Leadership and corporate governance of small and medium enterprises (SMES) in South Africa

Abstract

The main, underlying constraint to the growth of Small and Medium Enterprises (SMEs) is a lack of corporate governance (CG) structure (Mahmood 2014). In considering the UK- Department for Business Innovation and Skills report (2012), this constraint is described as one of the fundamental problems holding back the growth of SMEs. The report states it is this lack of leadership and management capability that should be present, to drive performance and enable them to succeed. However, statistics support the indispensable role that SMEs perform in a country’s economy and when the significance of this sector is taken into account, the role that CG and its practices play within SMEs has to be clearly understood (Le Roux, 2010). Due to SMEs survival and growth being dependant on their good business leadership and corporate governance, the ability to lead, manage, and take full advantage of the resources available have, in recent years, been highlighted on global public platforms and the media. It has further been acknowledged, through prior research studies on SMEs that, for a business to be successful, the critical role of leadership and good CG has to be fully understood. The purpose of this paper is to report on South African public perceptions of leadership and corporate governance of SMEs. The study aimed to analyse and evaluate these perceptions towards SME owner/managers and their consequences, on the survival and growth of SMEs. A mixed method approach allowed for qualitative and quantitative techniques in collecting data from individual participants, with primary data collected from nine provinces of South Africa, and 180 participants as the sample. The research instrument consisted of closed-ended, questionnaires made up of 5-point Likert scale responses and 20 questionnaires were distributed to each province. Delivery of the questionnaires was done through email to individual respondents, with follow–up via telephone calls. The research findings indicate that most respondents believed that the growth and survival of SMEs is, due to the lack of business leadership and poor CG. In addition, respondents agreed that SME owners/managers are just average entrepreneurs, as they do not have leadership qualities or skills and that CG does not exist in many SMEs, particularly in South Africa. The paper’s benefit will be to the owners/managers of SMEs, as well as, policy makers and financial agencies for SMEs. It is recommended that further research, with a larger sample size, be drawn from various townships.