overhead costs of
running the business.
2.12.2 Lack of Access to Finance
Lack of capital and the challenges of getting loans from banks, financial
establishments and government development agencies were mentioned as major
challenges to small business growth. It is significant to note that access to finance
was not ranked as the number one biggest obstacle. This surprise finding was
affirmed in the 2011 GEM report released by the University of Cape Town’s
Graduate School of Business, which found that a central challenge to small business
development is not a deficiency of available finance, but rather the knowledge of
where and especially how to access it (Mahembe, 2013). In terms of support
intervention, a huge information gap has been identified between local business
service providers and entrepreneurs. Nonetheless, the 2010 Small Business Survey
ranked lack of access to finance (8.7%) third after competition (12.6%) and
deficiency of space to operate (16.2%) as key obstacles to the development of
SMMEs (FinScope, 2010). The rejection rate for bank loans is high with only 25%
likely to be successful (out of 84.4% applications). Furthermore, out of 25%
successful applications, 85% of applicants accepted the loan but only 18% finally got
the loan (National Credit Regulator, 2011). According to Agwa-Ejon and Ebohwa
(2015), they noted that it has been observed that the requirements and selection
criteria for the financial applications are not made sufficiently clear to the clients
resulting in the higher failure rate of applications. Thus, SMMEs are still struggling to
access financial and non‐financial services and their performance have not improved
much.
29

30. 2.12.3tLack of Access to information
Lack of information and access to information is another critical constraint. In terms
of access to business information, the majority of entrepreneurs relied either on word
of mouth or had no sources of business information. For example the internet and
websites have been created that allows easy access to information concerning
SMME development programs, but it is difficult to interpret the information and put it
into practice because of the medium used for communication especially to those who
are not educated enough. According to Leonard and Dladla (2015), there has been
major progress made in ensuring and increasing the levels of community
participation in the tourism industry around Alexandra but residents still lacked the
ability to run and promote tourism operations.
2.12.4 Demographics of the operators of SMMEs
The demographics of the operators of the SMMEs have been found to affect the
performance and output of the business. This is so because the successes or failure
of the enterprise depends to a large extent on the characteristics of the owner. In
South Africa where women’s interest are relegated to the background, there may be
a general perception that businesses owned by women may not thrive as that of men
(Ministry of Trades and industry 2011). However, it is opined that women are better
managers than men. Also, because of persistent deprivations some women may not
be empowered enough to run successful SMMEs and may not be given similar
opportunity in terms of loan facility and contract offer because of gender issues.
Further research is needed to resolve the role of gender in the success of tourism
SMMEs. Such research will assist in making policies to address any issues related to
gender inequality in the tourism SMMEs at the township level.
The educational qualification of the operators can also determine how many
innovations that can be injected into the business. Most of the indigenous SMME
operators are likely to not be well educated and therefore may not have the
necessary skills to compete favourably in the tourism market. Research along this
line can be used to fashion how to organise remedial programs for the operators so
as to boost efficiency and improved service delivery with associated increased
returns on investment.
30

31. The race of the operator may also affect the small scale businesses. Historically,
black people are disadvantaged in the tourism industry. They may not have enough
capital to set up the business. Also, there may not be adequate opportunity for
networking and international collaboration as compared to their Caucasian
counterpart who will be able to have several networks of connection and be able to
get international collaboration for his/her business. Twenty years after the apartheid
era, it is expected that the effect of such racial disparity should be reduced so as not
to have impact on the successes of SMME activities. This research hopes to fill this
gap in knowledge
2.12.5 ‘Relationship’ level challenges.
The success of the tourism industry is a complex interplay between all the various
stakeholders. The relationship of SMMEs and the big multinational companies in the
tourism industry can go a long way to either protect the SMMEs or kill them. It is
always very difficult for SMMEs to compete with large multinationals for customers
and provision of goods and services. Thus activities of these multinational can
impact on the growth of the SMMEs. What are therefore encouraged are synergistic
relationships in which the big multinational companies are linked up with the SMMEs
and allow them to take control of some part of the production or supply chain.
SMMEs may not be able to attract international collaborators that will help to grow
their business. Currently in South Africa, most of the multinationals appear to be
monopolising all the various aspect of the supply chain and production thereby not
giving the SMMEs room to operate (Butler 2010). The government policies to protect
the SMMEs in this regard are not very functional in the tourism industry.
2.12.6 Community level challenges of SMMEs
At the community level, many black South African may not recognise the importance
of tourism to the enhancement of their cultural heritage and as a source of revenue
to the country. Some perceived risks by tourists that may make them to shun from
visiting a tourist site include: crime, xenophobic attacks, poor rural development and
perceived hostile environment by the populous blacks because of their history
31

32. against the white population. The prevalent HIV infection is also a risk factor as
observed in the Asian country of Thailand (Lepp & Gordon 2003). These perceived
risks may be tolerable by tourist to varying degrees (Lepp & Gordon 2003). Thus
poor knowledge and attitude of the community is a major constraint to the growth of
SMME tourism. This can greatly affect the business output of the tourism SMMEs in
the township. Thus, tourism SMME operators may have to invest extra effort and
energy in convincing tourists to visit if the community involvement in the process is
poor.
It is pertinent for South African tourism managers to explore some of these peculiar
risks by studying how tourists respond to them. The assistance of community liaison
officers may be necessary to promote cohesion between the tourism SMME
operators and the host community.
2.12.7 Crime and Corruption
The United Nations Office of Drugs and Crime (2007) stated that South Africa was
one of the world’s five most-violent Countries. According to the South African Police
Service Crime Statistics (2009), while the incidences of virtually all major categories
of crime has fallen during the previous year, business related crime is on the
increase. Most of these robberies were attacks on small business premises (Olawole
& Garve, 2010). Also the xenophobic attacks of 2008 and 2015 in South Africa have
heightened the fears of international tourists to visit the historically interesting South
African townships. To convince tourists of their safety, extra private security
arrangements may have to be made by the SMMEs. This will greatly add to the
overhead cost of doing business. Thus, crime and corruption in the country can
militate against the growth of tourism SMMEs in Alexanda (Leonard & Dladla 2005).
2.12.8 Society level challenge of Tourism SMMES
This challenge involves the various framework and enabling environment that are
broadly put in place by government and the society to aid the growth of the industry.
Onugu (2005) stated that poor management of financial instruments, poor regulation
of the tourism industry and inadequate protective legal framework are some factors
32

33. that affect the growth of tourism SMMEs. It was also stated that in several instances
where the government have established friendly policies to aid the promotion of
Tourism SMMEs, corruption and unwholesome bureaucracy may not allow the
SMMEs to gain maximally from such initiatives. This research is undertaken to add
to the debates of SMMEs and attempt to recommend solutions to the various
challenges to tourism SMMEs operators in the Alexandra township of South Africa.
33

34. CHAPTER 3 – RESEARCH OBJECTIVES & METHODOLOGY
3.1 Problem Statement
It is pertinent to note that strategic planning initiatives are difficult to undertake on the
Alexandra SMMEs economy because of the poor data base and limited research in
this area.
Although, there is an emerging black-ownership of tourism enterprises especially in
the townships, little is known about their constraints and challenges. This is because
most of them may not be registered (Rogerson, 2008). Generally, the mortality rate
of SMMEs in the developing world is high due to several reasons. However, it is not
clear if such unfavourable statistics is also prevalent in the tourism SMMEs of South
Africa. Rogerson (2008) studied the performance of SMMEs in South Africa’s priority
sectors and observed that the major challenges of small scale businesses were the
inability of meeting their expected role due to a number of challenges, poor financial
assistance, lack of accurate and recent knowledge of market information, and lack of
infrastructure for modern information technology. Hence, the changing face of
township business is to be able to demonstrate easy access to amenities and
adequate infrastructure. There is therefore the need to understand the existing
dynamics of Alexandra Township SMMEs, in order to promote their growth and
competitiveness. A successful business environment in the Alexandra Township
would contribute to redistribution of wealth, employment and improve the quality of
life of the township residents.
Alexandra has a rich history as a major location designated for the blacks in the pre-
apartheid era (Kaplan, 2004). However, since the commencement of multi-racial
democracy in 1994, several changes are expected to have occurred in the socio-
economic life of the people of the town. Such socio-economic transition is expected
to impact on the tourism SMMEs. But no recent data are available. This research
tries to look at the challenges to tourism SMME development in the Alexandra
township of South Africa in the context of the on-going transitions.
34

35. 3.2 Significance of the study
The activities of SMMEs are very important to the socio economic growth of a nation.
However there are constraints against their growth. Also the value of SMMEs to the
tourism industry in a developing country like South Africa cannot be over-
emphasised. There may also be some peculiar problems facing the Tourism SMMEs
that may not be amenable to the usual remedies that are given to SMMEs in general.
This study therefore aims to investigate the peculiar challenges of tourism SMMEs in
a township location like Alexandra to aid policy formulation and growth of the
industry.
3.3 Aims and Objective of Research
The aim of this research was to explore and determine the challenges of tourism
SMMEs in Alexandra Township, Johannesburg.
The specific objectives were:
1. To describe the demographic characteristics of the operators of tourism
SMMEs in the Alexandra township
2. To determine the challenges and constraints faced by tourism SMMEs in
Alexandra township.
3. To explore if the identified challenges were being addressed or tackled.
4. To offer recommendations to further address those challenges.
3.4 Research Methodology
This chapter describes the procedure used to gather data and how the data was
processed and presented. The data of the study was conducted using a qualitative
research design. A description of the research population and sample was done.
Ethical issues and the identified limitations of the study were considered. It is a norm
that researchers have to make inferences based on the reliability and
appropriateness of the instruments and methods that were utilised to research of any
aspect of the society. Thus, proper evaluation of the challenges facing tourism
SMMEs in South Africa can be well studied using the qualitative research approach
as was conducted in this study. Structured, semi structured and open ended
35

36. questions were used to elicit the necessary information to answer the objectives of
this study (Leedy & Ormrod, 2010). According to Denzin and Lincoln (2011),
qualitative researchers study things in their natural settings, attempting to make
sense of, or to interpret, phenomena in terms of the meanings people bring to them.
It uses in-depth studies of small groups of people to guide and support the
construction of hypotheses (Denzin & Lincoln, 2011).
3.4.1 Research Design and Methodology
In this study a qualitative research approach is applied, since this research is an
effort to explore the challenges facing SMMEs in Alexandra. Face to face interviews
with the identified respondents were the primary method of data collection in this
study. As stated by Kumar (2005), primary data is data that must be gathered in
such a way to sufficiently answer the set objectives of the study. Thus, qualitative
research is useful to help to exhaustively explore all the perceptions and knowledge
of the respondents. One other advantage of the qualitative study design is the ability
to be able to unwind complex subjects and its adaptive characteristics (Walker,
1985). The methodology used was predominantly semi- structured, in-depth and one
on one interviews with key individual informants.
3.4.2 Study Population
The study population of this research are all the operators of tourism SMMEs in
Alexandra. This township was chosen because of the tourism potential of Alexandra.
Alexandra is historically one of the black designated townships under the apartheid
rule with several locations of historical significance.
3.4.3 Study Sampling
Purposive (convenience) sampling was then utilised to select the sample of tourism
SMMEs. Thus, the researcher went to the location where the operators are and
approached them individually. Every consenting operator was then interviewed at
his/her convenience. Also, because of poor response rate by the operators (despite
explaining fully the benefits accruable from a research of this nature), a snowball
36

37. approach was then utilised. This method entails the researcher requesting any
consenting respondent who was interviewed to recommend other operators that
could also be interviewed. In order to avoid the bias of clustering that may occur with
this method of sampling, it was requested that successive interviewees
recommended somebody that may be of the opposite sex and in another sector of
the tourism industry other that of the previous interviewee. At the end of the
interviews, responses ranged from a great mix or spectrum of tourism SMMEs
operators.
Thus, the sample size included two Bed & Breakfasts, two Travel and Tourism
Operators such as cultural tourism activities (Jazz, dance, crafts), two Transport
operators, two hawkers and two Spaza shops. According to McMillan and
Schumacher (2010), such a spread of tourism operators will help to illuminate
different aspects and give rich data that will complement one another.
3.4.4 Semi-structured Interviews
According to Cohenet, Manion & Morrison (2007), a semi-structured interview is the
ability of the interviewer to clearly structure questions, listen attentively, pause, probe
or prompt appropriately, and encourage the interviewee to talk freely, which makes it
easy for interviewees to respond. The semi-structured interview as Creswell (2003)
states, furnishes the best chance for the respondents to share information in a
comfortable and familiar manner and the researcher to explore interesting insights as
the need arises as only key questions will be predetermined. In each interview, a
transcription of the conversation was used and notes were taken on paper.
Respondents were asked flexible checklist questions in the subject which was
developed from the literature review.
3.4.5 Snowballing Technique
Although this sampling technique is non-random, nevertheless it comes handy and
invaluable in some research scenarios. It is a technique that can be used to obviate
the problems associated with sampling of concealed or the hard to reach populations
such as conduct of researches in individuals with criminal tendencies or isolated
37

38. population. The hard to reach population or respondents who practiced clandestine
activities like the homosexuals can be investigated with this sampling method
(Faugier & Sargeant, 1997). Because such groups are hard to reach, this poses a
range of methodological research challenges if we are to understand more about
such peculiar behaviours.
After meeting and gaining the trust of a member of the target community, such index
respondent may be able to refer the researcher to other acquaintances or peers
rather than other more formal methods of identification. Furthermore, Snowball
sampling has been found to be economical, efficient and effective in various studies.
For example, it has been shown to be capable of producing internationally
comparable data in a study by Avico, Knorczak, and Van Meter (1988).that
investigated cocaine users in three European cities. Snowballing methods may also
be used to examine changes over time. Therefore, this method was utilised with
potential for good outcome in my study.
3.4.6 Procedures used for data collection
The respondents had face to face interviews with the researcher at their
convenience. The interviews were conducted in their offices or close to their usual
business environment. English language was the usual medium of communication.
The interviews roughly took about 30 minutes with the minimum time spent with an
interviewee being 23 minutes and maximum time spent with an interviewee was 47
minutes. The interviews were tape-recorded after obtaining the participants’ consent.
3.4.7 Data analysis and interpretation
The entire audio recorded interview was transcribed verbatim by the researcher as
soon as the interview was completed. As suggested by Henning, Rensburg, and
Smit (2004), the data was transcribed, coded and the emerging themes related to
the challenges of tourism SMMEs in Alexandra were identified. The demographic
responses were analysed and reported as percentages.
According to Miles and Huberman (1984), the data management system comprises
of three interrelated sub-processes: which data reduction, data presentation and
38

39. conclusion drawing (Miles & Huberman, 1984). In the case of finding and identifying
the challenges (e.g. lack of skilled labour, lack of access of information, poor
infrastructure and crime, etc.) of SMMEs, the researcher used the coding system
that reflects theoretical in a much more descriptive account.
3.5 Limitation of the study
The study utilised the purposive and snowball sampling method. However, these
sampling methods are non-probabilistic (or non-random) sampling methods.
Therefore inferences from the results may be biased. This limitation is likely to be
obviated by the fact that there was a spread of the participants in terms of their
specific sector of tourism. Also, a sample size of 7 may be small. But usually
exploratory quality research utilise small sample sizes because the strength of
inference in a qualitative study is the in-depth interviews rather than number.
Since exploratory and qualitative research rely on the perceptions and attitudes of
the respondents for meaningful inferences, the proper understanding of socio-
cultural milieu of the respondents is very key. However, the researcher is a foreigner
and this may affect the interpretation of themes and expressions of the respondents.
To reduce this effect, the researcher had some blind discussions with some South
African friends in order to clarify such socio-cultural effects. Since this study is for the
purpose of writing a research report in partial fulfilment of the award of Honours
degree, the study therefore had stringent time bounds. So because of constraints of
time, the researcher could not interview beyond 7 respondents within the time
allotted for the research.
39

40. CHAPTER 4 – RESULTS & DISCUSSIONS
4.1 Introduction
A total of seven respondents from seven different tourism establishments were
selected and interviewed over a period of two months.
Table 4.1: Socio demographic characteristics of informants interviewed during
fieldwork (July to October 2015).
INTERVIE
WEES
ORGANIZATIONS POSITION Gender Age Race INTERVIEW
DATES
1. A Travel and
Tourism Services
Owner Female 41 Black(So
uth
Africa)
21 August
2015
2. B Hotel and Lounge General
Manager
Male 48 Black(So
uth
Africa)
10
September
2015
3. C Hawkers Hawkers Female 52 Black(So
uth
Africa
21
September
2015
4. D Spaza Shop Owner Male 38 Black
(Foreign
er)
30
September
2015
5. E Arts and Craft Owner Male 32 Black(So
uth
Africa
October
2015
6. F Liquors-Alex Assistant
Manager
Male 37 White
(Asian)
October,
2015
7. G Tuck shop Owner Male 30 Black(So
uth
Africa)
October
2015
4.2 Socio demographics of respondents.
Majority of the respondents in this study were male (71% male and 29% female) and
most of them were black South Africans (71% black South African, 29% foreigners).
The maximum and minimum age of the respondent was 52 and 30 years
respectively and the average age was 39.7 years. All the respondents declined to
give insight into their annual average income. See table 2 above and figure 3 below
40

41. Figure 4.1. Gender distribution of Tourist SMMEs operators in Alexandra,
South Africa
4.3 Emerging themes of the Study
The emerging themes from the various in-depth interviews that were conducted
included:
1. Issues of gender inequality and poor status of women in society
2. Insecurity situations in Alexandra and improper response by law
enforcement agents
3. Poor potential for networking and linkages between SMMEs and
Multinational tourism companies.
4. Weather conditions affecting tourism markets.
5. Inadequate credit facility with poor capital bases were the major factors
militating against the growth of tourism SMMEs in Alexandra.
6. Government have a great role to play in growth of tourism.
7. Poor knowledge of the industry and where to access loans.
4.3.1 Issues of gender inequality and poor status of women in the
society.
The data showed that female operators are generally few in the tourism business
because of cultural discrimination and inadequate education and skill. Most of the
female respondents believed that other women also do not see themselves as being
41

42. able to own a tourism business, although i did not interview all the women in
Alexandra but most of my respondents were women. All the three female
respondents felt that they were discriminated against because they were women and
that other women are not involved in the tourism industry because of
discouragement from the society.
“I faced several challenges in this business because I am a woman. Most people
refuse to give me loans because they said women should not be trusted. People
also feel that if you are making it in the tourism industry then you are selling your
body….. You know what I mean now. As for me I will not sell my body and I will
continue to work hard. I cannot go and steal. Women in Alex needs to come out from
their shell, education must be seen as the ultimate. Knowledge should be seen as
the power. Only if that can be changed, things will get much better” (Respondent A,
a 41 year old female tourism entrepreneur and a certified tourist guide and facilitator)
“When I first started this business my fellow women discouraged me that it was
men’s business and nobody was ready to give me money to expand my business.
But I must make ends meet so I stayed and today I thank God that I can feed my two
children and send them to school. They are the all I have. Police always come to
disturb me at my shop but they will not disturb the other men because the men have
police friends and know how to settle their ways. Sisi, it is very difficult but God is
helping me because I now know the way” (A 52 year old female interviewee who is a
single mother of 2 children and is a hawker selling cultural materials)
.
Thus, most women in the industry feel insecure and felt they can easily be cheated
because of their gender. However those women that persevered in the tourism
industry are now very successful and are ready to mentor other women to join the
business.
“A large number of people that are in Alex, do not have a clue that they themselves
can make it in the tourism SMME especially among women. They wait for years
looking for an unknown employment, they still have the “I beg to apply mentality”
where they keep seeking for getting employment” (Respondent A)
42

43. Respondents stated that issues of gender inequality were a societal problem but it is
just a perception that can be surmounted. Lack of education of the girls was also
seen as a major reason for the inequality.
4.3.2 Security situations in Alexandra and improper response by law
enforcement agent
Virtually all the respondents (six out of seven respondents) had had a very nasty
experience with issues related to insecurity and they claim that insecurity impacts
negatively on the growth of their businesses. The spectrum of insecurity issues
experienced vary from armed robbery attack, theft, gangsters’ attacks, xenophobic
attacks and hostility to the white customers during tours. These events have made
some of them to temporarily close their shops during the height of such events in the
past. The statement of one of the respondents was apt on this:
“Over the years, since I started my business one of my challenges is the gang star
attacks. They called them Tsotsis here; I have been attacked like 5 times since I
opened my shop. I feel it is even worse for those of us who are foreigners. If the
issue of security especially this bad boys issue is resolved in Alexandra, the
business will boom for us because most people will not be afraid to come here from
abroad to patronise us. I pray every day for things to improve…’ (Mr D 38 year old
man who owns a Spaza shop and he is a foreigner)
Furthermore, the general perceptions of the SMME operators that were interviewed
were that the police are not doing enough to control the insecurity situation. They
even accused the police of complacency and that the police were using the security
situation to exploit them. A few of them however had to spend more money to
employ private security companies to safeguard their businesses after having some
negative experiences.
“Some of the youths in the township of Alexandra are not employed. So this makes
them to take to drugs. The government should bring serious policemen, not the ones
we have here now to keep the area safe of robbery attacks. This will make many
people to come and support our business. You see, police are supposed to support
and protect us but they are not doing enough. You can imagine some policemen
43

44. coming to harass me because they want me to sleep with them. I have to change my
shop because of the disturbance of policemen” They are not running after criminals.
Imagine one boy called …. (Name withheld for sake of confidentiality) Everybody
knows him and can tell you what he can do in Alex. He was caught red handed
sometimes ago and was put in jail for some time for robbing some tourists here. I
was very surprised and angry to see him recently at the market (Respondent A,
narrating a previous experience)
4.3.3 Poor potential for networking and linkages of SMMEs and
Multinational tourism companies.
Opinions are divided among the respondents about the possible areas of
collaboration between tourism SMMEs and large multinationals that are involved in
tourism business. Some of the respondents believe that since they have indigenous
rights to own and run a tourism business they do not see any reason to collaborate
with multinationals that usually have higher foreign involvement and capital. They felt
that teaming up with those companies can destroy their business and they would
rather not go near them.
“ If you team up with any of those big companies. They will kill your company. They
do not have anything to offer. How then will my company grow? If you know them
you will know that they are cunny. I worked for a big Hotel for some years before
starting this my own business. So I know them very well…. In fact their profit cannot
be explained” (Respondent G, owner of a tuck shop)
Some respondents who are in the minority (two out of seven respondents) say that
they are ready to partner with multinationals to the extent that those companies can
provide some business opportunity for them. However, they said such opportunities
have not presented themselves. It is obvious from this data analysis that the
respondents do not see the economic potential in having linkages with multinationals
but a few that feel such opportunity could grow their business do not know how to
create the linkage.
44

45. 4.3.4 The seasonal Weather conditions affect tourism SMMEs market.
It was stated by most respondents that some extreme of weather that do occur in
Alexandra usually impact on tourism industry. The data showed that most tourism
SMMEs do not have the resources to prevent the effect of extreme weather. Some of
them make use of make-shift shops that cannot protect against bad weather. Thus,
most of them stay at home during extremes of weather. Such should not occur if the
operators have adequate capital to procure the appropriate infrastructures.
“Shelter is an issue here. People get robbed, some operate on the streets such that
when it rains or during the winter season, it is very difficult to be up and running.
When it occurs, people tend to stay away from business and wait until a favourable
weather conditions prevail” (Respondent E, Art and craft shop owner)
4.3.5 Inadequate credit facility with poor capital base was a major
factors militating against the growth of tourism SMMEs in Alexandra.
All the respondents believed that money is important to grow the business. However,
there is poor access to bank loans by SMMEs. Even where those credit facilities
exist the information is not readily available to the Alexandra area.
“When I tried to apply for a Bank loan it was a big challenge for me. It was through
hard work that I manage to survive. I do not have a proper shelter also I cannot
afford to rent any office space for my business because of affordability. When it rains
I cannot not sell my products, I close the shop and by doing that I do not have any
income” (Respondent G)
4.3.6 Government have a great role to play in growth of tourism.
All the interviewees were emphatic on the fact that government should be made to
provide the enabling environment for the growth of tourism industry at Alexandra.
They called on government to provide adequate security, infrastructure and credit
facilities. They also stated that Government should educate the generality of
Alexandra to engender a sustainable interest in tourism by the people of Alexandra.
45

46. “There is a high possibility for my business to grow. The government can help to
build a more suitable shelter for the people of Alexandra Township and police should
help reduce the crime problem that we are facing”. (Respondent F, owner of art and
craft shop)
“Yes, of course, I am very certain that things are changing around the world.
However, government and private sector should try to help tourism SMMEs in the
Alexandra Township and locations generally. People are not able to create business
plans, they lack managerial skills. Hence initiatives should be provided”.
(Respondent B, General Manager of a Bed & breakfast)
4.4 Summary
The analysis of the data from the in-depth interviews revealed that the emerging
theme showed that gender inequality impacts on the participation of women in the
tourism industry. Also, several operators of tourism SMMEs have suffered varying
degree of violent attacks and they believed that the police force is complacent. This
they believe reduces patronage. Also, opinion is divided about the benefit of linkages
between SMMEs and the multinational companies. Extreme weather conditions
easily affect the tourism business because operators lack the ability to protect the
business against harsh weather. Government is believed to have a central role to
play in providing an enabling environment for tourism SMMEs to thrive.
4.5 Discussion
This research report was conceptualised to evaluate the peculiar constraints of
Tourism SMME operators in Alexandra. The result from this report showed the
predominance of men as compared to women in the Tourism SMME industry. This
finding is in keeping with the gender pattern among SMME operators that were
studied by previous authors (SAnews.gov.za. 2015). However, this obvious
disproportion of male to female ratio in the tourism industry cannot be justified by the
population dynamics of South Africa. This is because females constitute about 51%
of the South African population according to the 2014 population estimates (Statistic
SA, 2015). Thus, the present dynamics of female domination in South Africa in terms
46

47. of population was not represented among the tourism operators. This brings to the
fore the poor participation of South African women in the economic development of
the tourism sector.
Not unsurprisingly, this study found that the few women that participated in the
tourism sector complained bitterly about perceived gender discrimination. The
women believed that they had to go the extra mile to be able to succeed in the
industry. Thus, women operators had an extra burden of convincing financial
institutions before being granted loans to grow their business because of their
gender. They also complained of other gender related cultural and social constraints
that are affecting them in the industry. Similar results of unfavourable gender
influence on tourism business was also obtained by Chipfua,Nzonzo,& Muchenje
(2012) in Zimbabwe where they found that women entrepreneurs in the tourism
industry had constraints of funding and other gender related socio-cultural barriers to
their business growth. It is believed that women are naturally endowed (and
therefore better than men) to be able to tend and manage the resources of the family
for training children and providing basic needs at the family level. Such skill is
expected to be very useful for growing such micro businesses like the tourism
SMMEs. However, the environment appears hostile for women to innovate and
develop the sector. Government should urgently address these gender related
issues in the industry. Government can initiate an “Association of women tourism
operators” and encourage them to organise themselves to hinder their specific
challenges. Also, women tourism operators that have made their mark can be
selected as role models to other women so as to encourage other women to pick up
the challenge of investing in the Tourism industry. Above all, the girl child education
should be vigorously pursued in the country.
The study found that majority of the tourism SMME operators in Alexandra are not
comfortable with collaborating with big multi-national companies. It is apparent that
most of them are unaware of the inherent benefits to their business if they partner
with the multinational companies. Branding as stated by Rogerson (2008b) is an
important marketing strategy of a flourishing business. Most multi-national
companies have the capital and means to brand their products (Rogerson 2008b).
However, most SMME cannot afford the cost of branding (Rogerson 2008b). A
47

48. partnership of SMMEs and the big multinationals will enhance their visibility and
branding (Rogerson at al 2008b; Butler 2010). Furthermore, the multinational tourism
companies have international networks that can assist the business of SMMEs if
they work together (The United Nations Conference on Trade and
Development(UNCTAD),2008). Also, linkages can be syndicated between them such
that the SMMEs can be part of the supply chain of the multi-national tourism
companies (Anderson, 2011). This will further enhance the revenue generation of the
SMMEs (Anderson, 2011).
It appears however that the disconnect and apparent animosity between the SMME
operators in Alexandra and the big multinational tourism companies is because most
of the tourism SMME operators in Alexandra are Black South Africans while most of
the owners of the big multi-national companies are either white South Africans or
foreigners (Butler, 2010). The historical disparity and inequity of the apartheid era
might be influencing the perceptions of the Black SMME operators (Butler, 2010).
The old fear of marginalisation may be making the black operators not to want to
interact with the big companies. The aforementioned have certainly blurred their
being able to appreciate the inherent benefits of such collaborations. Government
should promote programmes that will aid further integration of all the races for the
benefit of all. Further study should be conducted to address how the necessary
integration can fully occur in the tourism industry.
Despite Government’s efforts at funding the tourism industry (Agupusi, 2008), most
respondents in the study still believed that the impact of government funding was not
felt. This finding was also similar to reports from other parts of Africa like Nigeria
(Ilegbinosa &Jumbo 2005)and Ghana (Dawuda & Azeko 2015) . The bureaucracy in
Government funding must be reduced to improve the funding of SMME operators in
Alexandra.
Security concerns were raised by most of the respondents in the study. The security
issues that were of concern previously in the tourism industry has to do with locals
attacking tourists because they believed they are invading their cherished cultural
property (Butler, 2010) and sometimes religious fanatics had attacked tourists in the
Egyptian Niles because they felt tourist were practising anti-Islamic activities Ciment
48

49. J, (2015) . However, the present security concerns in the South African tourism
industry are targeted at the SMME operators and their businesses rather than the
tourists. Government must provide employment, adequate security and reorient the
people of Alexandra for them to appreciate the socio economic and cultural roles of
tourism in Alexandra.
Finally, extremes of weather conditions were also stated as a constraint to tourism
SMMEs in Alexandra. Thus, climate change may also be a recognised constraint of
tourism SMMEs. This finding is very novel in that it shows that climate change can
also affect tourism SMMEs in Alexandra. However, most previous studies did not
identify extremes of weather as affecting the operators of SMMEs. Government
should provide adequate infrastructure at the tourism market that will make operators
to be able to withstand extremes of weather (Meyer, 2004). Furthermore, tourists
also enjoy the scenery on the route to the final destination of the tourist attraction.
Such routes should be able to withstand extremes of weather and erosions and bad
roads from weather conditions should be avoided (Meyer, 2004).
CHAPTER 5 – CONCLUSIONS & RECOMMENDATIONS
In summary, this research has brought to the fore some peculiar constraints of
tourism SMMEs that requires urgent attention in order for the sector to maximally
thrive in Alexandra and other parts of the country. Furthermore, the study showed
that the constraints of tourism SMMEs are interrelated and multifactorial as stated by
the Social Ecological Model (SEM) (McLeroy, 1988). Thus, individual constraints like
gender and racial disparity affected the perceptions of operators. Moreover, the
current relationships between multi nationals and SMMEs do not promote growth in
49

50. Alexandra. The societal norms and perceptions as stated by McLeroy (1988) also
affected the growth of SMMEs (McLeroy, 1988). Finally, Government (which can be
taken to equivalent to the “Society” in the SEM) (McLeroy, 1988) was identified to
play a pivotal role in the success of the Tourism SMMEs
RECOMMENDATIONS
 Issues of gender inequality and poor status of women in society should be
address.
 Insecurity situations in Alexandra and improper response by law
enforcement agents should be closely looked upon.
 Poor potential for networking and linkages between SMMEs and
Multinational tourism companies.
 Weather conditions affecting tourism markets, government should provide
good and adequate infrastructure.
50

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