Research purpose: The purpose of the study was to identify the most pertinent business and management skills required for the management of small enterprises in Soweto.

Motivation for the study: Small-business creation is viewed as being a major contributor to economic growth. The motivation of the study was to foster understanding with regard to which business and management skills are essential to the longevity of a small business and to foster growth in small-business creation.

Research design, approach and method: A qualitative survey was conducted amongst 25 Black-owned small enterprises in Soweto. Data were gathered by means of semi-structured interviews. Content analysis, using literature as basis for common themes forthcoming from the interviews, was employed as the means of data analysis.

Main findings: The findings indicated that most enterprise owners lack management and business skills, that there is no single key success factor in managing small enterprises, that competitive advantage is seemingly overlooked and that small-enterprise owners seem to be driven by non-monetary rewards.

Practical/managerial implications: The study affirmed that a contextualised approach to management is crucial, irrespective of the scope of the business and that strategy is considered in a different light in a small business.

Contribution/value-add: Although the findings did not suggest anything contrary to the literature relating to skills, they did highlight the uniqueness of strategic management aspects in small enterprises and also alluded to the communal outlook of Black small-enterprise owners.

In South Africa, according to Abor and Quartey (2010), small- and medium enterprises are seen as a significant way of creating employment. These businesses have the ability to ensure an equitable distribution of income, promote general economic welfare amongst all citizens, improve the local market and make productive use of scare resources. Consequently, they enhance long-term economic growth within the country.

In spite of this contribution to the economy, small enterprises exhibit high failure rates soon after start up (Moodie 2003). Van Eeden, Viviers and Venter (2003) reported that up to 80% of South African small-business ventures fail within five years of establishment. Giliomee (2004) adds that of the 20% that survive for longer than five years, a further 80% fail within the next five years. This implies that only 4% of business ventures will survive beyond 10 years. This situation is not unique to South Africa, as 80% of business ventures started in 2000 and 2001 in the USA went out of business within five years (Papulová & Mokroš 2007). The main reasons for this high failure rate seem to centre on insufficient business skills on the part of the person or group that initiates the business venture.

Prior to 1994, historically Black-inhabited townships were typified by small, informal subsistence-orientated businesses that offered basic products to low-income earners (Ligthelm 2009). Most Soweto residents used the Central Business District (CBD) and surrounding shopping malls to do their shopping. In the wake of the political- and social change experienced in South Africa, many informal small businesses started registering and complying with the existing labour legislation. More malls were developed in historically Black areas in order to tap into the buying potential of the Black market, which provided an opportunity both for large retailers to expand into these areas and for small enterprises to grow and compete with the more established players (Ligthelm 2009).

Given their background, Black small-enterprise owners might not have had the educational and training opportunities as small-enterprise owners from other racial backgrounds and it is possible that ‘street smarts’, as opposed to education, could have contributed greatly to the development of their enterprises. This study focused on whether Black small-enterprise owners reflect the literature in terms of the business- and management skills required for the success of a small enterprise.

As already mentioned, the main contributing factor to the failure of new business ventures is a lack of appropriate business skills in the owner(s) of the new endeavour. It would therefore be appropriate to interrogate the aspect of business skills in more detail. ‘Business skills’, simply put, is a collective term that encompasses the several skills that are necessary in order to run a business efficiently and effectively. In this regard, Strydom (2005) lists the following business skills, in order of priority, as being essential for small enterprises: marketing skills, financial skills and purchasing or procurement skills. Marx, Van Rooyen and Reynerder (1998), on the other hand, also mention marketing skills and financial skills, but add both legal- and entrepreneurial skills to the list. Marx et al. (1998) argue that of all the business skills described in the literature, marketing skills, financial skills, legal skills and entrepreneurial skills are the basic business skills necessary in order for a small enterprise to survive.

In a survey conducted in 2005 amongst business owners in Mamelodi, marketing- and financial skills were rated as being the critical skills needed by small enterprises (Strydom 2005). Sixty-three per cent of respondents in this survey identified training in marketing skills as being an area of urgent training need for small enterprises and 71% identified bookkeeping skills as another such urgent need (Strydom 2005).

There are other effects of marketing skills. These include a deeper understanding of customer needs and behaviour as well as of the marketplace, which results in effective marketing strategy (Needle 2004). A business owner who has marketing skills realises the importance of relationship marketing. This means that the owner focuses on maintaining good long-term relationships with customers and suppliers and, in return, benefits by retaining both (Hatten 2009).

Lee and McGuiggan (2008) identified financial skills which are important to small-enterprise owners, such as benchmarking business performance, analysing and forecasting cash flows, facilitating online transactions, managing retirement funds, understanding business exit strategies, pricing of goods and services and investment decisions. Owners with sound financial skills are able to use the information at their disposal in order to predict and plan their costs and income and make suitable decisions that will increase profitability and satisfy their customers’ needs (Burgess 2007).

The adoption of sound financial management practices impacts on the performance of small enterprises (Gloy & LaDue 2003). Burgess (2007) supports this view by noting that most managers are good at customer care but lack financial skills, resulting in overall ineffectiveness in their jobs and impacting negatively on profitability. Oosthuizen and Van Tonder (2010) also state that it is important for small-enterprise owners to choose the most appropriate finance option that suits their business needs, which can be done if the owners have sound financial skills.

Legal skills are of importance to small enterprises in order to ensure that owners are aware of issues relating to litigation that could be harmful to the business should the small enterprise not comply with the law. In trying to comply with the law, enterprise owners are, however, faced with challenges. According to Hatten (2009), the following are some of the challenges that small-enterprise owners experience:

• Legal wording is technical and not easy to understand.
• Legal documents often imply vast amounts of paperwork and the small enterprise owner can get lost and confused with the detail.

Meggison et al. (2006) state that the first thing small-enterprise owners should do when contemplating a new business venture is to seek the advice of an experienced lawyer. Hatten (2009) supports this view by noting that enterprise owners must engage the services of a lawyer at the time that they are drafting their business plans and not when they are already in trouble.

Entrepreneurship is associated with innovation and this is an important aspect in managing an enterprise. Entrepreneurial characteristics such as commitment and determination, leadership, opportunity obsession and motivation to excel, are important for the successful management of small enterprises. Persistence and determination are estimated to make a contribution to over 90% of small-business successes (Bateman & Snell 2009).

Bekele and Worku (2008) state that in enterprises where owners possess sound managerial skills, the enterprises stand a better chance of longevity. Nieman and Bennett (2006), as well as Pettinger (2007), identified three key managerial skills, namely conceptual-, interpersonal- and technical skills. Although these skills have been investigated more from a corporate point of view (Nieman & Bennett 2006), their application can also be adopted by the small enterprise (Pettinger 2007). It is important to note that these skills differ depending on various identifiable managerial levels. In a corporate setting, top management would typically be required to apply, for example, more conceptual skills and fewer technical (or hands-on) skills. At a supervisory level, technical skills and conceptual skills (also referred to as strategic skills) would predominate. In the setting of the small enterprise, however, definite managerial levels often do not exit, hence the small-enterprise owner is often required to occupy multiple managerial roles, necessitating a balance of all these skills. This is because they are responsible for most, if not all, of the managerial functions in the enterprise.

In terms of conceptual skills, different authors mention that small enterprises can benefit from conceptual skills in the following ways:

• Conceptual skills help in developing plans, strategising and organising resources effectively (Marx et al. 1998).
• Small enterprises compete in a continuously-diversifying environment and conceptual skills help in understanding the enterprise and how it relates to the environment within which it operates (Nieman & Bennett 2006).
• Owners with conceptual skills possess vision and, in general, have better problem-solving abilities (Northouse 2009).

As far as interpersonal skills are concerned, Robbins and Hunsaker (2006) have compiled a list of crucial interpersonal skills (see Table 1). They argue that the list comprises interpersonal skills that experts believe successful managers and future managers should possess.

• They enable management of diversity, conflict and change and enable owners to lead, motivate and evaluate employee performance (Nieman & Bennett 2006).
• They enable trust, coordination and planning (Robbins & Hunsaker 2006).
• They empower owners with the ability to understand others and to know what motivates people (Bateman & Snell 2009).

The success of an enterprise depends on a thorough knowledge of the product or service provided. Technical skills are needed in order to assess what is possible when a customer requests a personalised service or product. In terms of technical skills, Roodt (2005), Nieman and Bennett (2006) and Pettinger (2007) all state that service delivery and customer satisfaction are dependent upon superior technical skills. They also say that owners need to have technical skills in order to supervise employees and to assess whether they are performing tasks correctly. In addition, they should have the specific knowledge, techniques and resources required for the performance of all tasks in order to be successful at managing their enterprises.

Parmigiani and Mitchell (2010) also state that most enterprises focus on technical skills rather than on other expertise, as technical expertise is seen to contribute most to the performance of the enterprise. It should, however, be noted that technical skills on their own are not enough. Multiple skills, such as financial conceptual skills together with technical skills, are needed for the functioning of a successful enterprise (Roodt 2005). Davis and Woodward (2009) support this sentiment by noting that most employers not only look for technical skills, but also for strong ‘soft’ skills in order to have a competitive edge.

The research problem thus seems to be that small enterprises that have been in business for a period of five years or more have done so because of the presence of certain skills required for the effective- and efficient management of small enterprises. However, these skills have seemingly not been articulated clearly for Black-owned South African small enterprises. This study, therefore, endeavours to identify which business- and management skills are present amongst Black small-business owners in Soweto.

As the study is aimed at investigating the management skills present in Black-owned small enterprises, it can also be viewed as being an ethnographic study. Ethnography produces findings derived from collecting data on the behaviour of (and in) a particular society (Babbie & Mouton 2004). The cultural boundaries of this study (Black-owned small enterprises) define the parameters of the particular society (Soweto) within which the research will be conducted. Soweto has always been viewed as a city that takes the lead and where innovative approaches to things are sought in an active manner. This was the main motivation behind selecting Soweto as the target area for this study. A major challenge was that many business owners did not have formal business- or management education and therefore had their own ideas regarding what was necessary in order to keep the business enterprise as a going concern over a prolonged period of time.

The population for the study was compiled from lists of retailers in Soweto held by the Centre for Small Business Development at the University of Johannesburg, the Soweto Chamber of Commerce and from a Soweto Business Guide found on the Internet. Potential participants were contacted telephonically to ascertain how long they had been running their business and also to secure an appointment for an interview if they had indeed been in business for five years or more. Letters requesting permission to conduct interviews were then delivered to the participants as a means of obtaining written consent for participation in the study. Interviews were conducted in English, although there were some concepts or questions that were explained in IsiZulu or SeSotho by one of the researchers, who is proficient in English, IsiZulu and SeSotho. Approximately 300 retailers were contacted initially from the lists obtained. Of these small enterprises, 97 had been conducting business for a period of five years or longer. A sample of 25 Black-owned small enterprises was selected using a convenience, non-probability sampling method. When selecting participants for qualitative studies, the only criterion is how relevant the participant is to the topic being researched (Neuman 2003).

Data were collected by means of semi-structured interviewing. This data collection method generates data through conversations with people concerning their day-to-day dealings and interactions with other people. The main function of the researcher during an interview is to provide a framework for the discussion as it unfolds (Miller & Brewer 2003). For this study, topics emerging from the literature were employed so as to guide the semi-structured interviews. As the study sought to identify which business- and management skills were present amongst Black small-business owners in Soweto, the interviews sought to solicit views pertaining to the most commonly-mentioned business- and management skills forthcoming from literature, these being marketing skills, financial skills, legal skills, conceptual skills, interpersonal skills and technical skills. One might ask why entrepreneurial skills have not been included here. As the study focuses on established businesses and not business start-up activities, entrepreneurial skills were not considered.

The interviews, as well as transcription of the interviews, were all done personally by the lead researcher. The transcripts incorporated notes and memos taken during the interview by the researcher. Interviews followed an interview guide, where the researcher discussed with the participant a range of themes relevant to the study. All interviews were recorded for the aim of future referral and data credibility.

Creswell’s four-stage process of analysis for qualitative data was employed in this study (Creswell 2003):

• Step 1: Organise and prepare data: All data gathered were transcribed after every interview.

• Step 2: Read through all data: An initial pass was made through the data to gain an overall understanding of the views of Black small-enterprise owners with regard to the business- and management skills deemed to be essential for the longevity of a small enterprise. Data were grouped into themes, based on the views that emerged from the interviews.

• Step 3: Begin a detailed analysis with a coding process: Here, one needs to identify the themes that emanate from each interview. Care should be taken not to duplicate themes. Constant revision is needed of dimensions and properties in order to consider subthemes, new themes that arise or even the possibility of having to collapse two or more themes into one

• Step 4: Use coding process to generate descriptions: Data from the identified themes were unpacked by making connections between the themes (Neuman 2003). Themes are thus continually being developed, but this development extends beyond dimensions and properties (Strauss & Corbin 1998) as it also entails linkages and relationships with other themes.

• ‘Marketing helped improve sales and secured more customers’.
• ‘It is important to incorporate after sales feedback and good customer service as a way of marketing’.
• ‘We find it useful to use the Post office to deliver pamphlets to houses, this increases awareness of our business’.
• ‘Community gatherings and stokvels [township savings clubs] are useful to advertise and attract customers’.

It must be noted that, in some instances, participants noted that although it is not crucial for an enterprise owner to possess marketing skills, they were of the opinion that the act of marketing is important to the enterprise. They felt that if the owner did not possess these skills, they could be outsourced.

• ‘If you always go for money, you collapse. If I knew all the financial details of my bakery I would have given it all up, long ago. We were not profitable for four years, but my lack of awareness about the degree of financial strain helped me continue with this enterprise. My accountant took on the responsibility to turn the business around’.

Benefits cited by participants who possessed financial skills, mostly due to formal training, can be seen below:

• ‘Financial skills have enabled me to use my discretion as to how to do costing and mark-up and what to invest’.
• ‘Applying financial skills has helped to manage my finances without having to depend on a bookkeeper or an accountant’.
• ‘A business does not always make a profit. Managing a business, especially the financial side of it, can be problematic if you don’t know what is going on’.

• ‘Knowledge of the law helped in complying with the law by registering workers with the Department of Labour and deducting the Unemployment Insurance Fund’.

• ‘Conceptual skills have helped me to be an early starter and to attract customers before there was competition’.
• ‘I am able to translate ideas into money makers’.
• ‘Conceptual skills have contributed to efficient and profitable day-to-day running of the business and the capacity to deal with issues before they became a problem’.

• Interacting with customers, suppliers and staff in an effective way.
• Solving conflicts.
• Acquiring customers through word of mouth and referrals.
• Going the extra mile for customers.
• Building positive relationships with customers and staff.
• Relating to people easily.

• ‘You must know what your product is all about. You need knowledge and technical skills with regard to the business’.

Those participants that did venture to identify other salient skills mentioned benchmarking skills, computer skills, creative skills and strategic skills. As benchmarking-, computer- and creative skills were identified by no more than one research subject, they cannot be deemed to be an important skill identified by Black small-enterprise owners as a whole.

Table 3 shows the degree of importance that the Black small-business owners of Soweto placed on each of these attributes.

Few of the factors mentioned by the participants were mentioned more than once. However, 10 of the 25 participants viewed being passionate about their enterprise as being most crucial to them. Furthermore, seven of the subjects reflected that marketing was of the utmost importance to them. Here, sentiment reflected that being customer orientated was of singular importance to these enterprise owners. Being focused in terms of having a clear vision was another factor mentioned by two of the research participants.

The following excerpts from the interviews conducted support the claims above:

• ‘They should realise that keeping the customer happy was more important than pursuing money. Mistakes should be rectified immediately’.
• ‘You must be passionate about the type of business you want to start. Your heart should be in the business’.
• ‘Dedication and having a clear focus has enabled me to be strong and withstand difficult times’.
• ‘Be committed and do the job wholeheartedly. Don’t be lazy’.

The findings suggest that these business owners viewed the key to success as emanating from the enterprise owner, implying an internal locus of control as far as success factors are concerned. Black business owners thus view key success factors as something firmly within their control and theirs to control.

• ‘You need something new and different that describes you and your business’.
• ‘Have something that belongs to you only’.

It seems strange that the concept of competitive advantage had not been alluded to more frequently by participants and that it was not mentioned as a key success factor by any of them. One could speculate that, at face value, the research suggests that the concept of competitive advantage is either overlooked or poorly understood by the participants. This is an interesting finding, as contemporary strategic-management literature suggests that competitive advantage is probably the single-most pivotal factor in the success of a business. In this case, it might also be that the concept is not necessarily ignored, but might be conceptualised differently by Black small-enterprise owners in Soweto.

It would seem as though most of the regrets experienced by small-enterprise owners were related to financial matters, implying that the importance of possessing financial skills only becomes apparent after the enterprise has been established. The following interview excerpts reflect the above sentiments:

• ‘I should have left my previous job earlier … and not feared the unknown’.
• ‘Take schooling seriously and know what you want to be’.
• ‘I think I should get some training of tax’.
• ‘Do research, draw up a business plan and get funding’.
• ‘Don’t be too trusting of people … even your staff. Remember, they don’t have the same idea you have’.

By far the largest sentiment echoed here, from 11 of the 25 participants, revolved around the owner experiencing how the business grew to achieve good standing or success from a market point of view, to which the following quotations bear witness:

• ‘Moving from working in a backyard shack to an industrial park and subcontracting for Eskom’.
• ‘Growing from selling fish and chips and sorghum beer to a buy-and-braai licensed entertainment and eating outlet’.
• ‘Seeing the restaurant fully booked and customers waiting to get a table’.

Further to this sentiment, four of the participants were recipients of awards, namely, Shoprite Woman of the Year 2008, SAB Young Entrepreneur, Best Bed & Breakfast in Soweto 2004–2008 and finalist at Business Women Association Entrepreneur of the Year 2009.

Three research subjects cited recognition as FIFA’s 2010 Accommodation of Choice as being an outstanding moment and a further two reflected that reaching their first R1 million in turnover was a proud moment for them.

It is interesting to note that these sentiments reflect mainly non-monetary rewards for the enterprise owners. None of the participants reflected on making money out of the business as being an outstanding moment or achievement. This seems to be indicative of a mindset where profit is not the motivator for establishing a business, but rather that the attainment of an ideal is what provides purpose to the small enterprise owner.

• Most enterprise owners lack business skills such as financial skills and legal skills.
• Most enterprise owners benefit from management skills such as conceptual skills, interpersonal skills and technical skills.
• Participants differentiated between skills needed by the business owner as opposed to skills needed by the enterprise owners.
• Passion and customer focus seemed to be factors that most small-enterprise owners deemed to be crucial for the success of the enterprise.
• Black small-enterprise owners in Soweto deemed key success factors to be factors they had exclusive control over.
• Regrets experienced by small-enterprise owners are mostly related to financial issues.
• The concept of competitive advantage seems, to a large extent, to be overlooked or understood poorly by small-enterprise owners.
• Small-enterprise owners seem to be driven by non-monetary rewards when reflecting upon defining moments in the business.

As this study aimed to assess which skills Black small-enterprise owners in Soweto possess and which skills have contributed to the success of their enterprises, it would be logical to compare the findings resultant from this study with perspectives from literature. Papulová and Mokroš (2007) contend that most small enterprises do not survive because of a lack of business- and managerial skills. This study does seem to confirm this sentiment, but makes a clear distinction between the skill being present in the business as opposed to the particular skill being innate to the business owner. Many of the participants admitted openly that they do not possess certain skills that the literature views as crucial, but these participants also recognised that the skills are important to the business. Hence, where business owners themselves do not possess a skill, it is outsourced.

Dockel and Ligthelm (2005) contend that although literature suggests skills that appear to be key factors, they are not the only key factors for business success. This is echoed by the findings of this study, especially where participants were asked to reflect on additional skills they viewed as being important to the development of an enterprise or where participants were asked to identify key success factors of their enterprise. Therefore, one has to conclude that longevity of a small enterprise is dependent on a range of variables, ranging from personal characteristics and traits to situational factors and unique skills, which seem to reflect the sentiments of Jayawarna and MacPherson (2006). The study therefore also underscores the importance of a contextualised approach toward studying the modern business organisation, irrespective of scope.

The study also suggests that strategic concepts, such as competitive advantage, are either overlooked or understood poorly by Black small-enterprise owners in Soweto. However, this conclusion is reached when considering strategy from a typically Anglo-Saxon view of the large firm. In a study by Thompson, Bounds and Goldman (2012), it was found that many successful small-, medium- and micro-sized enterprises (SMME) owners or managers did not conduct strategic management in the classical concept of the term. However, many of these SMME owners or managers did exhibit elements of thinking strategically. Through this, Thompson et al. (2012) concluded that SMME owners or managers cannot be seen as being ignorant of strategic management, but rather conceptualise and practise strategic management differently when compared with corporate enterprises. The findings of this study suggest the same thing. This is definitely an area that needs attention, not only in terms of curriculum development and training for existing business owners, but in the need for a shift of emphasis. It is becoming apparent that strategic management seems to be conducted according to a different set of rules in SMMEs versus corporate enterprises. Energy needs to be channelled into discovering what strategy and strategic management is all about in the SMME context.

It is interesting to note that all of the Black small-enterprise owners who formed part of this study described defining moments in the existence of their enterprises in non-monetary terms. What was very prominent was that serving their communities and being recognised in their respective communities seemed to be strong driving forces.

This sentiment alludes to the role of the business organisation in society. The traditional, western capitalist thought surrounding the business organisation is that it exists in order to make a profit. This study indicates a uniquely-African perspective on the business organisation as a role-player in society. It views the enterprise as being part of society and not apart from society, tapping into the African collective value system. This view is crucial when it comes to creating a sense of economic development through community. In a country where the creation of small business is seen as a pivotal step in boosting and expanding the economy, it could be a useful strategy to highlight the role that traditional, African values can play in the establishment of SMMEs and how this is linked to economic development.

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