SOCIAL RESPONSIBILITY IN THE SMMEs OF THE BOTSHABELO INDUSTRIAL ESTATES by FRANCIS OKYERE M.Tech.: Business Administration in the Faculty of Management Sciences CENTRAL UNIVERSITY OF TECHNOLOGY, FREE STATE SUPERVISOR: PROFESSOR D.Y. DZANSI CO-SUPERVISOR: MR. P.K. HOEYI DECEMBER 2012 DECLARATION I, Francis Okyere, student number 207071829, do hereby declare that this research report submitted to the Central University of Technology, Free State, for the Degree M.TECH: BUSINESS ADMINISTRATION is my own independent work and has not previously been submitted by me at another university/faculty. I furthermore cede copyright of the dissertation in favour of the Central University of Technology, Free State. _____________________ 10TH DECEMBER SIGNATURE OF STUDENT DATE i ACKNOWLEDGEMENTS I, Francis Okyere, remain ever grateful to the following: • The Almighty for all his mercies, protection, gifts, opportunities, and talents bestowed upon me. • My wife, Mpolokeng Ntobo, and lovely daughter, Nana Ama Okyere for their sacrifices. • Mr. Edmund Amoakoh, my study partner for the encouragement he offered me. • My parents for bringing me into this wonderful world, and siblings for their prayers and support. • My supervisor, Professor Dennis Yao Dzansi, for his patience, quality supervision and advice. • My co-supervisor, Mr Prosper Hoeyi, for his guidance and vital suggestions. MAY YOU ALL BE BLESSED!!! Francis Okyere Maseru, Lesotho December 2012 ii TABLE OF CONTENTS DECLARATION ............................................................................................................... i ACKNOWLEDGEMENTS ............................................................................................... ii TABLE OF CONTENTS ................................................................................................. iii LIST OF FIGURES....................................................................................................... viii LIST OF TABLES .......................................................................................................... ix ABSTRACT .................................................................................................................... x CHAPTER I: INTRODUCTION TO THE STUDY ............................................................ 1 1.1 INTRODUCTION ................................................................................................ 1 1.2 PROBLEM STATEMENT ................................................................................... 4 1.3 RESEARCH QUESTIONS.................................................................................. 5 1.4 STUDY OBJECTIVES ........................................................................................ 6 1.5 IMPORTANCE OF THE STUDY ........................................................................ 7 1.6 METHODOLOGY ............................................................................................... 9 1.6.1 RESEARCH DESIGN ......................................................................................... 9 1.6.2 POPULATION AND SAMPLING ...................................................................... 10 1.6.2.1 The population .................................................................................................. 10 1.6.2.2 Sampling........................................................................................................... 11 1.6.3 DATA COLLECTION ........................................................................................ 11 1.6.4 QUESTIONNAIRE DESIGN ............................................................................. 11 1.6.4.1 Sections in the questionnaire ............................................................................ 12 1.6.4.2 Pre-testing the questionnaire ............................................................................ 13 1.6.5 ENSURING CREDIBILITY OF THE STUDY .................................................... 14 iii 1.6.5.1 Ensuring measurement validity ......................................................................... 14 1.6.5.2 Ensuring reliability ............................................................................................ 16 1.6.6 DATA EDITING, CODING AND ENTRY .......................................................... 18 1.6.6.1 Data editing ...................................................................................................... 18 1.6.6.2 Data coding ...................................................................................................... 18 1.6.6.3 Data entry ......................................................................................................... 19 1.6.7 DATA ANALYSIS ............................................................................................. 19 1.6.7.1 Descriptive statistics ......................................................................................... 19 1.6.7.2 Inferential statistics ........................................................................................... 19 1.7 ETHICAL ISSUES DEALT WITH ...................................................................... 20 1.8 RESEARCH LIMITATIONS .............................................................................. 21 1.9 DEFINITION OF KEY TERMS .......................................................................... 22 1.10 OUTLINE OF THE STUDY ............................................................................... 23 1.11 CHAPTER SUMMARY ..................................................................................... 24 CHAPTER 2: SMMEs IN SOCIO-ECONOMIC DEVELOPMENT ................................. 25 2.1 INTRODUCTION .............................................................................................. 25 2.2 DEFINING SMMEs ........................................................................................... 26 2.2.1 SOME INTERNATIONAL DEFINITIONS .......................................................... 26 2.2.2 LOCAL DEFINITIONS ...................................................................................... 29 2.3 CONSTRAINTS FACING SMMEs IN DEVELOPING COUNTRIES ................. 32 2.3.1 PROBLEMS EXPERIENCED BY SMMES IN SOUTH AFRICA ....................... 34 2.3.2 THE SOUTH AFRICAN SMME ENABLING ENVIRONMENT .......................... 38 2.3.3 SUMMATIVE ASSESSMENT OF THE SMME ENVIRONMENT ...................... 45 2.4 SMMEs IN SOUTH AFRICA’S SOCIO-ECONOMIC DEVELOPMENT ............ 46 iv 2.5 CHAPTER SUMMARY ..................................................................................... 53 CHAPTER 3: SMALL BUSINESS SOCIAL RESPONSIBILITY ................................... 55 3.1 INTRODUCTION .............................................................................................. 55 3.2 DEFINING BSR ................................................................................................ 56 3.3 THEORETICAL FOUNDATIONS OF BSR ....................................................... 62 3.3.1 THE CHARITY (PHILANTHROPIC) PRINCIPLE ............................................. 62 3.3.2 THE STEWARDSHIP PRINCIPLE ................................................................... 62 3.3.3 THE STAKEHOLDER THEORY ....................................................................... 64 3.4 ETHICS AS A FOUNDATION FOR BSR .......................................................... 70 3.4.1 MEANING OF ETHICS ..................................................................................... 71 3.4.2 BENEFITS OF BUSINESS ETHICS TO SMMES ............................................. 74 3.5 THE SMMEs AND BSR INTERFACE ............................................................... 75 3.5.1 ENGAGING SMMEs IN BSR ............................................................................ 77 3.5.2 BENEFITS OF BSR TO SMMEs ...................................................................... 80 3.5.3 MEASURING BSR IN SMMEs ......................................................................... 81 3.6 THE INSTRUMENT USED ............................................................................... 81 3.7 CHAPTER SUMMARY ..................................................................................... 82 CHAPTER 4: RESULTS AND DISCUSSION ............................................................... 84 4.1 INTRODUCTION .............................................................................................. 84 4.2 DEMOGRAPHICS ............................................................................................ 84 4.2.1 PERSONAL CHARACTERISTICS ................................................................... 84 4.2.2 BUSINESS CHARACTERISTICS ..................................................................... 88 4.3 SOCIAL RESPONSIBILITY IN THE SMMEs .................................................... 95 v 4.3.1 RESPONDENTS’ UNDERSTANDING OF BSR ............................................... 96 4.3.2 PERCEPTION OF BSR AS A SOUND BUSINESS PHILOSOPHY .................. 97 4.3.3 REASONS FOR UNDERTAKING BSR ............................................................ 98 4.3.4 ATTITUDE TOWARDS BSR ............................................................................ 99 4.3.5 BARRIERS TO BSR ACTIVITIES .................................................................. 100 4.3.6 MAIN BSR ACTIVITIES .................................................................................. 101 4.3.6.1 Customer-related activities ............................................................................