Working Paper 2 - 2005: Tourism SMMEs in South Africa: A Case for Separate Policy Development?

One of the key issues that has been raised in terms of the analysis of small enterprise (SMME) support programmes in South Africa is that often support initiatives have been in the form of ‘generic’ packages that overlook the specificities of particular sectors. Although it has been recognized that the SMME economy in South Africa is extraordinarily diverse and composed of different groups of enterprises which require different kinds of support intervention, currently there exists only limited research on the specific support needs and constraints that challenge SMME development in particular sectors of the economy. This report is part of a series of studies to be undertaken on the specific challenges that exist in terms of SMME development in particular sectors of the South African economy with special attention to the priority sectors which have been identified in the government’s Microeconomic Reform Strategy and the DTIs Integrated Manufacturing Strategy.

The focus in this investigation is upon the tourism sector – one of the DTI priority sectors - and the specific issues that confront tourism SMME development. For the period 1998-2002 of all the priority sectors tourism exhibits the strongest growth in terms of absolute numbers of formal sector employees. Indeed, tourism is the only sector for the period 1998-2002 that shows both positive growth in employment and contribution to GDP. Whereas for several other priority sectors the trend has been for employment to decrease whilst contribution to GDP continues to grow, tourism has recorded substantial improvements both in terms of employment and GDP contribution (Monitor, 2004).

It is clear that, in terms of the future development of the tourism economy in line with government objectives of transformation and Black Economic Empowerment, the promotion of SMMEs is an issue that is of critical concern for policy-makers (TBCSA, 2002, 2003, Rogerson, 2004a, 2004b). Despite the importance of SMME development in the contemporary South African economy it remains that relatively little research has been undertaken on the issues and developmental challenges that confront tourism SMMEs. This paper aims to present the findings from a number of recent empirical investigations and review material concerning the progress and problems of tourism SMME development in South Africa. The essential argument that is developed here is that the nature and problems that face tourism SMMEs in South Africa exhibit certain similarities but also several important and distinct features to SMME development in other sectors of the South African economy.

The paper aims to contribute towards a body of knowledge and more nuanced understanding of the South African SMME economy with the additional goal of feeding into a rethinking of support interventions. The analysis unfolds through five major sections of material.

• First, a review is undertaken of international writings and debates on small tourism firms. This review provides a wider context within which to view the South African experience and challenges of tourism SMME development.
• Second, clarification is provided of the definition of tourism, its key features and performance in the South African economy.
• Third, the position and importance of developing tourism SMMEs in South Africa is examined.
• Four, new research material is presented which analyses the major problems that face different types of tourism SMMEs in contemporary South Africa.
• Finally, by way of conclusion, a select review is offered of certain support initiatives to assist SMME development in tourism