FULLL NAMES:
STUDENT NUMBER:
UNIQUE NUMBER:
MODULE CODE: OTE2601
ASSIGNMENT: 02
MODULE NAME: ORIENTATION TO TEACHING
ECONOMIC AND MANAGEMENT SCIENCES
YEAR MODULE 2025
,QUESTION 1
Entrepreneurship is often hailed as a key driver of economic growth, job creation,
and innovation, especially in developing countries such as South Africa, where
unemployment and poverty are persistent challenges. Despite the enthusiasm and
the increasing number of individuals venturing into business, many new enterprises
fail within the first few years of operation. Various studies and reports have
consistently shown that South Africa has a high failure rate of small and medium-
sized enterprises (SMEs), with estimates suggesting that up to 70% of new
businesses do not survive beyond the initial two to three years. This is a concerning
trend given the importance of SMEs in contributing to the Gross Domestic Product
(GDP), job creation, and poverty alleviation (OTE2601 Study Guide, 2021:157).
While entrepreneurs such as Patrice Motsepe have successfully navigated the
complexities of business and emerged as leading figures, many others face
insurmountable challenges that lead to business failure. The reasons for these
failures are multifaceted and can be broadly categorised into internal and external
factors.
One of the primary internal reasons why businesses fail is due to poor planning and
lack of a clear business strategy. Many entrepreneurs rush into starting a business
without conducting adequate market research, feasibility studies, or developing a
sound business plan. A business plan serves as a roadmap that guides the
entrepreneur through the different phases of the business and helps to anticipate
challenges, allocate resources, and set realistic goals. Without this strategic
document, business owners often operate blindly, leading to mismanagement of
resources, poor decision-making, and failure to respond effectively to market
demands or changes (OTE2601 Study Guide, 2021:158). For example, a young
entrepreneur might start a fast-food business in an area already saturated with
similar outlets, without investigating the needs or preferences of the local
community, resulting in low sales and eventual closure.
Financial mismanagement is another significant reason for business failure. Many
entrepreneurs lack basic financial literacy and struggle to manage cash flow,
, budgeting, and financial record-keeping. Poor financial management can lead to
over-expenditure, failure to meet operational costs such as rent, salaries, and stock
purchases, and inability to service debts. In some cases, business owners use
personal funds to finance business operations without separating business and
personal accounts, leading to confusion and unsustainable practices. Moreover,
lack of access to affordable financing is a chronic problem for many SMEs in South
Africa, particularly for entrepreneurs from historically disadvantaged backgrounds
who lack collateral or credit histories. This lack of capital hampers business growth
and survival, forcing some entrepreneurs to resort to expensive and risky informal
loans that further strain the business (OTE2601 Study Guide, 2021:159).
Leadership and management weaknesses also contribute to the high failure rate of
businesses. Being an entrepreneur does not automatically equip one with the
necessary management skills to run a business successfully. Effective leadership
involves not only vision but also the ability to manage employees, build teams,
delegate tasks, and motivate others. Many entrepreneurs struggle with managing
human resources, resulting in high staff turnover, low productivity, and workplace
conflicts. Inadequate marketing and customer service skills are also common
pitfalls. Entrepreneurs may fail to market their products or services effectively,
neglect customer feedback, or offer poor after-sales service, leading to customer
dissatisfaction and loss of business. This is particularly true in sectors such as retail,
hospitality, and services where customer experience is a key determinant of
success or failure (OTE2601 Study Guide, 2021:160).
External factors also play a crucial role in the failure of businesses. South Africa's
challenging economic environment, characterised by low economic growth, high
unemployment, and inflation, creates a tough operating climate for new businesses.
When the economy slows down, consumers reduce spending, especially on non-
essential goods and services, affecting businesses’ revenue streams. Load-
shedding, high crime rates, and policy uncertainties further create operational risks
that small businesses often cannot withstand. Additionally, regulatory and
compliance requirements can be burdensome, particularly for small businesses that
lack the capacity to deal with complex tax laws, licensing, and labour regulations.
STUDENT NUMBER:
UNIQUE NUMBER:
MODULE CODE: OTE2601
ASSIGNMENT: 02
MODULE NAME: ORIENTATION TO TEACHING
ECONOMIC AND MANAGEMENT SCIENCES
YEAR MODULE 2025
,QUESTION 1
Entrepreneurship is often hailed as a key driver of economic growth, job creation,
and innovation, especially in developing countries such as South Africa, where
unemployment and poverty are persistent challenges. Despite the enthusiasm and
the increasing number of individuals venturing into business, many new enterprises
fail within the first few years of operation. Various studies and reports have
consistently shown that South Africa has a high failure rate of small and medium-
sized enterprises (SMEs), with estimates suggesting that up to 70% of new
businesses do not survive beyond the initial two to three years. This is a concerning
trend given the importance of SMEs in contributing to the Gross Domestic Product
(GDP), job creation, and poverty alleviation (OTE2601 Study Guide, 2021:157).
While entrepreneurs such as Patrice Motsepe have successfully navigated the
complexities of business and emerged as leading figures, many others face
insurmountable challenges that lead to business failure. The reasons for these
failures are multifaceted and can be broadly categorised into internal and external
factors.
One of the primary internal reasons why businesses fail is due to poor planning and
lack of a clear business strategy. Many entrepreneurs rush into starting a business
without conducting adequate market research, feasibility studies, or developing a
sound business plan. A business plan serves as a roadmap that guides the
entrepreneur through the different phases of the business and helps to anticipate
challenges, allocate resources, and set realistic goals. Without this strategic
document, business owners often operate blindly, leading to mismanagement of
resources, poor decision-making, and failure to respond effectively to market
demands or changes (OTE2601 Study Guide, 2021:158). For example, a young
entrepreneur might start a fast-food business in an area already saturated with
similar outlets, without investigating the needs or preferences of the local
community, resulting in low sales and eventual closure.
Financial mismanagement is another significant reason for business failure. Many
entrepreneurs lack basic financial literacy and struggle to manage cash flow,
, budgeting, and financial record-keeping. Poor financial management can lead to
over-expenditure, failure to meet operational costs such as rent, salaries, and stock
purchases, and inability to service debts. In some cases, business owners use
personal funds to finance business operations without separating business and
personal accounts, leading to confusion and unsustainable practices. Moreover,
lack of access to affordable financing is a chronic problem for many SMEs in South
Africa, particularly for entrepreneurs from historically disadvantaged backgrounds
who lack collateral or credit histories. This lack of capital hampers business growth
and survival, forcing some entrepreneurs to resort to expensive and risky informal
loans that further strain the business (OTE2601 Study Guide, 2021:159).
Leadership and management weaknesses also contribute to the high failure rate of
businesses. Being an entrepreneur does not automatically equip one with the
necessary management skills to run a business successfully. Effective leadership
involves not only vision but also the ability to manage employees, build teams,
delegate tasks, and motivate others. Many entrepreneurs struggle with managing
human resources, resulting in high staff turnover, low productivity, and workplace
conflicts. Inadequate marketing and customer service skills are also common
pitfalls. Entrepreneurs may fail to market their products or services effectively,
neglect customer feedback, or offer poor after-sales service, leading to customer
dissatisfaction and loss of business. This is particularly true in sectors such as retail,
hospitality, and services where customer experience is a key determinant of
success or failure (OTE2601 Study Guide, 2021:160).
External factors also play a crucial role in the failure of businesses. South Africa's
challenging economic environment, characterised by low economic growth, high
unemployment, and inflation, creates a tough operating climate for new businesses.
When the economy slows down, consumers reduce spending, especially on non-
essential goods and services, affecting businesses’ revenue streams. Load-
shedding, high crime rates, and policy uncertainties further create operational risks
that small businesses often cannot withstand. Additionally, regulatory and
compliance requirements can be burdensome, particularly for small businesses that
lack the capacity to deal with complex tax laws, licensing, and labour regulations.
