Constraints of Small Business Development in South Africa

The increase of competition in all industries worldwide has caused a series of alterations in existing business policies. firms of all sizes update their plans and proceed to the development of strategic alliances in order to face their competitors. The potentials of firms to stabilize their position in a particular market seems to be directly related to the market conditions and the support available by the state. The current report focuses on the constraints in small business development in South Africa. the firms of this size seem to face a series of obstacles in regard to their entrance and their survival in the local market. Legislators worldwide have described the term ‘small business’ using similar criteria. most commonly the number of employees is the key criterion for characterizing a business as ‘small’. In accordance with Little (2005), the term small business is used for describing a firm with up to 499 employees, in accordance with the description given by the Small Business Administration (USA). The annual revenues of the business are another criterion for the characterization of this business as ‘small’. in the study of Hillman (2001), it is noted that a business is characterized as small when its annual revenues are up to $25 million.In South Africa, the criteria used for the characterization of businesses as small are slightly differentiated compared to the criteria used in Western countries for the same purpose. a comparison can be made between the characteristics of small businesses in the USA and those in South Africa. in fact, small businesses in the USA could be characterized as small businesses in South Africa (Goldman et al 2008). In South Africa, the size of the firm is decided in accordance with the following criteria: the number of its employees, the level of its annual turnover, the industry in which the specific business operates, the type of its management and the capital backing the organizational activities (Goldman et al. 2008).