OTE2601
Assignment 2
(Detailed Answers)
Due 15 June 2025
, OTE2601
Assignment 2
(Detailed Answers)
Due 15 June 2025
QUESTION 1: Causes of Business Failure in South Africa
Introduction
Despite the rise of prominent entrepreneurs such as Patrice Motsepe, the
entrepreneurial landscape in South Africa remains plagued by a high incidence of
business failures, especially among small and medium-sized enterprises (SMEs).
Understanding the systemic and operational shortcomings that lead to these failures is
critical to fostering sustainable entrepreneurship and shaping effective mentorship
initiatives for emerging business owners.
Key Causes of Business Failure
1. Lack of Strategic Planning
A major contributor to business failure is the absence of a well-formulated
strategic plan. Without a clear vision, mission, and long-term objectives,
businesses struggle to make informed decisions, adapt to market changes, and
allocate resources efficiently. Nieman and Nieuwenhuizen (2009) emphasize that
reactive operations often expose firms to unnecessary risks and hinder growth.
2. Deficient Financial Management
Many entrepreneurs lack the necessary financial literacy to manage cash flow,
budgeting, pricing, and cost control effectively. This deficiency often results in
cash flow crises, insolvency, and misallocation of resources, ultimately leading to
business closure (Van Aardt et al., 2011).
3. Insufficient Access to Capital
Access to finance remains a significant barrier due to stringent lending criteria by
financial institutions. Entrepreneurs without collateral or a proven credit history
Assignment 2
(Detailed Answers)
Due 15 June 2025
, OTE2601
Assignment 2
(Detailed Answers)
Due 15 June 2025
QUESTION 1: Causes of Business Failure in South Africa
Introduction
Despite the rise of prominent entrepreneurs such as Patrice Motsepe, the
entrepreneurial landscape in South Africa remains plagued by a high incidence of
business failures, especially among small and medium-sized enterprises (SMEs).
Understanding the systemic and operational shortcomings that lead to these failures is
critical to fostering sustainable entrepreneurship and shaping effective mentorship
initiatives for emerging business owners.
Key Causes of Business Failure
1. Lack of Strategic Planning
A major contributor to business failure is the absence of a well-formulated
strategic plan. Without a clear vision, mission, and long-term objectives,
businesses struggle to make informed decisions, adapt to market changes, and
allocate resources efficiently. Nieman and Nieuwenhuizen (2009) emphasize that
reactive operations often expose firms to unnecessary risks and hinder growth.
2. Deficient Financial Management
Many entrepreneurs lack the necessary financial literacy to manage cash flow,
budgeting, pricing, and cost control effectively. This deficiency often results in
cash flow crises, insolvency, and misallocation of resources, ultimately leading to
business closure (Van Aardt et al., 2011).
3. Insufficient Access to Capital
Access to finance remains a significant barrier due to stringent lending criteria by
financial institutions. Entrepreneurs without collateral or a proven credit history
