Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa

Magocha, Medicine (Ed.); Matashu, Martha (Ed.) Book Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa Provided in Cooperation with: African Online Scientific Information Systems (AOSIS) Suggested Citation: Magocha, Medicine (Ed.); Matashu, Martha (Ed.) (2024) : Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, ISBN 978-1-991271-15-0, AVARSITY Books, Cape Town, https://doi.org/10.4102/aosis.2024.BK404 This Version is available at: https://hdl.handle.net/10419/321931 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/ EDITED BY Medicine Magocha & Martha Matashu Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa Published by AVARSITY Books, an imprint of AOSIS. AOSIS Publishing 15 Oxford Street, Durbanville, 7550, Cape Town, South Africa Postnet Suite 110, Private Bag X19, Durbanville, 7551, Cape Town, South Africa Tel: +27 21 975 2602 Website: https://www.aosis.co.za Copyright 2024 © Medicine Magocha & Martha Matashu (eds.) Licensee: AOSIS (Pty) Ltd. The moral right of the editors and authors has been asserted. 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Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa EDITORS Medicine Magocha & Martha Matashu Social Sciences, Humanities, Education and Business Management domain editorial board at AOSIS Chief Commissioning Editor: Scholarly Books Andries G van Aarde, MA, DD, PhD, D Litt, South Africa Board members Anthony Turton, Professor in the Centre for Environmental Management and Director TouchStone Resources (Pty) Ltd, University of the Free State, South Africa Charles O’Neill, Associate Professor in the Department of Business Administration, The British University in Egypt, El Sherouk, Cairo Governorate, Egypt Cheryl A Potgieter, Professor and Head of the Research and Doctoral Leadership Academy (RADLA) and Head of the GenderJustice, Health and Human Development research niche, Durban University of Technology, South Africa Christi van der Westhuizen, Associate Professor and Head of the Centre for the Advancement of NonRacialism and Democracy (CANRAD) research programme, Nelson Mandela University, South Africa Emmanuel O Adu, Professor of Teacher Education and Curriculum Studies, Faculty of Education, University of Fort Hare, South Africa Elphinah N Cishe, Professor of Nedbank Research Chair, Department of Continuing Professional Teacher Development, Faculty of Educational Sciences, Walter Sisulu University, South Africa Jayaluxmi Naidoo, Associate Professor of Mathematics and Computer Science Education, College of Humanities, University of KwaZulu-Natal, South Africa Johann Tempelhoff, Professor and Lead of the Cultural Dynamics of Water (CuDyWat) research niche and Head of the South African Water History Archival Repository, School of Basic Sciences, North-West University, South Africa Llewellyn Leonard, Professor of Environmental Management and Chair of the Centre for Excellence (CoE) (Adaptation and Resilience), School of Ecological and Human Sustainability, University of South Africa, South Africa Piet Naudé, Professor of Ethics related to Politics, Lead of the MBA programme in Business in Society and Leadership Development and Director of the University of Stellenbosch Business School, University of Stellenbosch Business School, South Africa Reina-Marie Loader, Programme Lead of the MA programme in Producing Film and Television and Lecturer in Film Production, Faculty of Media and Communication, Bournemouth University, United Kingdom Siphamandla Zondi, Professor of Politics and International Relations, Faculty of Humanities, University of Johannesburg, South Africa Stanley Murairwa, Professor and Head of the Department of Business Sciences, College of Business, Peace, Leadership and Governance, Africa University, Zimbabwe Tembi Tichaawa, Associate Professor and Head of the Department of Tourism, School of Tourism and Hospitality, University of Johannesburg, South Africa Vusiwana C Babane, Department of Educational Psychology, Faculty of Education, University of the Western Cape, South Africa Zilungile Sosibo, Professor of Education, Faculty of Education, Cape Peninsula University of Technology, South Africa Peer-review declaration The publisher (AOSIS) endorses the South African ‘National Scholarly Book Publishers Forum Best Practice for Peer-Review of Scholarly Books’. The book proposal form was evaluated by our Social Sciences, Humanities, Education and Business Management editorial board. The manuscript underwent an evaluation to compare the level of originality with other published works and was subjected to rigorous two-step peer-review before publication by two technical expert reviewers who did not include the volume editors or authors and were independent of the volume editors or authors, with the identities of the reviewers not revealed to the volume editors or authors. The reviewers were independent of the publisher, volume editors and authors. The publisher shared feedback on the similarity report and the reviewers’ inputs with the manuscript’s volume editors and authors to improve the manuscript. Where the reviewers recommended revision and improvements, the volume editors and authors responded adequately to such recommendations. The reviewers commented positively on the scholarly merits of the manuscript and recommended that the book be published. Research justification This book is concerned with the part played by corporate governance practices in the sustainability of small, medium and microenterprises (SMMEs) in the South African context. With the emergence of the new global economy, SMMEs and corporate governance are recognised as strategic drivers of economic development in any economy. Although a plethora of studies have been conducted on corporate governance and SMMEs, such studies have applied a fragmented approach, and this has not only widened the epistemological, ontological and philosophical gaps but also increased our misunderstanding of the interrelationship between governance and small enterprises in theory and practice. Currently, theoretical and empirical studies on corporate governance have focused on large corporate companies, shaping our understanding of how the capital sources used to finance the firm warrant a separation of ownership and control, and prompting the need for putting governance structures, principles and practices in place that safeguard the maximisation of wealth for stakeholders. At the macro-level, corporate governance is believed to contribute to economic growth and development through improved corporate performance and sustainability. Although studies on corporate governance broaden our understanding of the way in which large corporate enterprises are governed, corporate governance in entrepreneurial firms, specifically SMMEs has been little researched. Studies on SMMEs have focused on understanding several issues such as funding, job creation and the challenges small business face. However, there is limited research that focuses on exploring whether the adoption of corporate governance in SMMEs may lead to the promotion of small business sustainability. Within this context, this book thus addresses the gap in the corporate governance and small enterprises literature by exploring whether the integration of corporate governance in SMMEs enhances the sustainability of these entities. This book is centred on exploring whether embedding sound corporate governance in entrepreneurial practices may contribute to the improved performance and sustainability of SMMEs. Given the importance of SMMEs for economic development, it is imperative to investigate whether corporate governance can enhance the performance and sustainability of such small businesses. This is therefore the central investigation of this manuscript, with each chapter uniquely contributing to knowledge generation and debate in this regard. Chapters rely on a variety of methodological approaches to answer their main research questions and aims. Chapter 6, ‘Addressing sustainability challenges facing small and medium-sized tourism enterprises in Amathole district through embedding corporate governance’, by Bulelwa Nguza-Mduba is based on a more than 50% reworking of her PhD thesis and an appropriate acknowledgement is provided in this regard. We confirm that no part of the work has been plagiarised and that this manuscript represents original scholarly work and contribution. The target audience of the book is scholars in the field of corporate governance, SMME studies and economic development. Medicine Magocha, Business Management and Economics Department, Faculty of Economic and Financial Sciences, Walter Sisulu University, Mthatha, South Africa. Martha Matashu, School of Commerce and Social Studies Education, Faculty of Education, North-West University, Mahikeng, South Africa. vii Contents Abbreviations and acronyms, figures and tables appearing in the text and notes xvii List of abbreviations and acronyms xvii List of figures xxi List of tables xxi Notes on contributors xxiii Acknowledgement xxxv Foreword xxxvii Introduction xli Part 1: Theories and philosophies of entrepreneurship governance and sustainability Chapter 1: Corporate governance practices for promoting sustainability of small and medium enterprises 3 Martha Matashu Abstract 3 Introduction 4 Definition of a small business and owner self-governance dilemma 7 Landscape of sustainability of small andmedium enterprises in South Africa post-1994 8 Research design 10 Theory synthesis of four stages 10 Stage 1: Revisiting existing theoretical and conceptual paradigms for theunderstanding of small and medium enterprises 11 Small and medium enterprises as strategic drivers of development policy goals 11 Institutional policy and support initiatives forsustainable development of small and medium enterprises 12 Fragmented small and medium enterprises, corporate governance and sustainability knowledge disciplines 13 Epistemic dissonances and absence of corporate governance in smalland medium enterprises 14 Epistemic, theoretical and conceptual gaps in the existing understanding of small and medium enterprises and their sustainability 15 Contents xiv Corporate governance promoting environmentalrisk management 157 Conclusion 158 Recommendations 158 Chapter 7: Government policies for promoting small, medium and microenterprises development in South Africa 161 Thobeka Ncanywa, Noluntu Dyantyi & Zukiswa Roboji Abstract 161 Introduction 162 Problem statement and study objectives 164 Literature review 166 Government policies promoting small, medium and microenterprises developmentthrough corporate governance 169 Government policies on the regulatory environment of small, medium and microenterprises 169 Government policies on supply chain management 170 Government policies on training and skills transfer in small, medium and microenterprises 172 Government policies on finance and managementskills 175 Access to finance 175 Lack of alignment between corporate social responsibility and financial management skills 176 Policies guiding good corporate governance of small, medium and microenterprises 177 Conclusion 177 Recommendations 178 Chapter 8: Pitfalls weighing down the development of sustainable entrepreneurial governance culture among the SouthAfrican youths: Eclectic contexts 181 Medicine Magocha & Simon M Kang’ethe Abstract 181 Introduction 182 Pitfalls weighing down the development of entrepreneurial culture among SouthAfrican youths 184 Role of patriarchy in undermining entrepreneurial culture 185 South African curriculum suffers from colonial hangovers 187 Contents xv Poor saving culture among the young entrepreneurs 187 Fiscal challenges 191 Enhancing youth entrepreneurial culture through a Jingoistic approach 193 Sustaining youth entrepreneurship culture in South Africa through good corporate governance 194 Conclusion 197 Recommendations 198 Chapter 9: Financial governance practices and sustainable development of small, medium and microenterprises 199 Dorah Dubihlela & Jobo Dubihlela Abstract 199 Introduction 200 Small, medium and microenterprises development in South Africa 201 The concept of financial governance 203 Results of good financial governance 205 The need for a theory of financial information and sustainability 206 Theories on beneficiaries of financialinformation 206 Vulnerable group theory of financial information 206 Financial literacy theory of financial information 207 Public money theory of financial information 207 Intervention fund theory of financial information 208 Financial governance and small, medium and microenterprises 209 Financial governance challenges for small, medium and microenterprises 211 Financial governance systems are not sufficient 211 The structure of financial reports is inconsistent and irregular 211 The cost system is not perfect 211 Poor planning of financing options 212 Minimal to no use of accounting informationsoftware 212 Small, medium and microenterprises access to finance and information 212 Success stories and efforts at policy level 213 Financial governance and good corporate governance practices 214 Conclusion 215 Recommendations 216 Contents xvi Chapter 10: Sustainable entrepreneurship performance through adoption of sound corporate governance practices 219 Kin Sibanda & Progress Hove-Sibanda Abstract 219 Introduction 220 Corporate governance and small and medium enterprise sustainable entrepreneurship performance 222 Factors that affect small and medium enterprise sustainable entrepreneurship performance 224 Size of the firm 225 Availability of government support 226 Access to adequate resources 226 Organisational culture 227 Small and medium enterprise leadership’s sustainability orientation, commitment and support 228 Small and medium enterprise sustainable entrepreneurship performance evaluation metrics and approaches 230 Ways in which corporate governance can enhance the sustainable performance of small and medium enterprises 233 Sustainable entrepreneurship: Trendsandpractices 234 The future of entrepreneurship 236 Characterised by digitalisation: Emphasising agility, resilience and speed 237 New age of diverse entrepreneurship 239 Location-independent solutions 240 Green businesses 240 Conclusion 241 Recommendations 241 References 243 Index 295 xvii Abbreviations and acronyms, figures and tables appearing in the text and notes List of abbreviations and acronyms 4IR Fourth Industrial Revolution AFCFTA African Continental Free Trade Area AGRA Alliance for a Green Revolution in Africa AIS Accounting information systems AISCR African Institute of Supply Chain Research ALTX Alternative Exchange APP African Pathways Programme B&B Bed and breakfasts BBBEE Broad-based black economic empowerment BEM Bernelli Entrepreneurial Model BIC Business Innovation Centres BRICS Brazil, Russia, India, China, South Africa BW Botswana BWA Botswana CAEPR Centre for Aboriginal Economic Policy Research CANRAD Centre for the Advancement of Non-Racialism and Democracy CDC Coega Development Corporation CDE Centre for Development and Enterprise CEO Chief Executive Officer CFO Chief financial officer CG corporate governance CGP corporate governance practices CIPC Companies and Intellectual Property Commission CIS Chartered Institute of Secretaries CO2 carbon dioxide CoE Centre of Excellence COGTA Cooperative Governance and Traditional Affairs COVID-19 coronavirus disease 2019 Abbreviations and acronyms, figures and tables appearing in the text and notes xviii CPI Corporate Private Incubators CSIR Council for Scientific and Industrial Research CSR Corporate social responsibility DBSA Development Bank of Southern Africa DFI Development Financial Institutions DHET Department of Higher Education and Training DMaaS Data Management as a Service DSBD Department of Small Business Development DTI Department of Trade and Industry DTIC Department of Trade, Industry and Competition EBO Established Business Ownership ECP Eastern Cape province EDC Enterprise Development Corporation ELPF East London Port Festival EO Entrepreneurial orientation EP Enterprise propellers ESG Environmental and Social Governance EU European Union FSB Financial Services Board GDP Gross domestic product GEM Global Entrepreneurship Monitor GHA Ghanaian GNP Gross National Product HCJWF Hogsback Christmas in July Winter Festival HEI Higher Education Institutions ICLS International Classification of Status in Employment ICSB International Council for Small Business ICT Information and communication technology IDC Industrial Development Corporation IJAR International Journal of Accounting Research IJEBA International Journal of Economics & Business Administration IJERT International Journal of Engineering Research & Technology ILO International Labour Organisation IMF International Monetary Fund IoT Internet of Things IPADA International Conference on Public Administration and Development Alternatives Abbreviations and acronyms, figures and tables appearing in the text and notes xix IPI Independent Private Incubators IT Information technology JA Junior Achievement JBRMR Journal of Business and Retail Management Research JRBEM Journal of Research in Business, Economics and Management JSE Johannesburg Stock Exchange LCM Life Cycle Model LDC Least Developed Countries LED Local Economic Development LFS Labour force survey LSO Lesotho MBALI Management, Business, Administration and Legal Initiatives MDG Millennium Development Goals MOI Memorandum of Incorporation NARYSEC National Rural Youth Service Corps NDP National Development Plan NEF National Empowerment Fund NICVA Northern Ireland Council for Voluntary Action NIHSS National Institute for the Humanities and Social Sciences NISED National Integrated Small Enterprise Development NPO Non-profit organisation NRF National Research Foundation NSBAC National Small Business Council NSBDS National Small Business Development Strategy NTSS National Tourism Sector Strategy NWU North-West University NYDA National Youth Development Agency OAPEN Open Access Publishing in European Networks OECD Organisation for Economic Co-operation and Development PFMA Public Financial Management Act PGDHET Postgraduate Diploma in Higher Education and Training PPPFA Preferential Procurement Policy Framework Act QES Quarterly Employment Statistics QLFS Quarterly Labour Force Survey R&D Research and development RADLA Research and Doctoral Leadership Academy Abbreviations and acronyms, figures and tables appearing in the text and notes xx SA South Africa SAACE South African Association of Commerce Education SABEF South African Black Entrepreneurs Forum SACC South African Competition Commission SACCO Savings and credit cooperatives SADC Southern African Development Community SARS South African Revenue Services SDGs Sustainable Development Goals SEDA Small Enterprise Development Agency SEFA Small Enterprise Finance Agency SEP Sufficiency Economy Philosophy SEP Sustainable Entrepreneurship Performance SETA Sector Education and Training Authority SLA Sustainability Livelihood Approach SME Small, medium and micro-enterprise SMME Small, medium and micro enterprise SMTEs small and medium-sized tourism enterprises StatsSA Statistics South Africa STP SEDA Technology Programme SWOT Strengths, weaknesses, opportunities and threats TDCA Trade Development and Cooperation Agreement TEA Total Early-Stage Entrepreneurial Activity TVET Technical and Vocational Education and Training UBIs University Business Incubators UIF Unemployment Insurance Fund UK United Kingdom UKZN University of KwaZulu-Natal UN United Nations US United States VFR Visiting Friends and Relatives WCED World Commission on Environment and Development WEF World Economic Forum WTO World Trade Organization YBSA Youth Business South Africa ZAF South Africa Abbreviations and acronyms, figures and tables appearing in the text and notes xxi List of figures Figure 1.1: Outline of themes and chapters of the book. 6 Figure 1.2: Theory synthesis of four stages. 10 Figure 1.3: Gaps between theory, policy and practice. 19 Figure 1.4: Proposed conceptual framework of corporate governance practices for promoting sustainability of small and medium enterprises. 24 Figure 2.1: Corporate governance – sustainability framework. 53 Figure 3.1: Cooperative Ubuntupreneurship centric governance and sustainability model. 76 Figure 3.2: Ubuntu social justice corporate governance framework. 78 Figure 5.1: Survivalist perceptions. 122 Figure 8.1: Selected sub-Saharan African saving % of gross domestic product. 189 Figure 8.2: Emerging funding methods of youth enterprises from households. 192 Figure 10.1: Chapter map. 221 Figure 10.2: Corporate governance practices and sustainable entrepreneurship performance evaluation metrics for small and medium enterprises. 232 List of tables Table 2.1: Upgraded definition of small, medium and microenterprises in South Africa. 34 Table 5.1: Trajectory from survivalist to small-scale entrepreneurs and contribution to the informalsector. 115 Table 9.1: Benefits of financial governance. 205 xxiii Notes on contributors Anthony K Masha Department of Management Studies, Faculty of Economics and Information Systems, Walter Sisulu University, Queenstown, South Africa Email: [email protected] ORCID: https://orcid.org/0000-0001-9306-0042 Anthony Kambi Masha is a distinguished figure in academia and research within the Faculty of Management and Public Administration at Walter Sisulu University in South Africa. His academic journey culminated in a PhD in Public Administration from the University of Fort Hare. As a dedicated faculty member, Masha passionately imparts his wealth of knowledge, currently instructing a module at Walter Sisulu University. His areas of specialisation encompass a wide spectrum, including organisational learning, human capital management, entrepreneurship, public management and policy evaluation. His significant contributions to the academic landscape are reflected in his published research papers, which appear in esteemed journals. Additionally, he actively engages in evaluating MA dissertations and PhD theses from various South African universities, further solidifying his status as a respected authority in his field. His unwavering commitment to his profession is exemplified by his affiliation with multiple professional bodies, affirming his dedication to advancing scholarship and fostering excellence within the academic community. Bulelwa Nguza-Mduba Department of Management, Faculty of Management and Public Administration Sciences, Walter Sisulu University, Butterworth, South Africa Email: [email protected] ORCID: https://orcid.org/0000-0002-7298-6345 Bulelwa Nguza-Mduba is an Associate Professor in the Department of Management at Walter Sisulu University, South Africa. Nguza-Mduba holds an STD, BCom (Ed), BEd, BCom (Hons), MEd, MBL and a Doctor of Business Administration obtained from University of KwaZulu-Natal (UKZN) in Durban. Her research interests include small and medium-sized enterprises, entrepreneurship, tourism, public administration, strategic leadership and management. Currently, she is the acting rector of the Butterworth Campus at Walter Sisulu University and serves as a council member. Nguza-Mduba has advanced through various roles, starting as Head of the Department, then Director of the School and later Dean of the Faculty. She is actively involved in entrepreneurship development within the higher education sector and is a former member of the Hospital Board. Additionally, she Notes on contributors xxx Noluntu Dyantyi Research and Innovation Directorate, Walter Sisulu University, Butterworth, South Africa Email: nody[email protected] ORCID: https://orcid.org/0000-0001-6380-1997 Noluntu Dyantyi is the Manager of Research and Postgraduate Support in the Directorate of Research and Innovation at Walter Sisulu University. Dyantyi holds a PhD in Chemistry from the University of the Western Cape, specialising in hydrogen fuel cell technology. With industry experience as a Research Scientist focused on drinking water quality and hydrogen fuel cell components, including catalysts and membranes, she has now redirected her research focus to green hydrogen production and the commercialisation of research since entering the field of research administration. Dyantyi is passionate about mentoring youth in entrepreneurship and is a member of the university initiative known as Training Future Entrepreneurs. She has published ten journal articles in high-impact local and international engineering journals and served as the leading author for a book chapter published by Elsevier. Her Google Scholar h-index is 5 and her i10-index is 4. Simon M Kang’ethe Department of Social Work, Faculty of Law, Humanities & Social Science, Walter Sisulu University, Mthatha, South Africa Email: [email protected]; [email protected] ORCID: https://orcid.org/0000-0001-9150-0235 Simon Murote Kang’ethe is a full professor of Social Work in the Department of Social Work at the Faculty of Law, Humanities and Social Science, Mthatha Campus, South Africa. Kang’ethe is an accomplished C2-rated NRF researcher (2023–2027) who has authored more than 200 journal articles in local and international journals, several books and close to a dozen book chapters. He has supervised nearly 50 postgraduate dissertations and theses to completion. His multidisciplinary research focuses on culture, health, gender, social enterprises, children, old age and xenophobia. Kang’ethe serves on the National Executive Committee for both the Department of Social Work and the Department of Psychology, and he is the chair of the Faculty of Law, Humanities and Social Science’s mentorship programme. He supports his departmental leadership by stepping in as Head of Department whenever needed. Additionally, he mentors emerging scholars in both his department and the broader faculty in areas such as publication and community engagement. While working at the University of Fort Hare, he received the Vice Chancellor’s Excellent Emerging Researcher award in 2012 and the Faculty of Humanities and Social Science Excellent Award in Community Engagement in 2019. His citations total 1,350, with an H-index of 18 and an i10-index of 46. Notes on contributors xxxi Siphenathi Fihla Department of Management Studies, Faculty of Management and Public Administration Sciences, Walter Sisulu University, Butterworth, South Africa Email: [email protected] ORCID: https://orcid.org/0000-0001-9632-2650 Siphenathi Fihla is a distinguished academic and professional with a PhD in Business Management from the University of Fort Hare. As the chairperson of Community Engagement in the Department of Management at Walter Sisulu University, Fihla channels his wealth of knowledge and experience into his role as a dedicated lecturer within the Faculty of Management and Public Administration Sciences in South Africa. He also holds an MA degree in business management from the prestigious University of Fort Hare. Over an impressive career spanning eight years in local government, he has cultivated a profound understanding of the complexities of public management. Beyond his teaching responsibilities, Fihla is deeply involved in rigorous research endeavours, focussing on the dynamic fields of human resources management, entrepreneurship and public management. His commitment to expanding the frontiers of knowledge is evident not only in the classroom but also through his scholarly contributions to the academic community. A testament to his dedication is the publication of his research paper in a reputable journal, showcasing his intellectual prowess and scholarly rigour. Fihla’s unwavering dedication to both academic excellence and practical application is reflected in his multifaceted contributions to business management. His holistic approach to education and research positions him as a valuable asset, enriching the academic landscape and making a lasting impact on the next generation of business leaders and administrators. Stenford Matenda Department of Marketing, Public Relations and Communication, Faculty of Public Management and Administration Sciences, Walter Sisulu University, Butterworth, South Africa Email: [email protected] ORCID: https://orcid.org/0000-0003-2753-5585 Stenford Matenda works in the Marketing, Public Relations and Communication Department at Walter Sisulu University’s Butterworth Campus, where he serves as a lecturer and head of the department. Matenda holds a PhD in Communication Science and has additional qualifications in higher education studies. He has extensive experience in journalism, having worked in both print and electronic media in Zimbabwe. He has over 20 years of experience in journalism education in Zimbabwe and South Africa. From 2016 to 2023, Matenda also served as an academic Notes on contributors xxxii developer, specialising in writing centre practice and academic literacy development. Later, he worked as the teaching and learning manager for the Mthatha Campus at Walter Sisulu University. During this time, he oversaw programmes on peer-to-peer support, academic advising, learning and teaching with technology and academic staff development. His research interests include studying how small enterprises use public relations techniques to enhance their brands and reputation, as well as the use of social media tools for both business and civic engagement purposes. He has published widely in these areas, in addition to academic development in higher education. Thobeka Ncanywa Department of Economic Management Sciences, Faculty of Education, Walter Sisulu University, Komani, South Africa Email: [email protected] ORCID: https://orcid.org/0000-0001-9656-8538 Thobeka Ncanywa is a Professor of Economics in the Department of Economic Management Sciences at the Faculty of Education at Walter Sisulu University. Ncanywa specialises in Applied Economics, Public Sector Economics, Monetary Economics, Development Economics, Econometrics, Microeconomics, Education Economics, Macroeconomics and Entrepreneurship studies. Her work encompasses teaching and learning, community engagement activities and supervising postgraduate students. She has published articles in local and international journals, as well as in conference proceedings and book chapters. Additionally, Ncanywa has chaired sessions at both academic and non-academic conferences. She serves as a board member for Economic Research of Southern Africa, International Public Administration and Development Alternatives. Her projects include student entrepreneurship development in higher education and a multidisciplinary initiative focused on resilient futures in transforming the mining sector. Zukiswa Roboji Department of Public Management and Governance, Faculty of Management and Public Administration, Walter Sisulu University, Butterworth, South Africa Email: zr[email protected] ORCID: https://orcid.org/0000-0001-7124-8183 Zukiswa Roboji is a lecturer in Public Management in the Department of Management and Governance at Buffalo City Campus. Roboji holds an MA Degree from Nelson Mandela University and a PhD in Public Management and Development from North-West University. She is responsible for lecturing Notes on contributors xxxiii undergraduate and postgraduate students and has served as an internal faculty reviewer at Walter Sisulu University. Externally, she has had the opportunity to review conference papers and preside over national conferences. Roboji’s research interests include Policy Development, Monitoring and Evaluation, and Gender-Based Violence. As a novice scholar, she embraces networking and collaboration. She is a member of theSouth African Association of Public Administration and Management and the Humanities and Social Sciences Alumni Association. Currently, Roboji is in the process of exploring new ideas across various diverse spectrums for exchanging teaching, research, feedback dissemination and creating repositories of knowledge through the digital African Pathways Programme (APP) or Brazil, Russia, India, China, South Africa (BRICS) teaching and research mobility grant supported by NIHSS funding. xxxv Acknowledgement The Research and Innovation Directorate at Walter Sisulu University is acknowledged for its commitment to academic citizenship as demonstrated by providing funding to publish this book. xxxvii How to cite: Balkaran, S 2024, ‘Foreword’, in M Magocha & M Matashu (eds.), Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp. xxxvii–xxxix. https://doi.org/10.4102/aosis.2024.BK404.0f In the ever-evolving landscape of global economics, the role of entrepreneurial ventures cannot be overstated. These innovative enterprises, often small and medium-sized, form the backbone of economies, fostering creativity, generating employment and driving economic growth. In the context of South Africa, a nation rich in entrepreneurial history, the significance of these enterprises is particularly pronounced. However, their potential has yet to be fully realised, and understanding the intricate interplay between corporate governance and the sustainability of these ventures is pivotal. In today’s rapidly changing global economy, entrepreneurial firms are increasingly recognised as crucial drivers of economic development. Despite the wealth of research on corporate governance and entrepreneurial firms, there has been a notable gap in our understanding of corporate governance principles applied to small and medium enterprises (SMEs), the backbone of many economies, especially in South Africa. Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa delve into the heart of this critical relationship. This ground-breaking volume not only identifies the gaps in our current understanding but also provides invaluable insights into how sound corporate governance can enhance the performance and Foreword Sanjay Balkaran Coordinating Dean, Faculty of Management and Public Administration Science, Walter Sisulu University, Umthatha, South Africa Foreword Foreword xxxviii sustainability of SMEs. Through meticulous research and thoughtful analysis, the authors navigate the complex terrain of entrepreneurship, shedding light on the challenges faced by these ventures and proposing innovative solutions grounded in corporate governance principles. The strength of this book lies in its comprehensive approach. It tackles the subject matter from various angles, exploring theories and philosophies of entrepreneurship governance and sustainability, dissecting ownership and governance practices, and unravelling the nuanced dynamics of performance and sustainability in the entrepreneurial realm. By doing so, the authors paint a comprehensive picture of the challenges and opportunities that small, medium and microenterprises (SMMEs) encounter, offering readers a deep understanding of the intricate web of factors that influence their success. The book begins by underscoring the fragmented approach that previous studies have taken when examining the interrelationship between corporate governance and entrepreneurial firms. Most prior research has been heavily skewed towards large corporate companies, overlooking the specific needs and challenges faced by smaller businesses. This book seeks to rectify this imbalance by delving into the critical topic of corporate governance in SMMEs, shedding light on how these practices can enhance their performance and sustainability. One of the book’s most commendable aspects is its focus on the unique African context. By drawing on South Africa’s rich entrepreneurial heritage and historical trade relationships, the authors contextualise their research, providing a lens through which readers can appreciate the complexities of entrepreneurship in this region. In doing so, they highlight the importance of preserving and nurturing indigenous entrepreneurial philosophies, such as the Ubuntu philosophy and integrating them with modern corporate governance practices to forge a path towards sustainable economic development. As I perused the chapters of this book, I was struck by the depth of analysis and the relevance of the topics explored. From the challenges faced by family-owned businesses to the exploration of sustainable entrepreneurship performance through the adoption of sound corporate governance practices, each chapter offers valuable insights that policymakers, academics and entrepreneurs can leverage to foster a conducive environment for SMMEs to thrive. In conclusion, the book Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa is a timely and essential contribution to the field of entrepreneurship studies. Its thoughtful examination of corporate governance practices not only fills critical gaps in the existing literature but also provides a roadmap for policymakers and practitioners alike. I commend the authors for their Foreword xxxix diligent research and commitment to addressing this important gap in the literature. Their efforts in exploring corporate governance practices for promoting the sustainability of SMMEs have the potential to foster economic growth, reduce inequality and improve the lives of countless individuals. I hope this book will inspire further research and policy initiatives to support the vital role of entrepreneurship in South Africa and beyond. This book is a must-read for anyone passionate about fostering sustainable economic development and empowering entrepreneurial ventures in South Africa and beyond. 3 How to cite: Matashu, M 2024, ‘Corporate governance practices for promoting sustainability of small and medium enterprises’, inMMagocha & M Matashu (eds.), Corporate governance practices promoting thesustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp.3–29. https://doi.org/10.4102/aosis.2024.BK404.01 Abstract Theory synthesising has received little attention in developing a corporate governance-driven understanding of small and medium enterprises (SMEs) sustainability. Small and medium enterprises are recognised as strategic drivers of economic development; hence, it is imperative to understand the theoretical and conceptual principles underlying the sustainability of small business enterprises. It has emerged in the literature that SMEs continue toexperience a high rate of failure despite the availability of myriads of support aimed at promoting the sustainability of small business enterprises. This context raises questions about the adequacy of the conceptualisation and theorisation of corporate governance practices of SMEs and their sustainability. Through a theory synthesis research design, this conceptual Corporate governance practices for promoting sustainability of small and medium enterprises Martha Matashu School of Commerce and Social Studies Education, Faculty of Education, North-West University, Mahikeng, South Africa Chapter 1 Corporate governance practices for promoting sustainability of small and medium enterprises 4 study examined corporate governance practices for promoting the sustainability of SMEs. Findings revealed the existence of a conceptual and theoretical gap in knowledge about the relationship between corporate governance and the sustainability of SMEs. The identified problem justified the introduction of corporate governance as an alternative theory for developing the sustainability of SMEs. Findings from the theory synthesis suggested the existence of inadequacies in the theorisation and conceptualisation of SMEs’ sustainability. Theory synthesis assisted in explaining the theoretical and conceptual relationship between SMEs’ corporate governance practices and sustainability. Evidence found in this study leads to the conclusion that corporate governance promotes the sustainability of SMEs through the adoption of structures, processes and systems that promote accountability, fairness, responsibility and transparency in the social, economic and environmental operations of the small business entity. The study thus developed and recommended a framework for adopting corporate governance practices for promoting the sustainability of SMEs. The framework delineates and outlines corporate governance as an integral practice for promoting the sustainability of SMEs. The framework is recommended for use by policymakers and scholars interested in adopting corporate governance practices to promote the sustainability of SMEs. Introduction This study inaugurates a dialogue about the theorisation and conceptualisation of corporate governance practices for promoting the sustainability of small, medium and microenterprises (SMMEs). Small and medium enterprises (SMEs) are recognised as an integral part of economic and social development policy in any economy (Organisation for Economic Co-operation and Development [OECD] 2022; World Bank 2022). As a result, the World Bank (2022), European Union (EU) (2023), OECD (2022) and Southern African Development Community (SADC) (2023), among many other bodies, continue to provide support to promote the sustainable development of SMEs. Notwithstanding the ubiquitousness aids, empirical evidence globally reveals that SMEs continue to experience of high failure rate and discontinuity (Global Entrepreneurship Monitor [GEM] Report 2022; National Integrated Small Enterprise Development [NISED] 2022). The major problem emerging from empirical trends indicates that there is persistent failure of SMEs despite the availability of myriads of global and national institutional support provided for many years to promote their sustainability. Arguably, these dichotomies warrant an exploration into corporate governance practices for promoting the sustainability of SMEs Chapter 1 5 (Department of Small Business Development Republic of South Africa 2022; South Africa 1996). Corporate governance refers to the way an organisation is directed and controlled (Cadbury Report 1992). King Report (2009, 2016) elucidates that corporate governance reinforces corporate sustainability through embedding principles that promote effective control, ethical leadership and sustainable economic, social and environmental performance of the firm. Finance theorists Berle and Mean (1932) and Friedman (1954) conceptualised corporate governance as an internal control mechanism that maximises value creation of the invested capital through managing and minimising conflicts that arise from the separation of ownership and control. Scholars attested that corporate governance influences the sustainability of the firm through its impact on the operational performance and profitability of the entity (Berle & Mean 1932; Friedman 1954; Keasey, Thompson & Wright 1997; La Porta et al. 2002; Shleifer & Vishny 1997). This suggests that the sustainability of any enterprise is dependent on corporate governance. Presumably, if corporate governance is necessary for the sustainability of large companies, then it follows that it may also be crucial for sustaining the growth and development of SMEs (Republic of South Africa 1995). Although corporate governance is predominantly applied in large corporations, its adoption is not only at a nascent stage in SMEs, but the forms of ownership, governance and management of these entities also differ significantly from those of large companies. A broad understanding is required to understand the promotion of the sustainability of SMEs (Enaifoghe & Vezi-Magigaba 2023; Peters & Naicker 2013; Zide & Jokonya 2022). Abor and Adjasi (2007) aver that corporate governance embeds structures, processes, practices and principles that harness and foster improved performance and sustainability of the entity. Corporate sustainability assists a company in developing its sustainability footprint, enhancing its value creation and overall performance (Ajeigbe & Ganda 2023). Kocmanová et al. (2011) recommended that corporate governance strengthen the development and implementation of business strategies that consider the interest of multiple stakeholders, integrating environmental, social and economic factors. In this regard, the central research question that arises is could corporate governance practices promote the sustainability of SMEs? The major research objective of this study is thus to explore whether corporate governance can promote the sustainability of SMEs. Findings from studies in the various chapters of this book potentially have relevance to government policymakers, researchers and practitioners interested in promoting the sustainability of SMEs. It is thus imperative to conduct this study. Corporate governance practices for promoting sustainability of small and medium enterprises 6 The purpose of this book is to explore corporate governance practices for promoting the sustainability of SMEs. It is necessary to write this book because knowledge about corporate governance and the sustainability of SMEs exists in silos because of the multi-fragmented nature of disciplinary knowledge. A book thus creates an opportunity for building a better comprehensive understanding of a given phenomenon than other research forms such as articles and journals. The book is divided into three themes, each with specific chapters, as shown in Figure 1.1. Figure 1.1 shows the three key themes and chapters, making this book entitled: Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa. The three themes of the book are namely, theories and philosophies of corporate governance Source: Author’s own work. Key: SMMEs, small, medium and microenterprises, SMEs, small and medium enterprises. FIGURE 1.1: Outline of themes and chapters of the book. • Corporate governance practices of promoting the sustainability of SMEs • The contribution of good corporate governance of entrepreneurship towards South African economic development and sustainability • Towards an utu, unhu-ubuntu entrepreneurship model • Addressing sustainability challenges facing small and medium sized tourism enterprises in Amathole district through embedding corporate governance • Government policies for promoting SMMEs development in South Africa • Pitfalls weighing down the development of sustainable entrepreneurial governance and culture among the South African youths. Eclectic contexts • Financial governance practices and sustainable development of SMMEs • Sustainable entrepreneurship performance through the adoption of sound corporate governance practices • An insight into family owned businesses, growth, and sustainability • Survivalist microenterprises and informal businesses Ownership, governance practices and implications on sustainability of the SMEs Performances and sustainability of SMEs Corporate governance practices for promoting the sustainability of SMEs Theories and philosophies of corporate governance and sustainability of SMEs Chapter 1 7 and sustainability of SMMEs; ownership, governance practices and implications on sustainability of the SMMEs as well as performance and sustainability of SMEs. Overall, the book is based on the assumption that the theories and philosophies of corporate governance and sustainability adopted shape the ownership, governance practices and sustainability of SMMEs, which in turn affect their performance and long-term viability (Zahra et al. 2007). As a result, this book provides a broader exploration of corporate governance practices aimed at promoting the sustainability of SMMEs across ten chapters. While subsequent chapters shall explore other aspects of the research problem under investigation in this book, the primary objective of Chapter 1 is to explore the corporate governance practices for promoting SMEs’ sustainability. Chapter 2 examines the role of corporate governance in entrepreneurship and its impact on South African economic development and sustainability. It will discuss the potential of adopting an Ubuntu entrepreneurship-driven corporate governance model. Corporate family-owned businesses, survivalist microeconomic and informal businesses, and small and medium-sized tourism enterprises (SMTEs) will be explored as these are common forms of ownership of SMMEs in South Africa (Naldi et al. 2007). Subsequent chapters will examine and provide insights into government policies supporting SMMEs, dynamics disrupting the entrepreneurship culture, sustaining entrepreneurial performance and the financial performance of SMEs through the adoption of corporate governance (Maranga 2014). A detailed discussion of the concepts and matters covered in the other chapters is beyond the scope of this study. The remaining section delves into corporate governance practices that promote the sustainability of SMEs. Definition of a small business and owner self-governance dilemma Small businesses have a distinct anatomy that inherently imposes informal management and governance systems. The Bolton Committee Report (1982) states that: We define a small firm, generically, in terms of three main characteristics: firstly, in economic terms, a small firm has a relatively small share of its market. Secondly, an essential characteristic is that it is managed by its owners or part-owners in a personalized way and not through the medium of a formalized management structure. Thirdly, it is also independent in the sense that it does not form part of a larger enterprise and that the owner-managers should be free from outside control in taking their principal decisions. (p. 3) Hakimah et al. (2019) assert that SMEs and small businesses are governed and managed by their owners by virtue of being self-funded by their owners. Informal ownership SMEs lead to self-owner management and governance practices within small business entities. This suggests that it is Corporate governance practices for promoting sustainability of small and medium enterprises 8 the owner’s knowledge, competency and talents that determine the control, governance and management practices employed in SMEs rather than corporate governance as in corporate companies. Taken together, this means that the sustainable performance of an enterprise is dependent on the governance and management capabilities of its owners instead of corporate governance principles. Wen et al. (2023) elucidate that corporate governance promotes firm sustainability through embedding inbuilt sustainable internal practices and processes. It is evident that ontologically, the notion of corporate governance holds no practical epistemic relevance to the form of ownership, governance and management approaches of small business entities. Considering the epistemic gaps and ontological conflicts discussed in this section, it is questionable whether the sustainability of SMEs will be achieved through owners’ self-governance and management practices without the implementation of effective corporate governance. Landscape of sustainability of small andmedium enterprises in South Africa post-1994 Historically, the South African government’s institutional support for SMEs started with, among many other initiatives, the introduction of the National Small Business Development Strategy (NSBDS) in 1995, which outlined government support provisions for SMEs in South Africa. The NSBDS was further supported by the promulgation of the National Small Enterprise Act of 1996 aimed at creating an enabling legislative and regulatory environment for the sustainable development of SMEs. The integrated Strategy for the Promotion of Entrepreneurship was established to provide policy guidelines and strategic support for the operations of SMEs. The White Paper (1995) was another policy document outlining the government’s framework for supporting SMEs, which included enacting the National Small Business Act to establish an enabling legal environment for SMEs. It is evident that multiple government support was provided to support SMEs in South Africa post-1994. It, however, appears that the government’s policy goal ofsupporting SMEs’ sustainability has yielded less than the desired effect. An impact evaluation study of government support from 1994 to 2003 conducted by Rogerson (2004) concluded that SMEs failed despite the support provided for those initial 10 years. National Integrated Small Enterprise Development (2022) asserts that the government’s attempt to promote SMEs from 1994 to 2022 has achieved minimal desired outcomes because many small firms continue to fail and lack sustainability. Global Entrepreneurship Monitor (2022) also confirmed the continued disproportionate failure of SMEs in South Africa. Chapter 1 9 The observed lack of sustainability of SMEs has broad implications towards the attainment of the development strategy and the wellbeing of the economy. In South Africa, the National Development Policy (2012) and NISED (2022) envisaged SMEs as a development strategy for addressing the national socio-economic challenges of job creation, poverty alleviation and transforming resource distribution. A report from Statistics South Africa (StatsSA) (2023) shows that unemployment, extreme poverty and deepening inequalities are on the rise in South Africa. These ills adduce evidence that SMEs have not been sustainable to reach a stage where they could effectively contribute towards addressing social and economic development in South Africa. To strengthen its support for SMEs in pursuit of its development policy goal, the South African government reformulated an integrated framework for supporting the sustainable development of SMEs. The NISED Masterplan as a strategic framework aims to ‘support sector plans for SMEs growth and works in association with all other government planning and programming relevant to building an enabling environment for SMEs and economic growth’ (NISED 2022, p. 21). National Integrated Small Enterprise Development (2022) constitutes a paradigm shift in the focus of its strategy on expanding the prior government policy through an integrated approach that accelerates small enterprise growth and expansion. Although the NISED Masterplan focuses on providing integrated institutional support, it overlooks the adoption of corporate governance in SMEs as a strategy for promoting sustainability (OECD 2023). The persistent failure of SMEs despite the availability of a multitude of institutional support raises questions about the adequacy of institutional policy support alone to promote the sustainability of SMEs in the absence of corporate governance in their operations (Ropega 2011). Tuner (1998) cautions that the failure to synthesise information has adverse impacts on policymaking and outcomes. Tuner (1998) further recommends theoretical synthesis as the foundation for strengthening practical relevance. Similarly, George (1993, p. xix, xxiv), cited in Nye (2008), avows that while ‘scholars may not be in a good position to advise policymakers how best to deal with a specific instance of a general problem that requires urgent and timely action’, ‘they can often provide a useful, broader discussion of how to think about and understand that general problem’. Both Tuner (1998) and George (1993) underscore the importance of understanding the theorisation of a given phenomenon for informed policy, theory and practices. Reflecting on such counsels, albeit with precaution, this conceptual study undertook the obligation to investigate corporate governance practices for promoting the sustainability of SMEs using a theory synthesis. Corporate governance practices for promoting sustainability of small and medium enterprises 10 Research design This study deemed a theory synthesis as the most appropriate research design to guide this study because of its conceptual prowess. Jaakkola (2020) identified the theory synthesis approach as having the capability to provide grounds for conceptual integration across fragmented disciplinary knowledge, thereby creating a more parsimonious explanation that pulls disparate elements into a more coherent whole. Figure 1.2 presents the theory synthesis stages that guided this study. Theory synthesis of four stages Figure 1.2 shows the four stages of the theory synthesis approach. To achieve the study’s primary objective, this research followed the four stages of the theory synthesis research design guidelines recommended by Jaakkola (2020). As shown in Figure 1.2, Stage 1 begins with revisiting the existing theoretical and conceptual understanding of SMEs. Stage 1 provides an opportunity for conceptual gaps to be identified. Subsequently, Stage 2, focused on problematising the existing theory or concept to identify dilemmas that justify the introduction of a new theoretical lens for resolving the deemed gaps. Stage 3 expanded the application domain of existing theories or concepts by advancing the new theoretical lens. Lastly, Stage 4 identified new dimensions of an established construct by conceptualising a new theoretical lens to extend the existing understanding. In this study, a new corporate governance conceptual framework for promoting the sustainability of SMEs was developed and recommended. Source: Researcher’s conceptualisation based on theory synthesis research design adapted from Jaakkola 2020, p. 22. FIGURE 1.2: Theory synthesis of four stages. • Revising current understanding • Problematising an existing theory or concept and resolving identified dilemmas by introducing a new theoretical lens Stage 2 Stage 3Stage 1 Stage 4 • Expanding the application domain of an existing theory or concept by introducing a new theoretical lens • Identifying new dimensions of an established construct by introducing a new theoretical lens Chapter 1 11 Stage 1: Revisiting existing theoretical and conceptual paradigms for the understanding of small and medium enterprises This section aims to clarify the theoretical and conceptual relationship between corporate governance and the sustainability of SMEs. Understanding this relationship is essential for identifying any gaps between policy support, theory and practice. This conceptual analysis serves as a foundation for unravelling any existing misunderstandings of the phenomenon. Small and medium enterprises as strategic drivers of development policy goals Small and medium and enterprises are recognised as strategic drivers for economic and social development policy goals in any economy. The World Bank (2022) report reveals that SMEs comprise 90% of all businesses, account for about 50% of all jobs globally and contribute approximately 40% of the gross domestic product (GDP) in emerging economies. The World Bank’s findings affirm the assumptions of the Bolton Report (1971) that SMEs are drivers of economic development in any economy. As a result, the World Bank (2022) emphasises the sustainable development of SMEs as foundational pillars for economic development, particularly in emerging nations. Likewise, the OECD (2022) highlighted the strategic role of SMEs in economic development. The OECD (2022) report reveals that SMEs constitute 95% of businesses and 60% to 70% of jobs in OECD nations. Similarly, the EU (2022) acknowledged that SMEs employ more than 100 million individuals in the region, and those businesses also contribute to more than half of Europe’s gross GDP. This demonstrates the extent of SMEs’ impact on social and economic development in the EU countries. The South African government also recognises SMEs as a national development strategy for fostering inclusive social and economic growth and transformation (National Development Plan 2012; NISED 2022; White Paper 1995). Small and medium enterprises play a key role in the economic development of an economy (Ajeigbe & Gand 2023; Dhondge 2023; Singh & Rastogi 2023; Wen et al. 2023). The highlighted strategic contribution of small businesses to economic development in both developed and developing countries underscores the importance of strengthening the sustainability of SMEs in any country. Corporate governance practices for promoting sustainability of small and medium enterprises 18 creation in SMEs. This demonstrates the complexity and multidimensional nature of fundamental obstacles encountered by SMEs. Despite the well-documented internal challenges affecting sustainability, few studies have focused on examining the conceptual relationship between corporate governance and the sustainability of SMEs. Brunninge, Nordqvist and Wiklund (2007) advocated adopting the board composition, board sizes and top management to improve the performance of SMEs. Sarah (2017) affirms that corporate governance enhances the sustainability of SMEs. Small enterprises are undoubtedly distinct from businesses in form, nature and capital structure, among many other facets; hence, embedding corporate governance requires scientifically informed insights about the subject matter. Afrifa and Tauringana (2015) examined the connections between board size, chief executive officer’s age and tenure, directors’ remuneration and proportion of non-executive directors, and the performance of SMEs. Findings from studies that overlook the implications of the delimitations that SMEs are usually small in size and governed by ownership risk are not useful for the sustainability of small businesses. Günay and Apak (2014) and Sarah (2017) found empirical evidence that corporate governance enables continued firm performance. Kocmanová, Dočekalová and Němeček (2011) concluded that corporate governance is necessary for spearheading the development and implementation of business strategies that consider the interest of multiple stakeholders, integrating environmental, social and economic factors. Corporate governance promotes SMEs’ sustainability (Afrifa & Tauringana 2015; Brunninge et al. 2007; Sarah 2017; Singh & Rastogi 2023). Abor and Adjasi (2007) concluded that poor corporate governance could lead to business failure. Weak internal systems and processes, along with a lack of marketing, management and financial management skills, as well as limited access to resources, are major contributing factors to the failure of South African SMEs (Leboea 2017; Olawale & Garwe 2010; Van Scheers 2011). The established major obstacles challenging the sustainability and continuity of SMEs are internal governance and management suggesting that these entities must adopt corporate governance. Afolabi et al. (2023) argue that SMEs are hindered by several factors in adopting practices that promote their sustainability. Furthermore, Afolabi et al. (2023) identified a ‘lack of resources and expertise, lack of clarity, knowledge gap, lack of perceived benefits, and voluntary approach of sustainability reporting practice’ as major factors impeding the adoption of the sustainability approaches (Sony et al. 2022). This means that corporate governance might not be adopted to promote the sustainability of small business entities because of the perceived lack of benefits. Chapter 1 19 Another strand of literature perceives corporate governance as having multiple benefits for SMEs. Through a literature review of 115 articles from 1990 to 2020, Singh and Pillai (2022) advocate that designing cost-effective corporate governance in SMEs can lead to improved performance. This suggests that adopting corporate governance without the appropriate understanding can impose a burden on SMEs. Zhang et al. (2022) elucidate that SMEs’ intentions to adopt sustainable practices are hindered by a lack of financial resources, technology and managerial competencies. Existing gaps between governance for small and medium enterprises’ sustainability and supporting policies At this stage, this study concluded that there are gaps in knowledge between the policy support aimed at promoting the sustainability of SMEs, theory, practice and outcomes. This gap is summarised in Figure 1.3. Figure 1.3 shows the gaps between theory, policy, practice and outcomes. The identified gaps assume that policies grounded on ideologies that disregard the role of corporate governance in fostering sustainability principles and practices in small businesses risk failing to achieve the desired outcomes. The figure shows that gaps in knowledge between Source: Author’s own work. Key: SMEs, small and medium enterprises. FIGURE 1.3: Gaps between theory, policy and practice. Theory Support policies Practice Outcome Impact gap The difference between planned policy outcomes and actual output yielded Alignment gap The difference between action taken and what the actual policy action that should have been undertaken in practice to promote the sustainability of SMEs Conceptual, theoretical and support policy gap Conflicts between theory and support policy principles Knowledge gap The difference between policy and theory Corporate governance practices for promoting sustainability of small and medium enterprises 20 theory and policy extent to influence the conceptual, theoretical and policy gaps subsequently lead to misalignment between support policy and practice gaps, ultimately leading to discrepancies between planned outcomes and actual output. Support for the assumption of this study depicted in Figure 1.2 is drawn from Afolabi et al. (2023) who observed the existence of some misalignment between government policy and the expected sustainability that the firm is driven to achieve. These inconsistencies justify an exploration of the possibility of whether adopting corporate governance practices could strengthen existing policy intervention measures to increase the sustainability of SMEs. Stage 3: Expanding the application domain of an existing theory or concept byintroducing a new theoretical lens Through theory synthesis, stage 3 provides an opportunity to integrate thenew dimensions of the established construct of sustainability of SMEs. The identified gap justifies the need to extend the existing limited understanding of SME sustainability by introducing a corporate governance theoretical lens into the subject matter. Deontological and utilitarian philosophy of small and medium enterprises’ sustainability Adopting corporate governance as the channel for enhancing sustainability in the social and economic dimensions might be considered burdensome for SMEs, given the limited resources and self-management nature of these entities, unlike corporate companies. In this regard, the assumption that corporate governance embeds sustainability in SMEs submitted in this study is underpinned by tenets of the deontological and utilitarian philosophical paradigms. According to Mandal, Ponnambath and Parija (2016), in the utilitarian approach, decisions are derived from the assumed greatest common goods to be derived from the action to be undertaken. Mandal et al. (2023) explain that utilitarian ethics hold that the desired outcome justifies how it is achieved. In contrast, deontological ethics places greater emphasis on duties and obligations (i.e. the end may not always justify the means). Contextualising the conceptualisation of SMEs from the deontological and utilitarian ideologies entails that these enterprises have a moral and ethical obligation to adopt corporate governance to promote their sustainability for the social and economic benefits of their owners and broader society. In other words, in SMEs, sustainability through the adoption of corporate governance is for the common good of its owners and nation. Chapter 1 21 The idea of the common good is encapsulated in the qualitative definition of SMEs expounded by the Bolton Report (1971), World Bank (2022) and NISED (2022), among many others, whose definitions encompass the categorisation of their size based on the number of employees and annual turnover they generate. The existence of SMEs has mutual symbiotic benefits to the owner through providing a source of income, yet creating employment and contributing to national economic development demonstrate inherent deontological duties placed on these entities. If understood from the utilitarian perspective, adopting corporate governance for embedding sustainability practices can be considered the means to achieving a greater common good. In other words, the means justify the ends. Embedding corporate governance in SMEs should be grounded on understanding and considering the nature and purpose of these entities from both utilitarian and deontological philosophies. Brand (2006) and Wagner (2007) assert that, although the definitions of entrepreneurial firms differ, there is often a common emphasis on characteristics such as ownership, being owner-funded, owner-managed, governed, risk-taking and small size. The characteristic of SMEs manifests the vulnerability and possibly marks the point of departure for adopting corporate governance techniques. However, Lakehal, Davies and Di Stefano (2023) argue that corporate governance can ensure the dual responsibility of strategic decisions and responsibility towards sustainable performance, which is often challenging given the limited resources nature of small businesses. This suggests integrating corporate governance in SME practices is likely to promote sustainable strategy formulation, implementation and operations management. Stage 4: Identifying new dimensions of an established construct by introducing a new theoretical lens The final stage of the theory synthesis presented in this section of the study introduces corporate governance as a new theoretical perspective for promoting the sustainability of SMEs. Theorisation and conceptualisation of the integration of corporate governance practices to promote the sustainability of small and medium enterprises Stage 4 of the theory synthesis introduces corporate governance as a new theoretical dimension for embedding sustainability in SME practices. In this Corporate governance practices for promoting sustainability of small and medium enterprises 22 study, the agency and stakeholder theory provide the theoretical framework for corporate governance practices of promoting the sustainability of SMEs. Agency theory Agency theorists conceptualise corporate governance as a determinant of firm sustainability through its impact on the performance of the corporation (Berle & Mean 1978; Cadbury Report 1992; Friedman 1974; Keasey et al. 1997; La Porta et al. 1997; Shleifer & Vishny 1997). Proponents of the agency theory, like Jensen and Meckling (1976) and Fama and Jensen (1983), conceived corporate governance as a set of internal governance mechanisms that control and regulate how the company is directed to ensure the sustained survival of the corporation. Berle and Means (1978) posited the agency challenges that emerge from conflicts of interest that arise from the separation of ownership from control. If not monitored and controlled, the agency challenge may deter the survival of the organisation. Casco Paguay and Díaz (2023) adduce that corporate governance enhances the competitiveness and sustainability of small business entities in the global environment. Lessons from the agency theory highlight the need for SMEs to consider separating the interests of the enterprises from those of the owners despite them being small. This means that through the adoption of corporate governance practices, SMEs could build sustainable internal systems and practices that strengthen the long-term viability and success of the entities. Wen (2023) observed that corporate governance enforces better operational strategies and internal control, thereby improving the growth and performance of SMEs and subsequently enhancing their internalisations. Abor and Adjasi (2007) elucidate the various advantages of corporate governance in ensuring sustainable internal operations in SMEs through improved management practices, internal auditing and a new strategic business outlook brought in by the board of directors. Wang et al. (2023) assert that corporate governance mitigates operational risks and strengthens shareholder and stakeholder relationships. This indicates that corporate governance is essential for ensuring the entity is governed sustainably. Stakeholder theory Freeman (1984) contested the agency theory ideas that only focused on maximising profits for their owners proposing its extension to include both the benefits and impacts on the broader range of stakeholders affected by the business operations. Freeman (1984) cautioned against a narrow and Chapter 1 23 short-term-oriented approach focusing only on profit maximisation for the owners arguing that it would deter the long-term survival of the business entity. The stakeholder approach underscores the sustainability of the firm as grounded on balancing the interests of the owners of the business entity and those of its stakeholders. Thematic lessons that can be learnt from the stakeholder theory is that SMEs should guard against the pursuit of profit maximisation for their owners with a limited focus on the sustainable survival and growth of small business entities. Both agency and stakeholder theories adduce the idea that unstable business practices will lead to business failure. Solomon (2011) expounded that the narrow perspective of focusing only on profit maximisation for business owners was fast being discarded. This stakeholder theory perspective suggests that SMEs should consider extending beyond the agency theory oriented towards embracing their multiple stakeholders to become sustainable entities. Wang et al. (2023, p.1) describe sustainable performance as the company’s ability to achieve long-term success while minimising negative environmental and social impacts. Multi-stakeholder engagement is considered by Castellani, Rossato and Giaretta (2023), who explain that sustainable development of SMEs could be achieved through partnership with stakeholders to address context-based socio-economic challenges. Castellani et al. (2023) recommended sustainable value creation through SMEs using products and processes as multifunctional tools designed by multiple stakeholders. Small and medium enterprises’ value creation from the stakeholder approach assumes that balancing the broader interest of the stakeholder is necessary for the long-term sustainability of the firm (Zhang et al. 2022). Although not explicitly explained in their study, it encapsulates the central idea espoused in sustainable value creation through a pluralist stakeholder approach. It enlightens us that managing multiple stakeholders’ diverging interests embeds the fundamentals of sustainability and corporate citizenship, which are key corporate governance principles. The stakeholder theory emphasises the need for businesses to consider the impacts of their operations on multiple stakeholders. This indicates that focusing on only creating profits or economic benefits for the business owners is an unsustainable business approach (Kocmanova etal. 2011). Because SMEs were conceptualised on a traditional business idea that seeks only to maximise the profits of the entrepreneur, that perspective must be revisited to promote the sustainability of these entities. Zhang et al. (2022) found that adopting stakeholders through corporate social responsibility as corporate governance overburdened SMEs and negatively affected their financial performance. Consideration of the agency and stakeholder theories provides the basis for SMEs to reconsider a paradigm Corporate governance practices for promoting sustainability of small and medium enterprises 24 of their owner governance towards corporate governance for enterprise sustainability. Dhondge (2023) recommends that corporate governance is necessary for building trust with funders and further adds that small entities remain with many untapped, and it is crucial for them to adopt sound governance. It can be ascertained that a transformation from a traditional predominant informal governance and management mindset towards a corporate governance-driven structure, processes and procedures that promote sustainability through corporate citizenship is required by SMEs (Kyereboah-Coleman & Amidu 2008). Proposed conceptual framework of corporate governance practices for promoting sustainability of small and medium enterprises Cognisance should be taken to the ontological dilemma that SMEs are small, owner-managed and self-owned; hence, they are different from the corporation upon which the concept of corporate governance was founded. This implies that, unlike incorporated companies, which are expected to comply with corporate governance practices, SMEs are not bound to do so. This study proposed that depending on the size of SMEs in terms of the number of employees and revenue, they should adopt and implement corporate governance practices to build their sustainability on a flexible basis. Figure 1.4 shows a diagrammatic depiction of the proposed framework for integrating corporate governance practices to promote the sustainability of SMEs. The proposed framework highlights the sequential conceptual relationship and the subsequent flow of corporate governance processes or procedures Source: Author’s own work. Key: SMEs, small and medium enterprises. FIGURE 1.4: Proposed conceptual framework of corporate governance practices for promoting sustainability of small and medium enterprises. Sustainable endogenous SMEs internal practices, management, administration, marketing, digitalisation, profitability, strategies and operations in their entirety Corporate governance structures and practices board structure, integrated report, risk management, stakeholder engagement, corporate sustainability Corporate governance principles transparency, accountability, fairness, responsibility SMEs sustainable performance dimensions economic, environmental and social sustainability Chapter 1 25 that should be followed to build sustainable development of SMEs. The conceptual framework proposes embracing corporate governance values of transparency, accountability, fairness and responsibility in SME practices as the primary step towards creating sustainability. This step must be followed by adopting governance structures and practices such as risk management, auditing and board of directors, which may foster sustainability and corporate citizenship. Collectively, corporate governance may strengthen the endogenous operation and practices of SMEs. Ultimately, corporate governance harnesses and fosters the SMEs’ economic, social and environmental sustainability. Corporate governance elements such as accountability and transparency enable the management, governance and financial performance of a firm to be measured (Wen et al. 2023). Risks can be mitigated timeously because of the presence of auditing and assurance systems (Nasrallah & El Khoury 2022). Studies have concluded that high performance, such as profitability, growth and competitiveness of the firm are fostered through the adoption of corporate governance values such as board structure, accountability and transparency, among many others (Dhondge 2023). Corporate governance principles, practices and sustainability Since the 1990s, several codes of good corporate governance practices and principles have been set rapidly (Cadbury Report 1992; King Report 2009, 2016; OECD 2015). Adopting corporate governance principles and practices is believed to protect the interests of the stakeholders and ensure the sustainability of the firm. Wang et al. (2023) explain that the need for transparency and accountability enhances the soundness of strategic decisions furthering the sustainability of the firm. Ajeigbe and Ganda (2023) concur that sustainability encompasses sustainable development through the integration of independence and interconnectivity between the economic, social, natural environment and human elements’ interaction in the same environment. This suggests that SMEs’ sustainability demands the formulation of sustainable economic, environmental and social sustainability strategies in contrast to the pursuit of self-owner-determined interests. King Report (2016) reiterates that corporate governance is manifested through effective and ethical leadership that is responsible for directing the business strategy to achieve sustainable economic, environmental and social performance. The economic sustainability of the firm measures the long-term capabilities, among other aspects, such as profitability, maintaining market share and financial performance. Environmental sustainability encompasses business operations that protect the Corporate governance practices for promoting sustainability of small and medium enterprises 26 environment while fostering long-term competitive advantage (Ajeigbe & Ganda 2023). The social dimension relates to all aspects that involve the wellbeing of society (Ajeigbe & Ganda 2023). If understood from tenets of the stakeholder theory perspective of corporate governance as theorised by Freeman (1984), sustainability embodies consideration of the broad impacts the business has on multiple stakeholders. Corporate citizenship and sustainability Fostering the sustainability of small businesses through incorporating sound corporate governance ensures the sustainability of the business. Wang et al. (2023) found that corporate governance mediates social responsibility, which enhances a firm’s sustainability. Scholars suggest that sound corporate governance of SMEs can develop sustainability frameworks to understand sustainable business practices that enhance the long-term viability of these ventures (Ajeigbe & Ganda 2023; Castellani et al. 2023). The King Report (2016) recognises corporate citizenship as a tool for transforming business operations towards sustainable operations in the triple-bottom-line approach. The corporate governance theoretical lens of sustainability embodies moral and ethical obligations for businesses to integrate social and environmental dimensions inclusively with their economic objectives. ButeSeaton (2023) recommended that SMEs can establish sustainability through the interactions of business practices, systems and policies. Singh and Pillai (2022) cautioned that designing cost-effective corporate governance in SMEs can lead to improved performance. Small and medium enterprises should adopt corporate governance to strengthen their processes and internal systems. Empirical evidence suggests that the main obstacles to the growth, development and long-term sustainability of small business entities include a lack of funding (World Bank 2022), a lack of generic management skills (Naciti et al. 2021), inadequate adoption of information and communications technology (Casco 2023), poor competitiveness (Van Scheers 2011) and a lack of digital strategies (Haohan & Beinan 2023). Italso includes a lack of quality assurance (Ngwakwe & Ngoepe 2017) and a lack of innovations (Almeida & Wasim 2023). Ramakrishna, Alzoubi and Indiran (2023) identify the lack of sustainability strategies as a hindrance to the continuity of small entities. The obstacles highlighted previously suggest that the failure of SMEs is largely attributed to weak internal systems. Dzomonda (2022) observed that corporate governance mediates the connection between environmental sustainability to improve access to finances and subsequently enhance the financial performance of SMEs (Ismail & Wright 2022). Chapter 1 27 Governance and management structure Grand theorists like Jensen and Meckling (1976) and Friedman (1954) long postulated the need for entities to have corporate governance principles, structures and processes that shape the way the company is controlled and directed to promote the long-term survival of the entity. Lakehal et al. (2023) recommended the adoption of corporate governance that consists of independent directors and diversified body composition as necessary for strengthening strategic decision-making in SMEs. Wen et al. (2023) found ‘a positive and significant association between the board of directors, disclosure, external auditing, and firm performance’. Wen et al. (2023) further found that concentrated ownership dominated by self-management negatively affected the performance of the firm and further recommended the need to adopt practices that enhance the performance and completeness of small businesses. According to Islam et al. (2023), through effective internal processes, corporate governance safeguards the value creation of the business, bolstering investors’ and financial institutions’ confidence in the firm to inject or loan funds to the business. Wen et al. (2023) concur that corporate governance provides an effective way to achieve the corporate strategy of the firm through established strategy-making structures and internal control mechanisms. Access to finance is necessary for boosting their development and improving productivity, given that most of them have limited sources of funds to stabilise and expand their business operations. Rachagan and Satkunasingam (2009) found the presence of corporate governance in ensuring the availability assurance and monitoring process that minimises fraud and self-dealing. Evidently, adopting corporate governance may address the governance and management weaknesses inherent in SMEs. Corporate governance will enable SMEs to establish formal governance and management structures, processes and procedures that promote sustainability through corporate citizenship. The corporation has a board of directors who provide oversight of the organisation. Small and medium enterprises are mostly owner-governed, which, from the perspective of corporate governance, inherently embeds the unregulated pursuit of self-interest and risk of dominance in decisionmaking. Adopting a governance structure with independent individuals as non-executive directors enriches decision-making and the contribution of various knowledge, experiences and skills that may enhance the survival of the entity. Self-interest that arises from sole ownership results in maladministration of the resources, resulting in the failure of the entity. Integrated sustainability report A financial report is an element of the integrated sustainability report. Small and medium enterprises should adopt transparency and accurate The contribution of good corporate governance of entrepreneurship 34 prosperity, job creation, economic growth and innovation (these are indicators of the economic development of a nation). According to Narula (2020), supported by Ohnsorge and Yu (2022), a significant portion of workers and businesses operate in the informal economy in emerging markets and developing economies. In countries like South Africa, Peru and Indonesia, this informal economy can account for as much as 80% of the population. As reflected by the observations from the findings of Narula (2020), Ohnsorge and Yu (2022) defined small enterprises as having 50 workers or less and a profit of R3m (agriculture) to R32m (wholesale trade, commercial agents and allied services) as advocated by National Small Business Amendment Act (NSBAA 2004). This type of business often operates from commercial or manufacturing bases, is registered and meets other formal revenue criteria (White Paper 1995). These businesses are typically scattered and clustered in urban areas and townships. In most cases, small businesses have a management structure in place and some level of managerial coordination (Roux 2002). Narula (2020) and Ohnsorge and Yu (2022) argue, in contrast to Roux (2002), that small businesses often lack a management structure and managerial coordination. The authors suggest that this chaotic approach to business does not contribute to economic growth and can lead to disorder in policy implementation (Andretsch et al. 2007). This situation highlights the need for effective corporate governance of SMMEs in South Africa to restore order and ensure the proper flow of resources to the state for revenue generation. Medium-sized businesses employ up to 200 people and have annual revenue of R64m. Medium-sized businesses have a gross asset worth ranging from R3m (catering, accommodation and other trade) to R210m (mining and quarrying) (NSBAA 2004). There is also increasing decisionmaking decentralisation, a more complicated management structure and a higher division of labour (Roux 2002). Following a quick discussion of the many types of small businesses, it may be interesting to understand the number of such enterprises and their employees in South African businesses. Table 2.1 shows the number of firms and workers in each category. In this case, the National Small Enterprise Act and its revisions refer to SMMEs as ‘small enterprises’ in general. Contextually, a ‘small enterprise’ is defined as a distinct business entity, including its divisions or affiliates, as TABLE 2.1: Upgraded definition of small, medium and microenterprises in South Africa. Enterprise size Number of employees Annual turnover upper band Medium < 250 R35–R220m* Small < 50 R15–R80m* Micro < 10 R5–R20m* Source: National Integrated Small Enterprise Development Masterplan (NISED) 2022. * Industry dependent Chapter 2 35 well as cooperative enterprises. It is managed by one or more owners and operates primarily in any sector or subsector of the economy, as specified in Schedule 1 of the Act. One can justifiably say that the definition of SMME is based on the number of employees and annual turnover (Republic of South Africa 1996). The upper limit indicates that, depending on annual turnover, an enterprise can be volatile, fluctuating between micro and small categories for years if good corporate governance and sustainability measures are not implemented (Enaifoghe & Vezi-Magigaba 2023). Comparatively, the given definitions proposed by the National Integrated Small Enterprise Development (NISED) Masterplan (2022) reflect different figures pertaining to number of employees in each category of SMMEs. This contradicts Table 2.1 and other definitions, leading one to justifiably argue that the upgrading of the given information demonstrates some growth in terms of turnover and employment capabilities of SMMEs over time. Small entities with 20, >10 and 200 employees are classified as small, micro and medium enterprises, respectively, while NISED (2022) upgraded these classifications to 50, >10 and 250 employees for small, micro and medium enterprises, respectively. In terms of turnover, the classifications are R3–R32m, >R5K–R1m and R3–R210m for SMMEs, compared to R15– R80m, R5–R20m and R35–R220m for SMMEs, respectively. Analytically, the growth pattern depicted in the different phases of growth of SMMEs from 2004 to 2022 may support the argument that SMMEs have been contributing to South African economic growth over time (Enaifoghe & Vezi-Magiga 2023, p. 100). The role of SMMEs in economic development includes being the growth engine necessary for a competitive and effective market, a key to reducing poverty through job creation and particularly significant in developing nations. Historical background of entrepreneurship in Africa According to Baten (2016, p. 318), before the arrival of European settlers in the 14th century, people in South Africa engaged in enterprising subsistence agriculture and hunting. Echoing Hrbek and Muhammad (1988), Schlebusch et al. (2017) indicate that pre-colonial South African history, and by extension the larger Southern African region, spans from the Middle Stone Age to the 17th century. McBrearty and Tryon (2006) suggest that Homo sapiens originally arrived in Southern Africa either 130,000 or possibly 260,000 years ago. Southern African hunter-gatherers, known as the San, were referred to as Bushmen by pastoral neighbours, the Khoikhoi. The term Khoisan refers to South Africa’s Pre-Bantu inhabitants (Daniels et al. 2023; Smith 1990). This term gained popularity in the early to mid-20th century and was coined around 1930 by Isaac Schapera. Thaler (2000) The contribution of good corporate governance of entrepreneurship 36 asserts that these Homo sapiens were surviving and interacting within economic, social, religious and political contexts. Entrepreneurship existed during that time (Auerbach 2023). At the social interaction level, they represent the cultural evolution of cooperative norms regarding how business is conducted and an enterprise accountable to an inclusive group identity (Clark et al. 1966). Entrepreneurship and economic development in South Africa Entrepreneurship According to Toma, Grigore and Marinescu (2014, p. 438), entrepreneurship is the process that involves the discovery, evaluation and exploitation of opportunities that lead to the introduction of new products, services, processes, ways of organising or markets. While, on the other hand (ed. Venter 2022, p. 29), entrepreneurship is considered ‘an individual’s creative capacity, independently or within an organisation, to identify an opportunity and to pursue it in order to produce new value or economic success’. This leads to the ability to connect all activities to generate profit and prosperity from labour, land, capital and, more recently, knowledge and technology (Alvarez & Barney 2020; Berger et al. 2021; Gedeon 2010). Additionally, it is the most natural solution to the problems of unemployment, poverty and inequality. According to Enaifoghe and Ramsuraj (2023, p. 4), the South African government actively promotes entrepreneurship to encourage economic development to increase job creation, competitiveness and income distribution. As a result, it has become easier for entrepreneurs to emerge and fulfil their essential role in South African economic development. Francke and Alexander (2029, p. 2) argue that entrepreneurship is supported by government policies that provide both financial and nonfinancial backing. Entrepreneurship is characterised as the ability of SMMEs to serve as the backbone of many successful economies worldwide. Research indicates that many established markets are built on small and medium-sized businesses, and developing countries are also encouraging entrepreneurial activities (Kaplan & Warren 2010). Enticed by the plethoric nature of entrepreneurship benefits including job creation, economic growth and social evils, regional, national and local government policies are focusing attention, resources and policymaking on entrepreneurial development (Bvuma & Marnewick 2020). Therefore, entrepreneurship is crucial in developing the economy through employment creation and business initiatives (ed. Venter 2022, p. 133). Toma et al. (2014, p. 438) suggest that certain conditions are conducive for entrepreneurship to thrive. These conditions include new products, new provision processes, new markets, new suppliers and new organisations. Chapter 2 37 Economic development Economic development is a discipline within economics that specialises in the study of macroeconomic factors influencing long-term economic growth, as well as microeconomic issues affecting individuals and businesses, particularly in emerging nations (Kumari & Bhanoo, 2022, p.76). Furthermore, some scholars argue that economic development is a concept primarily related to developing countries, while economic growth is associated with developed countries. Toma et al. (2014, p. 438) suggest that the goals of economic development can be summarised as follows: the creation of jobs, the enhancement of living standards and the process of influencing growth to improve the financial health of a community, society or economy. Kumari and Bhanoo (2022, p. 76) suggest that there are four important ways to measure economic development: • Gross National Product (GNP): This is used to measure the increase in real national incomes over a long period of time. • GNP per Capita: This measures the increase in per capita-related income over a long period. • Social Indicators: This takes the basic needs of individuals into consideration. • Welfare: This measures the inflow of goods and services to individuals. South Africa’s 21st-century entrepreneurial economic levels of sustainability Enhancing the SMME sector and promoting its economic growth, development and sustainability is a challenge that South Africa faces, like many other nations. Small, medium and microenterprises in South Africa are often not viable or sustainable. The Sustainability Livelihood Approach (SLA) is used to formulate strategies aimed at alleviating poverty in the South African economy (Bvuma & Marnewick 2020). Specifically, in terms of sustainability and innovation, South Africa’s economic landscape has presented both opportunities and challenges for entrepreneurs, as observed and updated in 2021 (Argade, Salignac & Barkemeyer 2021). South Africa’s significant economic challenges to the sustainability of entrepreneurship in the 21 century are well recognised. These challenges include a lack of access to resources combined with an unequal distribution of resources; a restrictive regulatory framework; high unemployment; poor infrastructure and connectivity; limited access tofunding; and instability in politics and the economy (Kah et al. 2022). Since 2015, real gross domestic product (GDP) per capita has declined (SARB 2018), productivity growth has stagnated (Aterido et al. 2019; Kreuser& Newman 2018; Wittenberg 2017), unemployment has risen from The contribution of good corporate governance of entrepreneurship 38 29.22% to 33.56% (Statistics South Africa 2017), and inequality remains high (Espoir & Ngepah 2021). Low economic development exacerbates poverty and inequality. High-income disparities aggravate social instability and jeopardise economic growth (Putnam 2007). Inequality generates divergent perspectives, making agreement difficult; the resulting stalemate and policy uncertainty can deepen weaknesses in the entrepreneurial economy. Small, medium and microenterprises are recognised as strategically important in advancing inclusive economic growth, job creation and transformation goals of South Africa (Visagie & Turok 2021). Economic restructuring initiatives that support SMMEs must achieve both entrepreneurial sustainability and intergenerational livelihood equity objectives. In other words, economic change should be fostered by SMMEs in a manner that does not jeopardise the long-term ability of the South African economy to compete in global product and labour markets. In light of competition, SMMEs need to incorporate corporate governance into their practices to ensure that fairness thrives (Thesing & Velte 2021). This suggests that our economic strategy should simultaneously prioritise economic renovation, driven by effective corporate governance policies and practices (Kamal 2021). Rungani (2022), in a contribution towards a comprehensive SMME support framework in South Africa, argued that one of the programmes focusing on economic change, inclusive growth and competitiveness in entrepreneurial encouragement should aim for the economic independence of the nation. The government of South Africa has identified SMMEs and cooperatives as potential catalysts for inclusive growth and local economic development (Rangwetsi & Van der Waldt 2021, p. 1). This clearly demonstrates that SMMEs drive economic transformation, which involves a rapid and significant shift in the ownership and control mechanisms governing SMMEs within the economy. The economic transformation of SMMEs is significantly proportional to their structural transformation. Structural transformation of SMMEs refers to the redistribution of entrepreneurial activities across various SMMEs. In other words, it entails the shift from low-producing, labour-intensive business activities to higherproducing, skilland technology-intensive ones through the implementation of corporate governance strategies (Soogun & Mhlongo 2021). While the primary purpose of this work is to describe measures that may aid in entrepreneurial change, the concept of structural change is occasionally discussed, particularly in the context of industrial strategy, as noted by the Centre for Competition, Regulation and Economic Development (CCRED 2016). Small businesses encompass a wide range of entrepreneurial activities, from self-employed individuals scraping by on the roadside to high-level professionals providing well-paid services to large corporations. This research on small, micro and medium enterprises Chapter 2 39 considers the significant differences between formal and informal enterprises. Formal small and microenterprises often have more financial resources, more advanced technology, more employees and higher revenues than their informal counterparts (Alvarez & Barney 2020). Generally, SMMEs represent the majority of businesses in South Africa, as evidenced by their significant contribution to ensuring consistency and continuous economic development across the economy (Ogujiuba et al. 2020, p. 10). Consequently, active SMMEs in South Africa generate over 56% of the country’s GDP, comprise over 91% of all formal organisations and account for almost 60% of all jobs (Ogujiuba et al. 2020, p. 13). The differences in financial and resource capacities among SMMEs need to be regulated to ensure competitiveness and fairness through good corporate governance. Otherwise, many of them may be barred from entering and participating in the market. Hockett and Gunn-Wright (2019) argued that there is always a connection between effective governance and legal compliance. Good governance cannot exist apart from entrepreneurship legislation, and it is entirely wrong to separate governance from the law, or vice versa. The same scholars contended that good corporate governance in entrepreneurship comprehensively revitalises the nation’s economy, supports the growth of the lower and middle classes and expedites the sustainability of enterprises. Small, medium and microenterprises can be governed by statute, by a code of principles, or by a combination of both through effective corporate governance practices. The World Trade Organization (WTO) supported good corporate governance by encouraging countries to lower trade barriers and modify trade rules that favoured industrialised economies over weaker ones, including many African economies. Additionally, the advocacy of the WTO at the national level aimed to protect SMMEs from being overshadowed by larger, established businesses. Whatever the case, these least developed countries (LDCs) recognise the importance of global commerce and corporate governance in enhancing the contribution of SMMEs to economic development (Singh & Pillai 2022). This study reveals that when SMMEs are exposed to good corporate governance, they can achieve sustainability and growth, leading to increased participation in exporting their products and services. According to Davies (2021), Africa’s exports to the United States of America account for just 1% of total US imports, with mineral products representing more than 60% of that share, primarily because of oil. This indicates that if SMMEs in South Africa synergistically collaborate with major corporations, there is a significant potential to increase production, with any surplus being exported, thereby boosting the economy’s GDP. International commerce is evaluated based on product and service exports and imports, which account for over 50% of GDP in some regions of sub-Saharan Africa The contribution of good corporate governance of entrepreneurship 40 (Fox&Gandhi 2021). This suggests that the heavy reliance on imports by SMMEs is not sufficiently balanced by their exports. Statistics indicate that the share of GDP attributed to SMMEs in international commerce is more than double that of exports, highlighting Southern Africa’s dependence on imports. For instance, in Mozambique, trade constitutes 96% of GDP, while exports make up only 26% (Parkin, 2013). According to stakeholder theory, organisations should implement corporate governance. Organisations should have panels of directors and managers who exceed the commitments mandated by law and consider stakeholder wealth and investment in their governance processes (Janang et al. 2020). The function of corporate governance is vital for maintaining an organisation’s sustainability and adaptability in the current challenging environment. Currently, SMMEs are not mandated by law; however, it is the responsibility of their boards of directors and managers to fulfil commitments to stakeholders in the interest of business sustainability. According to the study, South Africa’s economic progress is limited by a lack of commercial openness and corporate governance in SMMEs and innovation. In a few subSaharan African countries, non-parametric tests on businesses reveal that states with more open trade regimes have less diverse export structures. This chapter takes a broad perspective on entrepreneurship, sustainability and economic growth by examining theories and literature pertinent to theinclusion of good corporate governance in SMMEs. It focuses on the incorporation of corporate governance in SMME operations as a means of renewing South Africa’s SMMEs and enhancing their sustainability and contribution to economic growth. The contributions of entrepreneurship to economic development in South Africa Proper corporate governance of enterprises is essential for significant economic growth, job creation and poverty reduction in the South African economy (Enaifoghe & Ramsuraj 2023, p. 5). Since the establishment of a democratic South Africa, the fundamental objective has been to reinforce competitiveness by promoting job creation and national economic growth. In this context, it is evident that entrepreneurship contributes to sustainable development (job generation) for the growth of the South African economy. Ayankoya (2016, p. 10) postulates that entrepreneurial engagements by migrants in South Africa increase cross-country trade when foreigners sell South African-manufactured products to their home countries. This creates markets for South African products globally, increases the global competitiveness of South Africa, creates employment and provides muchneeded entrepreneurial role models. Sudha (2015) notes that the contributions of entrepreneurship to economic development in South Chapter 2 41 Africa stimulate employment creation, increase economic growth and development, promote wealth creation and distribution, improve the standard of living and contribute to GNP. Furthermore, entrepreneurship introduces innovations, induces economic growth, increases competition and promotes balanced regional development, among other benefits. Creates employment opportunities Entrepreneurship reduces the unemployment situation in the South African economy. It creates employment opportunities for people of different ages, skills and expertise, both directly and indirectly (Halizah 2022; Padi & Musah 2022). The establishment of more enterprises, both small and largescale, generates numerous opportunities in the South African economy. Increases economic growth and development Entrepreneurship promotes equity generation by mobilising idle savings from the public. Entrepreneurs utilise their own contributions, as well as funds from friends and family, along with borrowed resources, to set up their enterprises. Such entrepreneurial activities lead to value addition and wealth creation (Pulka & Gawuna 2022). Furthermore, entrepreneurship facilitates the utilisation of these savings, stimulating capital formation, which is essential for the capitalisation of enterprises and serves as the engine of economic growth and development in South Africa (Padi & Musah2022). Promotes wealth creation and distribution In South Africa, entrepreneurship enables citizens to fully engage their potential and energies to create wealth through the provision of goods and services. Mabasa et al. (2023) advocate that entrepreneurship accelerates the equitable redistribution of resources throughout the country, benefiting diverse geographic areas and large sections of society (Halizah, 2022). Improves the standard of living Successful innovations in entrepreneurship improve the standard of living by creating jobs and fostering conditions conducive to a prosperous society (Seoe & Swart 2023). Entrepreneurship plays a pivotal role in enhancing the standard of living by adopting the latest innovations in the provision of goods and services in South Africa (Matima 2022). Contributes to gross national product Entrepreneurship encourages efficient and cost-effective resource mobilisation of capital, skills, products and services, which develops The contribution of good corporate governance of entrepreneurship 42 markets for economic growth. This, in turn, helps increase the GNP and per capita income of the people in a country (Pulka & Gawuna 2022). Additionally, entrepreneurship contributes to the GNP and per capita income, serving as a signal of economic prosperity (Sudha 2015). Increases competition Kritikos (2014) asserts that ‘by starting new businesses, entrepreneurs [intensify] competition within the existing businesses’. As a result of these competing forces, ‘consumers benefit from the resulting lower prices and greater product variety’ (Kademeteme & Bvuma 2023). Introduces innovations and induces economic growth Entrepreneurs often drive economic growth by creating new innovations through technologies or processes, developing new products and opening new markets (Kademeteme & Bvuma, 2023). Promotes balanced regional development Selvan and Vivek (2020) state that entrepreneurs facilitate the reduction of regional disparities by setting up industries in less developed and backward areas. The increase in industries and businesses leads to public benefits such as improvements in health, education, road transport and entertainment, among others (Magocha 2014). Good corporate governance of entrepreneurship in South Africa Good corporate governance is essential for controlling internal operations and engaging stakeholders. The governance of an entity is shaped and often organised by crucial external interactions, which significantly impact the expanding role of firms in the public sector (Kuruppu & Lodhia 2019). The release of the King Report on Corporate Governance (King Report 1994) in November 1994 institutionalised corporate governance in South Africa. The King Report of 1994 was intended to promote the highest standards of good corporate governance in South Africa and beyond. The King IV Report (2016) emphasises that the beneficial effects of good corporate governance on organisations are imperative. Positive outcomes of good corporate governance include an ethical culture, high performance, effective control and legitimacy. Corporate governance is pivotal in protecting minority shareholders and enhancing the effectiveness of corporate governance itself (Antwi-Adjei et al. 2020). According to Antwi-Adjei et al. (2020), a good Chapter 2 43 corporate governance structure encourages trust in the economic system, as it is an acceptable condition for the development of the entire society and the environment. Jaimes-Valdez and Jacobo-Hernandez (2016) argue that corporate governance attracts capital and supports capital retention, which, in turn, enhances market capitalisation for corporations. Furthermore, it encourages entrepreneurship to address issues of transparency, fairness, ethics, responsibility and honesty in all dealings between investors and other stakeholders. However, corporate governance in SMMEs is often negatively affected by financial mismanagement scandals and the abuse of company benefactors, which erode public confidence and harm enterprise legitimacy (Kuruppu & Lodhia 2019). In the non-profit organisation (NPO) sector, accountability is viewed as a stakeholder requirement for gaining access to and securing resources, demonstrated through appropriate governance processes and effective resource usage. This is frequently regarded as a measure of control and justification, but it may also provide an opportunity for organisations to proactively demonstrate their legitimacy, survive allegations and obtain further legitimacy (Egholm, Heyse & Mourey 2020). The inclusive method requires clearly stating the business’s goal as determining and communicating the values by which the enterprise will conduct its daily operations to all stakeholders. It is also essential to identify the stakeholders who are critical to the enterprise’s operations. These three factors – stating the business goal, determining the goal and communicating the goal – must be addressed while developing approaches to achieve the company’s vision, mission and goals. The relationship between the firm and its stakeholders is expected to be mutually beneficial. Numerous studies have demonstrated that this comprehensive strategy is key to long-term firm performance and sustained growth in shareholder value for South African small, micro and medium enterprises (Gupta 2022; Kuruppu & Lodhia 2019). However, it is important to remember that entrepreneurship and innovative ideas are crucial attributes that drive a business. Emerging economies are powered by entrepreneurs who take business risks and initiatives. Successful enterprises contribute to thriving economies and have the potential to reduce economic inequalities. Without adequate levels of profitability, not only will investors seek alternative investments because of insufficient returns, but other stakeholders are also unlikely to maintain a long-term interest in the company (King IV 2016). Characteristics of good corporate governance required by South African entrepreneurs Good corporate governance and entrepreneurial orientations consist of seven traits: discipline, transparency, independence, accountability, responsibility, fairness, and social responsibility. The contribution of good corporate governance of entrepreneurship 50 adjustments to boost potential growth. Under these circumstances, SMMEs are critical for any country’s economic growth and development; however, maintaining their performance over time remains a significant challenge (Bhorat et al., 2018). The ever-changing nature of the international economy has grown increasingly complex, making it essential to create knowledgebased firms that can support continued growth and development while also achieving socioeconomic goals. Innovation in the commercial or industrial use of new products, techniques, or methods of production should be encouraged (Saunila, 2016). Despite its importance, the innovation of SMMEs remains a challenge globally, including in South Africa. The Fourth Industrial Revolution (4IR) and the COVID-19 pandemic have accelerated the need for small, micro and medium enterprises to innovate and digitise. As a result, performance management models are expanding their focus beyond traditional activities, such as finance and manufacturing, to include intangibles like information and expertise in areas such as innovation, digitisation, and research and development (R&D) (Davila, Epstein & Shelton 2012). It is therefore critical to better understand the performance of SMMEs and how it relates to innovation and digitalisation within these enterprises (Curraj 2018). As the most promising sector of South Africa’s economy, SMMEs emerge not just from a production standpoint but also from an interest in income distribution, where money and other cash equivalents are exchanged among a broad spectrum of people. South Africa has improved its average labour productivity by allocating a significant proportion of capital to large enterprises that achieve economies of scale and/or firms that utilise current technology. In this context, only a few highly experienced and well-paid individuals are needed to manage this capital. However, the larger labour force generates little capital because of low productivity and pay. This situation arises when labour, as the abundant factor of production, is working inefficiently, leading to a deterioration in the distribution of proceeds, particularly for unskilled workers and new labour entrants. Small, micro and medium enterprises should be supported through public procurement. The government’s overdue payments to small firms should be rectified, possibly by allowing automatic interest accumulation on unpaid amounts after an agreed-upon period. Governments and stateowned enterprises must develop bids whenever feasible to expand opportunities for small businesses. Additionally, a dispute resolution process within the Chief Procurement Office or a separate ombudsman is needed to enhance oversight and monitoring of subcontracting relationships (Garcia et al. 2022). Small businesses need to serve as subcontractors for larger firms to enter global value chains and establish longer-term, sustainable contractual relationships that improve their creditworthiness (Akenroye et al. 2022). Chapter 2 51 A dedication to reducing red tape can open doors for small enterprises. The Red Tape Impact Assessment Bill, which Parliament excluded on bureaucratic grounds, should be reconsidered (Kruger 2017). This proposed measure compels all departments and self-regulatory organisations to cut bureaucratic red tape by 25% over a 5-year period. Small enterprises (and other new market entrants) could benefit from whole or partial exemptions from certain types of regulation (e.g., the expansion of negotiating council agreements). Special economic zones in various provinces of South Africa can be utilised as prospective sites where economic interventions can be implemented (Sever et al. 2020). Red tape is described as laws and regulations, as well as administrative and management processes, that are ineffective in attaining their intended goals, thus causing suboptimal and undesirable social effects (Wegmann & Cunningham 2010). An examination of the literature reveals that red tape does not have a straightforward definition (Pandey & Scott 2002) and must be analysed in a broader context that includes concepts such as improved regulation, good governance and e-government. The DSBD asserts that there is potential for long-term improvement for SMMEs in South Africa. The Department’s 5-year strategic plan for 2020–2025 includes the following performance outcomes: • Enhanced participation of SMMEs and cooperatives in domestic and international markets • Intensified contribution of SMMEs and cooperatives in priority sectors • Scaled up and coordinated support for SMMEs, cooperatives, village and township economies • Increased access to financial and non-financial support and implemented responsive programmes for new and existing SMMEs and cooperatives • Diminished regulatory burdens for small enterprises • Advanced governance and compliance • Improved, integrated and streamlined business processes and systems (DSBD 2020–2025). The need to introduce good governance to improve the sustainability of SMMEs in South Africa is imperative, and reducing red tape is essential (Kovač & Jukic 2017). Using a normative-analytical approach, this study identifies seven strategic organisational governance areas relevant to SMMEs when engaging with the state (i.e., public administration) and where they may encounter managerial barriers related to regulation. These key areas include (1) sectoral regulation, (2) employment market functioning, (3) ease of fulfilling public responsibilities, (4) reporting to the state, (5) inspection efficiency, (6) obtaining building licences and (7) (re) establishing an enterprise. These findings align with those of the study by Obadic et al. (2020), which identified administrative barriers in the area of employment within businesses. The contribution of good corporate governance of entrepreneurship 52 Corporate governance and sustainability According to Jamies-Valdez and Jacobo-Hernandez (2016), sustainability is ‘the ability to meet present demands without compromising the ability of future generations to meet their own requirements’. Antwi-Adjei et al. (2020, p. 80) explain that corporate sustainability means that firms consider the future, as well as the present, in their management and planning, using available resources to create long-term value. Furthermore, the increasing emphasis on sustainability has prompted the adoption of novel tactics for engaging relevant stakeholders, highlighting stakeholder relationship management as a source of competitive advantage. Sustainable corporate governance strategies originate from the board of directors and are informed by the organisation’s mission and objectives. Corporate sustainability is essential for today’s businesses, critical to a prolonged corporate success story and vital for ensuring that markets provide value across society (Antwi-Adjei et al. 2020). Entrepreneurial firms and corporate governance must be recognised as key drivers of economic development in South Africa under the new global order. According to reports, the emergence of SMMEs could position the country to fulfil both the 2030 National Development Goals and the United Nations (UN) Sustainable Development Goals (SDGs). The high failure rate of small and micro firms may be attributed to inadequate corporate governance. The publication of the King Report (1994) established corporate governance principles in South Africa. King (2000) posits that corporate governance is primarily concerned with leadership. It is a guiding framework that frames the operation and control of a firm to achieve effective business management, concern for employees and good relationships with trading partners (Smit 2011). The fundamental principles of good corporate governance uphold values such as honesty, fairness, responsibility, social responsibility, accountability and discipline within the business. Small and micro firms in South Africa, especially in rural municipalities, currently face several sustainability challenges. According to Bruwer and Watkins (2010), the primary elements influencing sustainability are classified as macroeconomic issues, microeconomic factors and psychological aspects. However, SMME owners and managers are often unfamiliar with corporate governance. As a result, many small and micro companies do not adhere to corporate governance philosophies, which are considered ‘good business practices’ (Flowers et al. 2013). As identified in this chapter, owners and managers employ a limited degree of intuitive governance, recognising the importance of certain aspects of good governance, namely rules and processes. The framework was developed from critical discourse analysis of information from various sources. Chapter 2 53 Figure 2.1 demonstrates that the individuals who own SMMEs, those who intend to be entrepreneurial, and customers should be guided by corporate governance that oversees government apparatus and SMME operations in a fair and comprehensive manner. Government and SMMEs are interdependent concerning governance issues, and regulatory boards refer to the rules and regulations that govern the industry. Strict adherence to these rules is essential for the sustainability and future existence of SMMEs and humanity. The people of South Africa need to address gender disparities in entrepreneurship. Small, micro and medium enterprises are not gender-sensitive, particularly in agripreneurship. According to Du Toit et al. (2011), agriculture can help alleviate poverty by lowering food prices, creating jobs and increasing farm incomes. Women entrepreneurs are female entrepreneurs who create something from nothing; in developing countries, women often serve as initiators, owners and business managers (World Bank 2019). The primary reason women are interested in pursuing careers in agriculture, especially during the COVID-19 pandemic, is that the sector maintained vital services during the shutdown, highlighting the importance of farming in supplying nutritious food (Alliance for a Green Revolution in Africa [AGRA] 2021). This sector has some of the best prospects for job creation, and female entrepreneurial participation in agriculture is believed to have a positive impact. The significance and relevance of women’s empowerment have been widely debated, aiming to improve rural women’s living conditions and increase household income. The primary focus for female Source: Author’s own work. FIGURE 2.1: Corporate governance – sustainability framework. People Corporate governance Regulatory boards Sustainability Small, medium and microenterprises Government The contribution of good corporate governance of entrepreneurship 54 farming businesses will be on sustainable farming, decision-making and household farming labour, with land ownership being a secondary concern (Zaridis et al. 2015). The authors assert that agriculture is a crucial sector for female entrepreneurship and is one of the world’s largest employers of women (Kloppers & Kloppers 2006). Women play numerous roles in modern rural culture, contributing to families, communities and economic growth. Women entrepreneurs make significant contributions, and their diverse productive tasks, such as farming and managing a home and family, can benefit society (Zaridis et al. 2015). Hardik, Political & Administrative Transparency and Entrepreneurship (2022) posit that the government should enhance its instruments and machinery in collaboration with regulatory boards and SMMEs to maintain the sustainable livelihoods of the South African people. The government operates in tandem with several strategies and units, including the National Development of Agriculture, Land Redistribution for Agricultural Development, Comprehensive Agricultural Support Programme, National Skills Development Strategy, National Skills Development Plan, National Development Plan, National Planning Commission, Department of Economic Development, DTI, Sector Education and Training Authority, DSBD, South African Women Entrepreneurs’ Network, National Youth Development Agency, Global Entrepreneurship Monitor and many others. The government monitors internal controls related to access to finance, employee satisfaction, employee education, training provisions for employees, organisational policies and procedures, sound information technology systems and competitor regulation as part of good corporate governance. On the other hand, SMMEs remain vulnerable to labour laws, tax laws and compliance-related bureaucracy, with the expectation that the government will restore confidence through the initiation of new incentives. This includes the DTI initiating various funding schemes ranging from grants to business incentives (Couch 2023; Lim 2022). Sustainability is critical for the development of SMMEs in terms of efficiency and the foundation of sound business principles, which are embedded in corporate governance principles (Fernandez-Armesto 2006). The weakening of the South African Rand, market volatility and the global recession negatively impact the sustainability of small and micro businesses. According to Muller (2009), good corporate governance is essential for the development of a healthy and modest business sector. One of the key values of corporate governance for small businesses is the establishment of a better and more robust system of internal controls, accountability, transparency and an improved strategic vision. By involving outside business experts, entrepreneurs can focus more on strategic direction and business expansion rather than daily operations, thereby creating the ability to attract better managers and investors. Chapter 2 55 The benefits of corporate sustainability on entrepreneurship in South Africa The benefits of sustainability on entrepreneurship include: • Assessment and partnerships with suppliers have a positive effect on environmental performance. • There is a significant correlation linking corporate governance and sustainability. • There is a significant positive relationship amid governance and sustainability disclosure. • Sustainability offers greater value to the SMMEs. • Alliance between internal governance and stakeholders constitutes sustainable governance (Jaimes-Valdez & Jacobo-Hernandez 2016, p.49). The challenges of entrepreneurship to economic development in South Africa The challenges facing entrepreneurship and economic development in South Africa include, but are not limited to, a lack of access to funding andcredit, unfavourable legislative environments, a shortage of skills, information deficiencies and inaccessibility to markets and procurement (Enaifoghe & Vezi-Magigaba 2023, p. 100). Inefficient and ineffective support for current and potential entrepreneurs is another serious challenge in South Africa, making planning critically essential. According to Ayandibu and Houghton (2017, p. 136), external and internal factors affect SMMEs. External factors include financial constraints, while internal management factors encompass market conditions, economic factors and infrastructure. Additionally, Ayandibu and Houghton (2017, p. 136) identify major challenges faced by SMEs in both the internal and external environments, which may include high interest rates, insufficient owner equity contributions, business location, absence of information technology, high transportation costs, excessive taxes and tariffs, a lack of internet access, high production costs, business skills shortages, skilled labour deficiencies, registration and licensing costs, a lack of training and high foreign competition, among others. Conclusion As the economy is regrettably showing signs of decline, manifested in various deficiencies such as power shortages, unemployment, gender-based violence, rising crime rates, mass protests and price hikes of basic commodities, people are increasingly threatened by higher levels of poverty and social injustices. The sustainability of life is becoming increasingly unattainable. This situation The contribution of good corporate governance of entrepreneurship 56 serves as a wake-up call to the nation that action is needed. According to this study, entrepreneurial innovations are a promising solution. Furthermore, the South African government and business community are working to reduce red tape. The Director-General of the National Treasury, along with a private sector representative, co-chairs a process that has already produced results in addressing bottlenecks in the issuance of water licences and environmental regulations related to mining, as well as in business registrations. Additionally, e-solutions should be introduced and supported with a ‘knowledge backup’ for public officials and stakeholders, including appropriate updates and improvements, to provide structural support for sanctioned and contributory problems. The government should invest in modern technologies to enable effective essential services and keep pace with the private sector. Like other countries such as Slovenia, which has successfully completed several e-government projects (such as one-stop shops, the tax bot ‘Vida,’ and e-land registration), there is still much room for improvement in South Africa. In exercising good corporate governance to ensure the sustainability of enterprises, the principle of proportionality should guide establishments when regulating and enforcing business statutes. Furthermore, broadening the scope of discretionary controls can be a beneficial tool for increasing flexibility. However, such changes carry risks and require qualified public entrepreneurs who adhere to the highest standards of honour and ethics. Otherwise, the ‘neoliberal shift’ from supervision to management may lead to chaos, bribery, arbitrariness and illegality. Recommendations The following recommendations arise from a critical discourse analysis of the existing politics and philosophies of the economy. Lowering entry barriers can be facilitated by evaluating bureaucratic red tape surrounding licensing and municipal regulations as part of good corporate governance. Additionally, introducing a ‘silence is consent’ rule for licensing procedures with low associated risks would promote the sustainability of SMMEs. Small businesses should be supported through public procurement, potentially by accepting the automated addition of interest on remaining balances owed by the government after a certain period. Small, medium and microenterprises should serve as subcontractors to large firms. Working as a subcontractor for a large corporation can help small businesses enter international value chains and establish longer-term contractual relationships, which can enhance their creditworthiness. The people of South Africa should implement youth employment initiatives, such as sustained government support for business creation programmes. 57 How to cite: Magocha, M & Matashu, M 2024, ‘Towards an Utu, Unhu-Ubuntu entrepreneurship framework’, in M Magocha & M Matashu (eds.), Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp. 57–79. https://doi. org/10.4102/aosis.2024.BK404.03 Whose fault is it if no one knows about the philosophy of your grandfather and mine? Is it not your fault and mine? We are the intellectuals of (Africa). It is our business to distil this philosophy and set it out for the world to see. (Samkange & Samunge 1980) Abstract This chapter explores the possibilities of developing entrepreneurship governance based on Ubuntu philosophy. For some, the idealistic and moralistic undertones inherent in the term ‘Utu, Unhu-Ubuntu’ may be controversial. The researchers believe that integrating Ubuntu into entrepreneurial governance can enhance the entrepreneurial culture Towards an Utu, Unhu-Ubuntu entrepreneurship framework Medicine Magocha Business Management and Economics Department, Faculty of Economic and Financial Sciences, Walter Sisulu University, Mthatha, South Africa Martha Matashu School of Commerce and Social Studies Education, Faculty of Education, North-West University, Mahikeng, South Africa Chapter 3 Towards an Utu, Unhu-Ubuntu entrepreneurship framework 58 and mindset of countries. While Ubuntu is an African ideology centred on collaboration and mutual support through sharing and reciprocity, it can also be described as a philosophy emphasising ‘being self through others.’ It embodies a form of humanism expressed in the phrase ‘I am because of who we all are,’ derived from a Nguni language (isiZulu) aphorism: umuntu ngumuntu ngabantu. Utu, Unhu-Ubuntu is grounded in morality and dignified human values intended to maintain social cohesion and promote social justice. This chapter aims to develop a user-friendly framework for entrepreneurship based on Utu, UnhuUbuntu and corporate governance. Where these two fundamental ideologies integrate, the researchers believe there is potential for creating enterprises that rationally serve fundamental human dignity, thereby promoting sustainability. The researchers assert that ubuntuembedded corporate governance will be inclusive and encourage all individuals to participate in development. This approach can promote an indigenous method of utilising the country’s resources, which may have previously remained untapped. Introduction It appears that small and medium enterprises (SMEs) are conceptualised based on historical ideologies that promote the hegemony of capitalism and the neoliberal economics of wealth accumulation by individuals. Akyol (2022) describes SMEs as being founded on capitalism models that justify the principal owner’s contributed capital, self-management and flexible production systems, in contrast to large enterprises. This suggests that SMEs serve as institutional agents for transplanting the hegemony of capitalism. Bateman (2000) has long argued that SME development policies and intervention measures are driven by neoliberal ideologies. Von Feigenblatt, Pardo and Cooper (2021) argued that neoliberal systems often reintroduce themselves through SMEs as alternative enterprise structures for creating economic growth and development after the same ideology has created an economic crisis at the macro level. Von Feigenblat (2021) argues for the need to find an alternative philosophical ideology to the dominant neoliberal ideology, describing its weakness as being incompatible with local communities and ways of life. Baterman (2013) views the development of SMEs as an extension of the neoliberal approach, which dismantles large enterprises through policies aimed at developing and sustaining these small enterprises. It can be inferred that existing institutional efforts to support SMEs could further entrench capitalism if the Ubuntu entrepreneurship framework is not developed as an alternative philosophical grounding. Chapter 3 59 Research on the Ubuntu philosophical approach, which is based on communalism rather than capitalism, is still underdeveloped and should be considered as an alternative philosophical framework to inform SME models in the South African context. Consideration of ubuntu as an alternative entrepreneurship model has major implications for SME creation, capital, ownership, profitability and sustainability. The concept of Ubuntu is deeply rooted in African societies, yet it is often absent from the corporate governance practices of SMEs. Ubuntu is a lived philosophy that embraces communitarianism, where an individual’s identity is defined in the context of society rather than from an individualistic standpoint (Bohwasi 2020; Mabovula 2011; Ramose 2000; Welter et al., 2018,). This philosophy epitomises humanity, asserting that individuals exist not solely for their own sake but for the common good of society. Mabovula (2011) describes Ubuntu as centred on human beings as a collective, where the social contract of individual choices is defined and constrained by societal norms. In contrast, the principles underlying the governance of SMEs are not based on Ubuntu, which undergirds the African societies in which these entrepreneurial entities operate. Because Ubuntu is the fabric of society, it is unclear how SMEs founded on neoliberal principles of self-interest can coexist with communities whose way of life is based on communalism. Given that Ubuntu shapes the way of life in African society, this study grapples with the question of how Ubuntu can be introduced as an alternative framework for SMEs. Suffice it to say that South Africa has experienced its fair share of significant failures among SMEs, despite many years of available policy and institutional support (see National Integrated Small Enterprise Development Masterplan [NISED], 2022). Various scholars have explored the factors impeding the survival of SMEs. Changwesha and Mutezo (2023) identified a lack of financial literacy and limited access to finance. Ogujiuba et al. (2023) attribute the lack of access to startup capital as a subsequent cause of SME failure. Flepis et al. (2023) proposed a model that identifies several factors determining the success or failure of SMEs, namely: capital; financial and record-keeping skills; control; management and industry expertise; planning; professional advisers; education; personnel; product; timeliness of services; economic conditions; age of the owner; partners; parents who operated a firm; marketing abilities; and minority status. While numerous studies have broadened the understanding of and proposed different approaches to addressing the rampant failure of small businesses, there is still a scarcity of studies that contextualise ubuntu as a potential model for building sustainable SMEs. Towards an Utu, Unhu-Ubuntu entrepreneurship framework 66 corporate governance principles that should guide sustainable corporate behaviour, emphasising the integration of social, environmental and economic dimensions. While social aspects are included in capitalist-driven enterprise governance models, their focus is limited to addressing socioeconomic issues and does not extend to transforming entrepreneurship models to embrace the Ubuntu philosophy. This implies that the business perspectives and practices of SMEs continue to be conceptually informed by corporate governance frameworks whose principles often disregard the Ubuntu philosophy. Hence, there is a need to disrupt the existing neoliberal ethnocentric paradigms and move towards embracing the Ubuntu philosophy. The performance and sustainability of SMEs, like those of any business, influence our daily lives. Therefore, the governance of these venture enterprises has both theoretical and practical implications for society. Small enterprises provide goods and services, contribute to tax collection for public use and create employment opportunities. South African SMEs are major contributors to the gross domestic product, employment and overall economic development (NISED Masterplan 2022). Given that corporate governance practices affect SME performance, we can assume that these practices play a crucial role in driving economic development. It is, therefore, important to further explore the governance of SMEs at all levels. Theoretical frameworks underlying corporate governance practices adopted by small and medium enterprises The globally recommended corporate governance principles and practices were conceptualised on capitalism and free market ideologies of maximisation of profits for the firm owners (see Cadbury Report 1992; Fama 1980; Jensen & Meckling 1976). The agency theory considered corporate governance as a mechanism to protect the investment interest of the shareholder against appropriation by management and internal stakeholders (La Porta et al. 1997). Fama and Jensen (1983) theorised in the agency theory which postulates the maximisation of profits, internal control and monitoring of the action of management decisions and operations can improve corporate governance of SMMEs. It appears that although the codes of corporate governance principles and practices are different the principals’ duties of the board, openness and disclosure, rights of shareholders and equitable treatment of shareholders are commonly held as mechanisms of firm governance that enhance sustainability (see King 2009, 2016). The theoretical implication of the agency-principal Chapter 3 67 theory is profit maximisation through corporate governance. In other words, corporate governance promotes the sustainable generation of profits by setting up structures, processes, procedures and principles that control and minimise the pursuit of self-interest by management. These corporate governance principles have been adopted across various sectors, including SMEs. Corporate governance was conceptualised based on traditional theories such as shareholder theory, transactional theory, stewardship theory and agency theory, all of which emphasised profit maximisation while neglecting the broader societies in which businesses operate. Ideologically, agency theory is rooted in a dominantly capitalist and market-driven approach, which excludes stakeholders (Matashu 2016; Pandya 2011; Solomon (2011). Freeman (1984) proposed stakeholder theory to incorporate individuals whose actions may impact how businesses operate in achieving their corporate goals, or conversely, individuals who are influenced by the actions of the business. Although enlightened stakeholder theory acknowledges that business operations are embedded in society with diverse, competing interests, it does not explicitly promote the transformation towards Ubuntu entrepreneurship models. Often overlooked is the fact that entrepreneurial activities should not be seen as separate from the philosophical precepts of the society in which the entity operates. Moreover, distinctions between SMEs and large corporations should be based on their nature and form. Characteristics of small and medium enterprises As a point of departure, most SMEs, unlike corporate forms of ownership, do not begin with the privilege of receiving large capital injections from multiple investors. At most, these entities are self-funded and ownermanaged. The funding and ownership characteristics of SMEs set them apart from large corporations in terms of limited liability, legal persona and corporate governance practices (Abor & Adjasi 2007). Corporate governance frameworks are based on the legal principles of separation between ownership and control (Fama & Jensen, 1980). It is often overlooked that the control systems inherent in corporate ownership have very limited applicability to owner-funded and controlled SMEs. Entrepreneurship entities are primarily owned, funded and operated by the owners, resulting in no separation of ownership from control as seen in corporations. Given the fundamental differences between these two forms of ownership in organising economic activities, it is questionable whether the mere adoption of corporate governance principles in SMEs Towards an Utu, Unhu-Ubuntu entrepreneurship framework 68 constitutes an onerous burden on these small businesses. The concern that arises is whether implementing existing corporate governance frameworks in SMEs, without considering the differences in ownership and the nature of these entities, conflicts with the principles of agency theory. Conception of Ubuntu philosophy The conceptualisation of corporate governance in SMEs has not only neglected the theoretical and epistemic gaps between the governance needs of large corporations and SMEs but also suffers from philosophical incompatibilities. The Ubuntu philosophy is perceived to be non-existent or insignificant, despite being a central philosophy in African societies. Ramose (2000) lamented that writings on Ubuntu African philosophy began only recently, as it had never fully developed because of colonisation and there were few sources available. Ramose (2000) further explains that Eurocentric perspectives regard African philosophy as entirely non-existent. These assumptions stem from the belief that Ubuntu African philosophy lacks a written tradition and that its origins are rooted in communal and mystic thinking. If the assumption that African philosophy does not exist is valid, does it imply that no people ever existed in African societies? Or, if they did exist, did they live without beliefs, values, or a logical way of thinking? If this premise is invalid, could the non-recognition of African philosophy be considered a form of epistemic violence against it? Kaphangawani (2004) argues that Western philosophy was once unwritten and arose from communal thought. The continued existence of African societies demonstrates the presence of concepts and ideas. Oruka (1996) contends that African philosophy does not need to conform to the Western tradition of being documented to be considered valid. Oruka (1996) further argues that African philosophy has valuable insights regarding identities and the diversity of different realities. These views suggest that Ubuntu philosophy should contribute to the conceptualisation of entrepreneurship governance in African societies. Unlike Western capitalist ideologies, Ubuntu philosophy espouses communitarian ideals, emphasising that society is greater than the individual. Applying Ubuntu ideology to entrepreneurship seeks to establish mutual benefits between individual interests and societal well-being. Conceptualising an enterprise from an Ubuntu perspective entails viewing it as an asset that exists for the common benefit of society. South Africa, like several other Bantu-speaking societies, ascribes to the Ubuntu philosophy. As a social science, Ubuntu does not have a Chapter 3 69 universally accepted definition, although it represents a transcendental, binding way of life and thinking in African communities. Bohwasi (2020) stated that Ubuntu refers to a set of principles and behaviours that Black Africans or those of African descent believe define who they are as true human beings. Despite the subtle differences in beliefs and practices among various ethnic groups, they all convey the same message: a true individual human being is part of a larger, interconnected reality that is social, ecological, spiritual and communal. Radebe and Phoko (2017) characterise Ubuntu as an African way of life based on several tenets that constitute meaningful substance, extending beyond all facets of daily life and interactions with others and the wider world. This worldview or attitude serves as a set of guiding principles related to philosophy. Philosophy is the study of nature and the foundation of knowledge, reality, ethics, logic and existence. It also aims to explain human thought and perception of the world around us. One of the most accepted descriptions of Ubuntu is found in the dictum of Justice Mokgoro in the Makwanyane case, para [307], where it was stated that: Ubuntu is often translated as ‘humaneness’. It translates as personhood and morality in the most basic sense. Umuntu ngumuntu ngabantu, which translates to ‘a person is a person through/because of (other) people’, is a metaphor that describes the importance of group unity on survival concerns that are crucial to communities’ survival. It refers to humanity and morality in its most basic sense, even though it encompasses the important ideals of respect, human dignity, compassion, group solidarity, and collective unity. Its ethos highlights human dignity and signals a change from conflict resolution to cooperation. The Western cultural legacy places a high priority on respect for life, which is reflected in the all-encompassing notions of humanity and... [human dignity]. Ubuntu, as highlighted in the above dictum, epitomises the epistemological belief about the essence of life for human beings in African societies. Its values recognise the nuances of the intertwined coexistence that permeates an individual’s being, as defined by the larger collective society. The wellness of society is central to the definition of individual well-being. Principles for building sustainable societies are harnessed and engendered through egalitarian values (Himonga, Taylor & Pop, 2013, p. 26). Translating this to the entrepreneurial context, the Ubuntu philosophy posits that the sustainability of SMEs is co-determined by their capacity to meet societal needs. This means that no entrepreneurial activities should exist, wholly or in part, for their own sake but rather for the good of others. Thus, Ubuntu’s philosophy may provide an alternative framework for sustainable entrepreneurial governance. Inferences from the discussion suggest that the conceptualisation of entrepreneurial governance should be revisited to foster and harness the mutual coexistence between the existence of the entity and society by adopting the Ubuntu philosophy. Towards an Utu, Unhu-Ubuntu entrepreneurship framework 70 According to Onyango (2013), the term Ubuntu refers to humanity, morality and compassion. Pieterse (2004) claims that Ubuntu places a strong emphasis on social cohesion within the community, asserting that selfactualisation is attained through participation in the collective totality, with group solidarity prioritised over the pursuit of individual goals. Unlike the individualistic, market-driven environment that informs Western entrepreneurial philosophy, African societies are founded on the Ubuntu philosophy. Arguably, neglecting the social context renders business ventures futile, as it leads entities to perceive their existence as distinct from societal values. This study is premised on the argument that integrating Ubuntu philosophy into entrepreneurship models may enhance competitive advantage and innovative opportunities for developing both business and community objectives. This is because the concept of Ubuntu embeds social cohesion and communal values that are critical for the continued survival of both society and the entrepreneurial entity. The shared sense of individual responsibility and accountability through the principle of reciprocity fosters a sense of society’s collective obligation towards one another. The values of Ubuntu align well with corporate governance principles espoused by King (2016) for advancing the sustainability of business, society and the environment through mechanisms that promote transparency, accountability, responsibility, fairness and risk management. The epistemological similarities between Ubuntu and corporate governance necessitate further reconceptualisation to integrate Ubuntu philosophy into entrepreneurial governance. Ubuntu as an entrepreneurship philosophy Translating the Ubuntu philosophy to the enterprise world entails that entrepreneurship should promote a mutual symbiotic relationship between entrepreneurial activity and the common good of society at large. The view that an enterprise is communal reinforces the notion of its resourcefulness, embodying the ideals and spirit of togetherness, where an individual is seen as part of a larger community. The substantive content of Ubuntu embodies its values and principles, serving as the glue of humanness that connects the fabric of human lives in society. This perspective resonates with the idea that the pursuit of one’s good should enhance the common good for the community. According to Ncube (2010), business is communal and profits should be shared by all parties involved rather than going to any one person. Ncube (2010) also states that the Ubuntu principle promotes inclusive and circular decision-making, wherein the group’s aims take precedence over individual ones. For instance, communal ownership of a business allows it to draw on shared resources, such as borrowing funds when it struggles to cover salaries and operational costs because of Chapter 3 71 its reliance on core relationships. When a small business cannot pay salaries during its initial months, the owners, as members of the business, may need to sacrifice their compensation for a time until the business becomes functional, receiving remuneration at a later stage. Embedding Ubuntu into entrepreneurship raises fundamental questions about the implications of venture ownership, rationale and the resultant governance model. Conventional entrepreneurship models are founded on individualistic free-market economy ideologies that seek to maximise profits for the individual and do not recognise collective communalism (Campbell 2006). In this Western philosophy, entrepreneurship is based on an individualistic approach that venerates taking enterprise risks in pursuit of maximising personal wealth and self-interest, while disregarding the broader society in which the business operates. Attributes of entrepreneurship have been conceptualised from an individualist perspective rather than from collective communalism. Lopes (2023) identified sustainability-oriented entrepreneurial intentions as those that focus on integrating economic, social and environmental dimensions. Sustainability-driven, Ubuntu-oriented approaches to entrepreneurship embody inclusivity and egalitarian values of society, rather than emphasising the pursuit of individual profit interests. The tenets of the conventional entrepreneurship model thus stand in contradiction to the Ubuntu philosophy and ideals as lived in societies. Major benefits of entrepreneurship include employment creation, the provision of goods and services and an overall contribution to economic growth (Ughulu, 2022). These socio-economic benefits are conceptualised as spillovers or externalities within neoliberal market ideology. Principles of market-driven entrepreneurial governance that perceive societal benefits as incidental suggest that this ideology does not acknowledge broader social benefits as central to entrepreneurial activities. Market-centred ideologies are inconsistent with the Ubuntu philosophy, which believes in the pursuit of the common good or greater societal benefits. Arguably, the Ubuntu philosophy provides a theoretical framework for extending neoliberal entrepreneurship models to encompass the greater common good. Kasu (2017) proposed an Ubuntupreneurship model founded on Ubuntu philosophy, epistemology and ontology of humanness, personhood, solidarity, cooperation and communalism. Kasu (2017) suggests that entrepreneurship grounded in Ubuntu harnesses human dignity, reciprocity, solidarity, humanness and the pursuit of the common good collectively, which foregrounds the sustainability of enterprises within society. The rationale and motive for venture creation, from the Ubuntu epistemological perspective, is the optimisation of collective gain rather than individual benefit, which is dominant in Western knowledge systems. Arguably, an Towards an Utu, Unhu-Ubuntu entrepreneurship framework 72 irrefutable philosophical conflict exists between Western and African philosophies, the implications of which for the conceptualisation of entrepreneurship have not been fully explored. The contradictions in these philosophical beliefs have fundamental conceptual implications for entrepreneurship, particularly regarding the nature and form of ownership and governance structures. Addressing the existing paradigm conflicts requires a reconceptualisation and deconstruction of ownership, goals and governance structures in entrepreneurship to facilitate a transformation towards Ubuntu values and governance models. However, the Ubuntu concept has limited consideration for the financial viability of enterprises; therefore, instead of completely discarding Western corporate governance models, it is imperative to integrate them as complementary and codependent. Currently, governance models aimed at enhancing the sustainability of SMEs are based on corporate governance ideologies that differ from the precepts of Ubuntu philosophy. Consequently, the Ubuntu entrepreneurship philosophy would require a redefinition of the ownership, goals and governance structures of enterprising entities. Ownership model based on Utu, Unhu-Ubuntu The binaries contributing to the absence of Ubuntu philosophy may potentially be united through a collaborative and inclusive cooperative entrepreneurship model. In the context of Ubuntu, entrepreneurship is defined by Bohwasi (2020) as the support of the family business unit through the empowerment of families and communities to adopt a selfdriving mindset via the transfer of knowledge and skills. This means that when a business is established, it must work closely with relatives so that various benefits can accrue to the immediate family and the larger community. Several elements of communalism are evident in starting a business from the family nucleus, as benefits accrue to family members rather than the individual. According to Rattena (2020) and Hodgetts et al. (2020), entrepreneurship rooted in the Ubuntu concept involves negotiating livelihoods through physical and mental exertion, enduring challenges and taking on odd jobs to supplement income or improve one’s standard of living. Ubuntu ownership models should be grounded in collective understanding and shared values that promote sustainability. Skurnik (2002) asserts that a cooperative entrepreneurship approach allows individuals to learn to work together to manage and control the entity, serving as a platform for training and sharing skills and knowledge. Skurnik (2002) further affirms that when individuals cooperate in managing various tasks within the business, they can share and create a repository of experiences that can be passed on within the community and used to build sustainable businesses. Chapter 3 73 The Ubuntu collective values, such as group solidarity, human dignity, respect, compassion and communitarianism, are partially embraced in the sustainability concept, which integrates people, profit and planet within the business model. However, while the integration of people, profit and planet is essential, there is no specific inclusion of the Ubuntu philosophy. Consequently, the main difference between the sustainability approach and the Ubuntu philosophy is that the former is an emerging business model focused on business conduct and behaviour, while the latter represents a lived philosophy within the societies where businesses operate. Lessem and Schieffer (2009, 2010) recommended a shift towards sustainable development approaches that benefit both businesses and the communities in which they operate. Bohwasi (2020) suggested that business activities should align with the culture of the surrounding community. Arguably, entrepreneurship models that prioritise the maximisation of individual profits lack the conceptual capacity to embody the human essence. Collectively, these insights support the conclusion that the axiological and cosmological nature of Ubuntu philosophy for African people underscores the need for a transformation towards Ubuntu entrepreneurship models, which are currently absent in the literature. The perceived shortcoming in the conceptualisation of entrepreneurship necessitates a transformation of entrepreneurial models to incorporate Ubuntu philosophy. Conventional corporate governance requires enterprises to adhere to mechanisms that regulate the behaviour of agency in managing invested resources as a means of ensuring sustainability. There are structures and processes that companies must legally comply with to reduce agency conflicts and maximise wealth creation (King 2016). Arguably, in South Africa, the sustainable development of entrepreneurship should be linked to an Ubuntupreneurship framework that emphasises inclusive, egalitarian and communitarian enterprise ownership and governance. Considering all these factors, this study proposes that the extension of the sustainability-driven corporate governance model to adopt Ubuntu must focus on the principles of communitarianism, humanity and mutuality as normative: 1. Communitarianism emphasises the individual as embedded in the larger society, meaning that all actions undertaken by a person should be for the common good of society. 2. Humanity summons a moral and ethical consciousness of human dignity, respect and the equal value of human life as the source of one’s individual existence. 3. This approach promotes mutual symbiotic benefits in the governance of entrepreneurial activities for both business and society. Towards an Utu, Unhu-Ubuntu entrepreneurship framework 74 Communitarianism The cooperative entrepreneurship described by Skurnik (2002) and the Ubuntupreneurship model by Kasu (2017) provide characteristics for organising economic activity through an Ubuntu-centric approach that includes both individual and societal levels. The Ubuntu principles of communitarianism can be embraced through the intersectionality between cooperative entrepreneurship and Ubuntupreneurship models of ownership and governance. Kasu (2017) emphasises that Ubuntupreneurship is centred on the inclusive participation of community members to address problems of common interest, ultimately generating wealth for the community rather than focusing on maximizing profits for individuals. According to Kasu (2017), local knowledge systems offer entrepreneurial solutions that are sustainable and can address current issues when transferred from traditional knowledge systems. This suggests that Ubuntu tenets may create an alternative sustainable entrepreneurship model through the integration of Ubuntu knowledge systems. Ubuntupreneurship entails that enterprising should be conceived as an integral part of the community. In principle, communalism integrates individualism and communalism by regarding the individual as part of the greater collective (Radebe & Phooko, 2017; Holt & Littlewood 2018) In the context of Ubuntupreneurship, communalism means that the community shares its economic resources in pursuit of mutual benefit for society. Ubuntupreneurship can be extended to incorporate an ownership structure that promotes collective ownership and enterprise of economic resources within society, which aligns with cooperative entrepreneurship. Skurnik (2002) describes the cooperative model as based on the guidelines of autonomous teams that voluntarily unite to address the common socioeconomic and socio-cultural needs of society through enterprise, rather than pursuing the maximisation of invested capital. Skurnik (2002) defines cooperative values as encompassing self-help, democracy, equality and dignity. Implicit and explicit insights from scholars such as Skurnik (2002), Kasu (2017) as well as Radebe and Phooko (2017) provide guidelines for the fundamental principles that should underpin the governance model of Ubuntu entrepreneurship. According to Skurnik (2002), the principle behind cooperative entrepreneurship is that it is open to all members of society to produce goods and services in the interest of the community. Skurnik (2002) further explains that cooperative entrepreneurship can be viewed as a model for organising economic resources – past, present and future – based on the principle of collective small businesses that produce goods and services benefiting society rather than generating profits from income. It is important to note that cooperative entrepreneurship differs Chapter 3 75 from other forms of business in terms of its basic aims, ownership structure and principles. According to Skurnik (2002), cooperatives are founded on the principles of independence, democracy, equality and dignity. Their members also uphold the moral principles of transparency, social responsibility, honesty and compassion. Cooperative Ubuntupreneurship governance and sustainability framework This study proposes to combine cooperative entrepreneurship and Ubuntupreneurship to design a new conceptual model of cooperative Ubuntupreneurship sustainability and governance. Because Ubuntu is based on people’s moral behaviour towards one another – more precisely, how we treat others and how we are treated by others – Regine (2009, p. 21) concurs that Ubuntu encourages the preservation of humanity. Ubuntu applies to the business sector as it highlights the value of interpersonal relationships and emphasises values like harmony and care (West 2014, p. 47). Ubuntu is interrelated to the subfield of normative ethics, which focuses on defining what constitutes right and wrong behaviour and aims to create guidelines for conduct (Nicolaides 2014, p.18). It, therefore, requires the presentation and defence of a moral code, or what the ideal circumstance ought to be. It is widely recognised as a community-oriented philosophy that prioritises characteristics such as harmony, compassion and open-mindedness. According to Gianan (2011, p.64) and Taylor (2014, p.332), there has been considerable discussion on the ethical interpretation of Ubuntu. The Ubuntu proverb, ‘A person is a person because of other people’, inspired Taylor (2014, p. 332), to formulate an action-guiding principle: ‘An action is an action because of other people’. This led to the development of a principle of ethical action. All matters discussed in this study culminated in the development of the cooperative Ubuntupreneurship model depicted in Figure 3.1. Figure 3.1 shows the Ubuntupreneurship model. This proposed model incorporates the concept of Ubuntu as an integral part of determining the ownership, values, rationale and purpose of entrepreneurship and its governance for sustainability. The relationship between Ubuntu and the creation of sustainability should be embedded in community ownership and cooperative governance of SMEs in pursuit of wealth creation for the community. The conceptualisation of Cooperative Ubuntupreneurship is based on the integration of cooperative values and principles, Ubuntu values, entrepreneurship values and corporate governance principles in the formation and ownership of small enterprises, as shown in Figure 3.1. The proposed model indicates that community membership ownership and funding, founded on cooperative values and principles such as democratic 83 How to cite: Shava, H 2024, ‘An insight into family-owned businesses, growth and sustainability’, inMMagocha & M Matashu (eds.), Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp. 83–103. https://doi. org/10.4102/aosis.2024.BK404.04 Abstract In South Africa, family-owned businesses contribute immensely to the economy through employment creation, taxation and the creation of goods and services. Family-owned businesses ply their trade across various sectors of the economy and this has seen some growing to the extent of being registered on the Johannesburg Stock Exchange to raise funds. Highly performing family-owned entities categorised as small and medium enterprises (SMEs) can register on the Alternative Exchange to raise funds. Despite mechanisms to raise funds, including debt from commercial banks and venture capital, family-owned entities struggle to survive beyond the third generation. The primary cause of this predicament is poor implementation of corporate governance principles, such as using a family business constitution to direct entity internal and external affairs. A family business constitution for family-owned SMEs is comparable to a Memorandum An insight into family-owned businesses, growth and sustainability Herring Shava Department of Business Management and Economics, Faculty of Economic and Financial Sciences, Walter Sisulu University, Butterworth, South Africa Chapter 4 An insight into family-owned businesses, growth and sustainability 84 of Incorporation, which was formerly known as the articles of association in conventional companies. It outlines the authority of the board members and describes how internal and external affairs are to be managed. This chapter outlines how applying corporate governance principles enhances the sustainability of family-owned entities through the adoption of formal governance structures, which help resolve conflicts and promote collaboration. Adopting a family business constitution is considered a move in the right direction to govern effectively a family-ownedentity. Introduction Family-owned businesses in South Africa exist in many sectors of the economy and their different sizes range from small to large entities registered on the Johannesburg Stock Exchange (JSE). The high-performing family-owned small and medium-entities (SMEs) are registered in the Alternative Exchange (ALtX) to raise capital through the selling of shares on a regulated platform that is easily accessible to a global market. Family entities continue to suffer from traditional challenges such as succession planning. This poses a huge threat to the sustainability of family-owned entities. This problem is exacerbated by the inadequate application of corporate governance principles to ensure the continuity of the entity from one generation to the next. Research indicates that most of the familyowned entities only survive two family generations and fail to live beyond the third family generation. Given little research on how the application of corporate governance can mitigate the failure of family-owned businesses and ensure their sustainability, this study reviews the literature in a bid to contribute to literature to this debate. Adopting a family business constitution, appointing the board of directors, planning on how to introduce new family members to the business, appointing and announcing an heir, as well as remuneration are some applicable corporate governance principles that can enhance the sustainability of SMEs. In addition, having a family business constitution in place is likely to minimise family conflicts that may collapse the entity. Afamily business constitution provides a clear path of tackling conflicts as they emerge giving the entity a better chance to attain sustainability of the entity into the future family generations. This chapter highlights how SMEs in South Africa can utilise the mentioned corporate governance principles to ensure the longevity of family-owned entities. Definition of a family business The importance of family business to the South African economy cannot be overlooked (Venter & Urban 2015). Research by Venter, Kruger and Chapter 4 85 Urban (2010) points out that in South Africa, family businesses have been contributing significantly to the economy for at least three centuries and approximately 60% of the businesses listed on the JSE are family businesses. To understand better the concept of family businesses, we must point out that a family must exist before the business is formed. Therefore, to be called a family business, a significant amount of cooperation or togetherness must exist within the family that shares a similar goal, that is, to exploit a business opportunity while anticipating passing leadership to a younger family member at a later stage. Familiness becomes key to the exploitation of business opportunities. Familiness as coined by Hebbershon et al. (2003) speaks to the rare amount of resources which the entity owns because of positive ties that exist within the family and interactions between individual members and the business. According to Maas (2009), a family business is a venture that is dependent on family relationships to achieve its vision which can be described as the family’s vision that is passed from one generation to the next. Four key issues can be noted from the given definition, which are: • The family (whole or part) is actively involved in the decision-making and daily running of the business activities. • The business gets its mandate from the family who determine the strategic direction that the business must take to achieve the obligation in question. • At least one member of the family is actively involved in the business. • The overall goal is to sustain the business for the benefit of future family generations. Where a husband and wife are running a business venture, that venture does not qualify to be categorised as a family business. The venture can only qualify to become a family business when their children also become critical players in the running of the venture (Venter & Urban 2015). However, the intention must remain that of passing the business to the future generation to qualify the venture as a family business. For the family to be able to influence the strategic direction of the business, they should command a large stake in the business. In other words, they should be the major shareholder of the venture in question. This is important if the family is to be able to ensure that the business is run in line with family values and beliefs. Family businesses and corporate governance The history of families being involved in business activities is as old as the history of the world. Families started being involved in business activities An insight into family-owned businesses, growth and sustainability 86 during the era of barter trade. The Industrial Revolution only made business activities for individuals and families simple and manageable, particularly concerning record keeping. However, as industrialisation became overshadowed by information and communication technology (ICT), this opened a new sector for family-owned businesses to thrive. The most prominent family businesses globally are now found in the ICT sector (KPMG 2017). Some family businesses have managed to embrace the digital economy, in the foresight of technological changes; hence, they have evolved to become multi-conglomerate entities (KPMG 2017). Digitalisation, innovation, succession planning and governance are some of the major challenges affecting the sustainability of family-owned businesses (Liu, Zhou & Li 2023). South African family-owned businesses as part of SMEs are not immune and are the most vulnerable to the four stated challenges. This chapter reviews the literature and investigates whether the implementation of corporate governance principles could mitigate the planning, and the overall governance challenges faced by family businesses in South Africa, that is, succession. There are no South African studies that have investigated this subject albeit calls for research on the phenomena (Fahed-Sreih 2009; Gompers, Ishii & Metrick 2003; Neubauer & Lank 1998; Sarbah & Xiao 2015). This chapter attempts to fill this void and contribute to the literature by reviewing empirical literature on family-owned SMEs and corporate governance to identify areas where corporate governance principles can be utilised to ensure the sustainability of family-owned SMEs in South Africa. According to Bhagat and Bolton (2019), corporate governance refers to a structured method of governing an entity, consisting of rules, processes and practices implemented by management and leadership to effectively direct and control the organisation. Given the importance of family-owned businesses in South Africa, the need to implement corporate governance principles for the sustained success of family-owned SMEs is difficult to overlook. Corporate governance, in its simplest form, is a system through which entities are directed and controlled (Purbawangsa et al. 2020). This definition is centred on two aspects namely, management and stewardship. Additionally, the element of disclosure has been acknowledged to be extremely critical given that public confidence is key to running a profitable entity. In addition to disclosure, checks and balances are very important to the continuity of the firm. However, the key to all this is that concentration of power on one individual in the family businesses should be avoided to ensure that decision-making becomes a democratic approach where all players must have a say in the daily affairs of the entity. Borrowing from corporate governance principles, special emphasis is on the need for an independent board of directors with sufficient Chapter 4 87 authority to challenge family decisions. On the contrary, research indicates that family members rarely appoint a board of directors which is likely to weaken their control (Setia-Atmaja, Tanewski & Skully 2009). This implies that family-owned SMEs struggle with the implementation of corporate governance principles, and this raises questions regarding their sustainability. The agency cost theory advocates for the separation of management and firm ownership. Thus, firm ownership should be widely distributed among shareholders, while control of the firm should be exercised by managers (Jensen 1986). It is commonly known that in family-controlled entities, the agency cost theory is applied differently as family members are also entity owners; hence, they are directly involved in managing and controlling the entity (Ang, Cole & Lin 2000). It therefore follows that there is a high probability that family members will disregard investment decisions that benefit the minority stakeholders and pursue that which increase their own wealth (Villalonga & Amit 2006). In other words, family members make use of minority stakeholders’ resources to enrich themselves (Kilincarslan 2021). This is concerning given that some investment decisions approved by families may turn out to be unprofitable in the long term after incurring huge capital expenditures. Such a scenario could be easily avoided in the presence of an independent board of directors with sufficient authority, and when there is proper disclosure on how the entity utilises its financial resources, among others. This indicates that the adoption of corporate governance in family-owned businesses may potentially minimise conflicts of interest that arise between ownership and control of the SMEs. The chapter further discusses succession planning in family businesses at length and identifies how corporate governance can make this process less strenuous and conflict-free. This is imperative given that within family businesses, management is often passed from one generation to the next as the other generation gets older, dies or retires from family business activities. By doing this, the chapter answers the question, how can corporate governance be applied to ensure a less strenuous and conflictfree succession process within family businesses? The chapter further explains how the process of deciding on a new manager is often carried out to ensure a smooth managerial transfer and sustainability of a familyowned business. The chapter unpacks governance challenges affecting family-owned businesses in South Africa. More importantly, the chapter suggests several corporate governance strategies to be used to address family-owned entity governance challenges. By taking this approach, the study answers the question, What challenges do family-owned SMEs in South Africa encounter, and how can corporate governance principles be used to overcome such obstacles? An insight into family-owned businesses, growth and sustainability 88 Succession planning in the context of a family business The intention of starting a family business is to run the entity for the benefit of the first generation (the venture creators) and future generations (the children, grandchildren or close family members) (Venter & Urban 2015). Itfollows that as the button is passed from one generation to the next, careful planning and thoughtful consideration must take place (Michel & Kammerlander 2015). Succession in the context of family business describes a process of choosing a leader who will assume leadership roles in the business when the current leader steps down (Renuka & Marath 2021). The new leader can either be a family member or a non-family member who then can be categorised as a professional manager. Careful planning and thinking are needed as the business risks collapse if a new successor is poorly chosen. The advent of technology has stimulated the growth of many family businesses. Sustainable growth requires a paradigm shift, particularly in the recruitment of non-family managers into the business. By applying corporate governance principles, succession planning can be less strenuous and a conflict-free exercise (Idigbe, Tadema & Ojewumi 2021). It is therefore important to mention that corporate governance has two facets, that is, the corporate governance structure and corporate governance processes (Sarbah & Xiao 2015). On the one hand, governance structures’ focus is solely on the ownership structure as well as the board structure. Its core mandate is instilling discipline and guiding the behaviour of people involved (corporate governance actors), in running the affairs of the firm, that is, the executive team comprising of the board, management and owners. On the other hand, governance processes ensure fruitful engagements to achieve the desired objectives and goals through set governance structures. In a family-owned entity, succession planning can be very challenging especially if the founder is the one to be replaced. Replacing a founder who has been at the forefront of building a firm from 0 to 200 employees is not like replacing a leader who has grown a firm from 201 to 500 employees. The key issue is that of leadership styles required to continue the firm culture and competitiveness (Moats & DeNicola 2021). Corporate governance principles solve this issue by ensuring that the existing board and management look into the entity data to identify functional managers who are consistent in terms of performance and mentor them to become the next entity leaders (Berent-Braun & Uhlaner 2012; Leadership Dynamics 2023; Suess 2014). Business players trust and rely on existing departmental performance data in the process of choosing the next successor. Hence, relying on performance data to determine the next successor eliminates conflicts and is a less strenuous exercise. Chapter 4 89 Succession planning must not be limited to replacing the leader after quitting or retirement. Sometimes, leaders may be incapacitated, owing to mental illness and accidents, making them unable to continue their leadership duties. SpencerStuart (2021) found that during the coronavirus disease 2019 (COVID-19) pandemic era, about 75% of Chief Executive Officers (CEO) retired or stepped down, 20% resigned under pressure, 4% stepped down citing health issues and 2% resigned owing to mergers and acquisition decisions. The aforementioned statistics reiterate the importance of proactive succession planning. Smith and Conlon (2010) emphasised that the management team, that is, the CEO, board of directors and the human resources team, should regularly carry out an in-depth analysis of the existing team versus future demands of each leadership role. This allows the management team to identify the required aptitude, skill, experience, knowledge and behaviours matching the leadership role. By so doing, management can prepare and move the right people into certain positions, in other words, positioning the right individuals to take over leadership roles when the time comes. Corporate governance is critical in succession planning as it promotes compliance and in certain markets, particularly the financial sector, there are timelines at which appointments of managers or leaders must be made and these must be observed (Arteaga & Menéndez-Requejo 2017). Adhering to corporate governance principles compels the firm to make succession appointments within the set timelines to avoid investor panic, lack of leadership and unnecessary disruptions on the value-chain. According to research (see Bertschi-Michel, Sieger & Kammerlander 2019; Caputo et al. 2018; Chang, Mubarik & Naghavi 2021), several challenges can hinder a successful transfer of the business to a new leader which include but are not limited to: • A leader who does not want to relinquish leadership roles. • A leader who is in denial and does not accept the fate of life that everyone dies. • A leader who thinks children will never achieve anything meaningful without him or her having a part in it. • A leader who does not realise the need for new ideas, skills and knowledge as the environment is changing. • A leader who refuses to find a successor. • A leader who chooses only a person who sees things from his or her perspective as if it is only his or her opinion that matters. The scenarios highlighted here emphasise the role of leadership in succession planning if the family business is to remain sustainable. Basically, participative leadership is critical as opposed to the autocratic leadership style in any society, including in business ventures. This is because every An insight into family-owned businesses, growth and sustainability 90 person involved in the day-to-day operations of the venture has something valuable to contribute ranging from business management expertise, technical expertise, customer management skills and marketing as well as human resources skills. Collectively, the mentioned skills play a pivotal role in fostering the sustainability of any family business. It is also important to note that succession planning is not the sole responsibility of the leader. Every family member who is involved in running the venture has a role to play in succession planning (Umans et al. 2020). Given that not all family businesses are wholly owned by an individual family, it therefore follows that when there are other shareholders involved, the whole succession process must be transparent to their satisfaction. A non-transparent succession process will result in investors losing confidence in the new leader and this may result not only in conflicts between the family and non-family shareholders but ultimate failure of the business. To ensure a transparent succession planning process, a family constitution can be a very effective way of dealing with and managing succession planning (Vasquez 2017). The role of the family constitution, which must be set up by family members, is to bind their actions and inactions, as far as the leadership of the entity is concerned (Siddiqui 2018). The use of external consultants in setting up the family constitution can prove to be vital. The constitution may include clauses and guidelines on when to notify heirs of the business, recruitment and dismissal of family members, the procedure for handling key leadership roles in the business, board of directors, enactment of governing policies, share ownership to non-family executives and amendments to the family constitution among other integral issues to the smooth running of the family business (Arteaga & Menéndez-Requejo 2017). Having a family constitution does not guarantee that the succession planning process will be smooth or that there will not be disputes in the management of the business; however, it provides a route map for handling issues as they materialise including an emergency transfer of leadership (Idigbe et al. 2021). Not all successions will be similar given the changes that exist in the macro environment which influence the culture of one generation to the other. In addition, the industry in which the business operates also determines how urgent succession planning is needed. Competitive industries would need a robust succession plan whereas stable industries may not require such. However, the bottom line is that succession is inevitable although it may not be imminent. The challenge is that the absence of a succession plan complicates the smooth running of the business venture (Cater, Young & Alderson 2019; Hillebrand 2019; Umans et al. 2021). Stakeholders are generally Chapter 4 91 concerned with the continuity prospects of the venture. Therefore, a clear succession strategy that enables stakeholders to identify the successor of the business can simplify a complicated process. Consequently, corporate governance principles – which include establishing a family constitution, creating a stakeholders’ agreement, implementing a code of conduct and developing a remuneration structure for the board of directors and senior management – are designed to streamline succession planning and should be incorporated into family businesses (Umans et al. 2021). Other critical governance structures that can smoothen the succession planning process in family business include having advisory boards, a family council and setting up a formal induction process for introducing new family members into the business, among others (Idigbe et al. 2021). Managing succession planning in the family business for sustainability Succession planning in family businesses is not an easy task given that it is mainly associated with problems that are emotional and non-technical in nature (Parada et al. 2020). Resultantly, it is a risk that can have negative consequences leading to the total collapse of the business venture. Therefore, to avoid such a phenomenon, succession planning as a process needs to be carefully managed through established corporate governance structures (Michel & Kammerlander 2015). Accordingly, research has established that there is a significant positive relationship between governance structures and the success of the succession planning process and that there is a positive correlation between governance structures and the management of succession planning (Renuka & Marath 2021). Findings from several studies reveal that the presence of a proper corporate governance structure ensures that there is harmony leading to consolidated efforts from family members towards the success of the enterprise (Brenes, Madrigal & Requena 2011; Hillebrand 2019; Sreih, Lussier & Sonfield 2019). Despite the positives that succession planning brings to family businesses (Umans et al. 2020), research indicates that most family businesses either defer succession planning (Gilding, Gregory & Cosson 2015) or ignore the process altogether (Decker et al. 2016; Josefy et al. 2017). However, for those who choose to undertake succession planning, it is crucial for everyone involved to remember that the long-term survival of the family business largely depends on selecting the right successor and adhering to sound corporate governance procedures (Renuka & Marath 2021). An insight into family-owned businesses, growth and sustainability 98 firm (Mishra & Kapil 2018). In the context of a family-owned entity, this means that the chosen entity leadership is empowered to engage the founders on every decision they put forward. The board also plays the role of reviewing and advising the executive team. For family-owned entities, it is a challenge to find family members who are qualified to act in the capacity of the board of directors. Taking into consideration that family-owned firms always shy away from appointing non-family members into executive positions, there is a need for family-owned entities to be flexible and increase the board size to accommodate qualified non-family members to occupy executive positions. The thinking is that they will participate in constructive decision-making to ensure the sustainability of family-owned entities, as the entity will tap into their experience, competencies and knowledge of the business world. Another critical corporate governance principle found in the King Code is board independence, which is discussed in this section. Independence of the board A mere appointment of directors to the board without giving them full independence to approve or disapprove top management decisions and make meaningful contributions towards the sustainable performance of the firm is a meaningless event. According to the agency theory, directors who independently participate in the activities of the firm without any affiliation to the current entity, except for their directorship are in a better position to make a meaningful contribution towards sustainable firm performance (Shleifer & Vishny 1997). On the debate of whether an independent board of directors positively contributes to sustainable firm performance, research provides mixed results. Evidence supporting the notion that an independent director has a positive impact on firm performance exists (see Jackling & Johl 2009; Kao et al. 2019). Conversely, evidence to the contrary also exists; for example, research indicating a negative relationship (see Singh & Gaur 2009), as well as studies pointing to a non-significant relationship between board independence and firm performance (Zabri, Ahmad & Wah 2016). Although research results are not conclusive regarding the role of an independent board in firm performance, the argument for having an independent board of directors is gaining momentum and is well-received by corporate governance proponents (Singh & Gaur, 2009). Family-owned entities often struggle to find qualified individuals to assume executive positions within the business. To address this gap, the appointment of nonfamily members as independent board members ensures meaningful participation in sustaining the entity. They achieve this by assuming advisory roles, among other critical duties, which require no affiliation with the family-owned entity beyond their directorship. Chapter 4 99 Directors: Appointment, nomination, removal and term of office Given family dynamics, individuals involved often exhibit different economic interests and disagreements on how to effectively run the entity ensue. Thus, the management of family-owned entities is increasingly becoming a challenging task threatening their sustainability (Ismail et al. 2019). Implementing corporate governance principles such as the appointment ofmanagement or directors of the firm can resolve management issues of family-owned entities (Suess-Reyes 2017). This is because the board of directors’ primary mandate is to provide management oversight, where they exercise control, allocate resources and provide the necessary information for management to undertake their duties including succession planning (Arteaga & Menéndez-Requejo 2017). The leadership to be appointed must have a clear term of office and authority, and they must be visionary and competent people to lead the family-owned entity. For example, the 21st-century business environment is dominated by technological changes; therefore, the entity directors must have a clear strategy on which technology they would exploit to ensure the competitiveness of the firm. Corporate disclosure Remuneration is a critical subject and stakeholders are paying more attention to disclosure and voting on the subject of remuneration. It should be noted that employees and management of the entity are paid by the entity. The funds they receive are funded by investors coming from all over the globe, and the directors of the firm must be remunerated fairly, responsibly and transparently. This will ensure the sustainability of the firm through sound fiscal management practices. In the context of a family-owned entity, founders expect the entity to fund their life expenses as payback for the time they spent building the firm from the ground up (Nyamwanza, Mavhiki & Ganyani 2018). Suchpractices do not help as the entity may not be making money as it was during the start-up era. It is, therefore, advisable that as the founders pass on the firm to the next generation, they should retire and invest their funds elsewhere (Venter & Urban 2015). In other words, they must stop participating in the daily operations of the firm. However, from time to time, the new leadership can consult them whenever necessary as their experience is an invaluable resource (Venter & Boshoff 2007). This will ensure minimal interference in the firm’s activities. If founders are left to participate in the daily activities of the firm after they have retired, they often argue against expansion projects in fear of losing their retirement An insight into family-owned businesses, growth and sustainability 100 package, among other things, affecting the broad performance of the entity. This limits the survival chances of the firm as the competition landscape changes and the micro and macro environment factors demand significant changes in the business approach. Role duality As mentioned earlier, family-owned entities are adversely affected by the availability of qualified individuals to assume executive roles in the entity. This results in a scenario whereby the CEO has dual roles including that of entity chairperson. On the one hand, subscribers to the agency theory strongly reject the duality phenomenon and argue that this often leads to opportunistic behaviours, which have dire long-term consequences, compromising the sustainability of the entity in the process (Jensen & Meckling 1976). They further argue that to mitigate against opportunistic behaviours; there is a need to separate the roles of CEO and chairperson. On the other hand, subscribers to the stewardship approach rally behind the duality role. They argue that it offers greater autonomy to those entrusted with maximising wealth for shareholders (Donaldson & Davis 1991). Research is needed on this subject to ascertain whether in instances where role duality exists versus where it does not, what are the firm performance outcomes and to what extent that affects the sustainability of family-owned entities. Family entities and corporate social responsibility Firms carry out CSR activities to demonstrate their commitment to social, economic and environmental issues affecting the citizens (Perrini 2005). InSouth Africa, four drivers to CSR activities are found in literature namely, market, ethics, government and social drivers (Kloppers 2013). The guiding theory in the implementation of CSR activities by firms is the Tripple Bottom Line theory (Elkington 1997). The theory emphasises that each entity is equally responsible for protecting the environment and is equally to blame for the crimes committed against the environment by its partners in the value chain. What this means is the entity must carefully choose its partners to do business with. The key issue is as the firm and its partners pursue profits, this motive must have a similar weight to protecting the planet and its people. It is the responsibility of the family-owned entity to clearly communicate its CSR programmes to demonstrate its commitment to sustainable development. Such actions are highly valued by all stakeholders, who, in return, are likely to be satisfied to continue doing business with the firm, Chapter 4 101 leading to its sustenance. This argument is well supported by stakeholder theory (Freeman, 1984), which posits that firms are expected to establish and maintain relationships with all parties directly or indirectly involved in the entity’s affairs. Firms are further expected to provide all interested parties with information they may need as CSR is aimed at creating and improving open channels of communication with stakeholders to enhance ethical and socially responsible behaviour within firms (Lim & Greenwood 2017). As family businesses continue to contribute to the South African economy, their sustainability is critical. The most important factor of familyowned businesses is their ability to divert family values towards society, the environment and the economy at large (Bergamaschi & Randerson 2016). According to Berrone, Cruz and Gomez-Mejıa (2012), to enhance their sustainability, family-owned entities preserve their socio-emotional wealth. In addition, research indicates that family values which include long-term orientation, employee relationship, social and business community, integrity, continuity and attention to reputation (Le Breton-Miller 2005), make it relatively easier for family-owned entities to implement CSR activities as opposed to non-family-owned entities (Campopiano & De Massis 2015; Nekhili et al. 2017). All matters discussed in this study this far provide sufficient evidence that the implementation of corporate governance practices not only leads to better performance (economic and financial) of family-owned entities but also enhances their sustainability. Diversity The general agreement among corporate governance proponents is that a diverse board is required to ensure that the entity does not miss out on trends and opportunities in the business world. This places the firm in a better position to exploit new profitable opportunities, an important step towards sustaining the firm. However, the emphasis is that as firms seek to diversify their board membership, appointing individuals solely for their status – at the expense of competencies, knowledge and experience – will negatively impact the firm’s performance and jeopardise the sustainable agenda in the process. Establishing a board made up of people from different backgrounds can be a source of competitive advantage. In South Africa, most black people excel in soft skills which include human resources management and public service, and play an important role on issues of national interest such as transformation and gender. Although they lack hard skills, for example, engineering, accounting and actuary among others, their contribution in boardrooms is immense (SpencerStuart 2009). In addition to race, diversity is also looked at from the gender lens. The resource-based approach argues An insight into family-owned businesses, growth and sustainability 102 that males and females bring varied opinions, networks and leadership approaches when attending to corporate issues (Cater et al. 2019). In addition, research also found that male executives are opportunity-oriented as opposed to female executives and this greatly affects their approach to decision-making with males being known to be more risk takers while female executives tend to be more cautious (Adams & Ferreira 2009). Based on this evidence, to ensure that family-owned entity is sustainable, a diverse board is therefore recommended. Conclusion This chapter discussed family-owned businesses and how the use of corporate governance principles can enhance their sustainability. The scarcity of literature from a South African perspective marrying the two disciplines, albeit calls for research, led to the researcher investigating this important subject to contribute to research on this debate. Family businesses were defined as business entities that are run by both a husband and wife with the involvement of children, biological or otherwise, taking part in daily operations of the firm to pass firm leadership and control to the children. This cycle must continue resulting in the business changing leadership as one generation passes the torch to the next generation. Toensure that the family-owned becomes a sustainable business, that is, surviving many generations, succession planning is critical. Empirical research concluded that nominating a successor early is necessary to avoid family feuds and create a clear message regarding the future direction of the firm. To ensure there are no conflicts in naming a successor, a family constitution is critical, and each family business must have drafted its being led by trained consultants to take the lead in the process. Recommendations This chapter discussed family business and it was revealed that the major contributor to their failure is the inability to infuse corporate governance principles on critical issues such as succession planning. Chief among these corporate governance principles is the family business constitution. It is therefore recommended that because large entities rely on articles of association as a guide on internal and external relations and operations, family-owned entities must adopt a family business constitution for similar purposes. A family business constitution will guide the business in every aspect of its operations. The family business constitution will probably have clauses to deal with the following key issues: Practising corporate governance principles which include the appointment of a board of directors, having an independent board of directors, corporate disclosure, role duality and diversity is supported by empirical research Chapter 4 103 which suggests that this may enhance the sustainability of family-owned businesses in South Africa and globally. Other critical corporate governance principles that enhance the sustainability of family-owned businesses include the pursuant of CSR activities. When a family-owned entity begins taking part in activities that matter to the community such as sports sponsorships and the building of public clinics and parks among other key considerations, this sends a clear message that the entity values humanity and the planet when seeking profits. Such a gesture positions the family-owned entity better than its competition resulting in better overall performance, thereby enhancing its sustainability prospects. As stated earlier, the adoption of a family business constitution does not guarantee the sustainability of the family business, nor does it guarantee that the entity will run smoothly with fewer conflicts. The family business constitution provides a roadmap to help the family resolve issues as they arise. This ensures that internal problems are addressed quickly, allowing the family to focus on the business’s key mandate. 105 How to cite: Masha, AK, Matenda, S, Fihla, S & Mbodila, M 2024, ‘Sustainability of survivalist microenterprises and their role in informal employment creation’, in M Magocha & M Matashu (eds.), Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp. 105–127. https://doi.org/10.4102/aosis.2024.BK404.05 Sustainability of survivalist microenterprises and their role in informal employment creation Anthony K Masha Department of Management Studies, Faculty of Economics and Information Systems, Walter Sisulu University, Queenstown, South Africa Stenford Matenda Department of Marketing, Public Relations and Communication, Faculty of Public Management and Administration Sciences, Walter Sisulu University, Butterworth, South Africa Siphenathi Fihla Department of Management Studies, Faculty of Management and Public Administration Sciences, Walter Sisulu University, Butterworth, South Africa Munienge Mbodila Department of Information Technology Systems, Faculty of Information Technology Systems, Walter Sisulu University, Queenstown, South Africa Chapter 5 Sustainability of survivalist microenterprises and their role in informal employment creation 106 Abstract Over the past few years, unemployment among young people has been rising, leading many to turn to survivalist entrepreneurship for their needs. This approach involves investing minimal capital into a business to ensure family survival, with historical roots in South Africa. Despite the growth of this sector, no research has been conducted in the Eastern Cape to demonstrate how survivalist entrepreneurship contributes to job creation and how these enterprises can be sustained. The sustainability of survivalist microenterprises and their role in creating informal employment can be enhanced through corporate governance practices. This chapter is informed by case study research conducted in the Buffalo City Metropolitan Municipality in the Eastern Cape, which employed a mixed methods research approach to explore the sustainability of survivalist entrepreneurs and their contribution to the creation of informal employment opportunities. The study is grounded in the acknowledgement by various writers that entrepreneurship, even at a survivalist level, leads to job creation. The researchers adopted a positivist research paradigm and approach. Using a random sampling technique, data were collected through structured self-administered and drop-off questionnaires. Simple descriptive statistics were used for data analysis. The study found that survivalist entrepreneurs generate a significant number of jobs, indicating their contribution to employment creation. The study recommended that survivalist entrepreneurs be given access to funding and training sessions to enhance their skills. Furthermore, the study emphasised that South African support policy should not overlook the importance of survivalist entrepreneurs. Introduction In an environment where youth unemployment is rampant as in South Africa, there is a need to support survivalist entrepreneurship. Recently, this type of entrepreneurship has become an area of focus. Survivalist enterprises are characterised by unemployed persons, focusing on investing little capital to generate minimum income to keep their families alive (Mbomvu et al. 2021; Mothoa & Rankhumise 2021; Ouma-Mugabe, Chan & Marais 2021). The existence of survivalist microenterprises is grounded in the historical background of the country. Kambikambi (2003) informs us that since the apartheid era, the South African economy has been a mix of two separate distinct economies, that is, developed economy consisting of mostly white-owned and formal businesses on one hand and developing economy Chapter 5 107 consisting mostly of black-owned and informal businesses. Francis, HabibandValodia (2021) affirm that separate economic sector development has its roots in the apartheid period when the economy was deliberately structured as non-inclusive. However, post-democracy, it appears there has been a surge of survivalist microenterprises. The informal sector in South Africa has grown enormously over the past 10 years, illustrating why entrepreneurship is seen as an important career option for both men and women (Botha 2019). People who have talents, experiences, drive and several other capabilities, nonetheless, find themselves without employment (Botha 2019). This scenario explains why many individuals resort to survivalist enterprising to earn a living and sustain their lives. Entrepreneurs are vital because they contribute significantly to employment, job creation and wealth creation (Botha 2019; Nieuwenhuizen 2019). Justifiably, it can be proposed that the survivalist microenterprises have been central to the livelihoods in underprivileged societies. Considering these points, ensuring the sustainability of survivalist microenterprises’ role in informal employment creation becomes imperative. For instance, the trends indicate that South African youth suffer from the triple challenges of poverty, inequality and unemployment (Cramer, Sender & Oqubay 2020; Francis, Habib & Valodia 2021; Mangena 2021; Mohale 2022). The absence of formal employment to absorb the youth in an environment that is afflicted by social and economic ills further justifies the need for the sustainability of survivalist businesses to employment creation. Individuals who create business opportunities at this level do so for survivalist reasons. Survivalist enterprises do not have the power to add real economic value or create sustainable employment opportunities along the value chain (Van Aardt & Massyn 2017). Survivalist entrepreneurship must be understood in the context of smallscale businesses. The importance of the small, medium and microenterprises (SMMEs) sector is well recognised worldwide, with such enterprises often being described as the heartbeat, backbone or building blocks of an economy and largely being accepted as significant drivers of economic growth and job creation (Bvuma & Marnewick 2020). Globally, more than 95% of businesses are SMMEs accounting for over 50% of employment (Bayraktar & Algan 2019). Because the government has high expectations concerning the SMME sector, it has made several efforts to boost entrepreneurship and SMMEs (Moise, Khoase & Ndayizigamiye 2020; Ouma-Mugabe, Chan & Marais 2021). The sustainability of survivalist microenterprises’ role in informal employment creation is debatable and warrants further investigations in research, specifically from a context perspective. Financial governance practices and sustainable development 210 to automation solutions and digitised methods. This transition is placing excessive pressure on financial managers and business owners responsible for managing the finances of their organisations to keep up with new technologies and skills. As a result, these SMMEs lag in terms of financial innovation and adaptivity. For these managers to remain competitive, they must be up to date with the new technical and analytical skills needed in the new markets in terms of reporting and providing real-time data. However, data handling is still a challenge for financial managers among the SMMEs. The SMMEs lack financial support from well-established and accredited finance providers. The reasons for not accessing such support include not qualifying and lack of awareness of the opportunities and information needed to apply. In addition, a lack of financial, operational and strategic structures hinders the SMMEs from accessing finance and making the competent use of existing capital to boost their operations. Also, the lack of ability and capacity in accessing finance and credit are the critical hindering factors in business ventures. This is a critical impediment to SMMEs’ growth, particularly in developing economies (Chakabva et al. 2020). One of the major factors cited is that banks see it challenging to gauge whether SMMEs can pay back their debts on time. As a result of the credit crunch, regulators across the world are enforcing stringent capital adequacy requirements, which leads to an increasing reluctance to give to the personal and business sectors during and even after the financial crisis. In South Africa, is there a correlation between good financial information and the success of SMMEs? According to (Smith 2020), poor access to finance for SMMEs has been a challenge in South Africa, acting as an inhibiting factor for their growth and sustainable development. This lack of finance can be attributed to poor corporate governance, lack of suitable finance products available to SMMEs, insufficient credit information, perceived riskiness of lending to SMMEs and lack of collateral. All these factors deter sustainable growth and development among these firms. Banks are naturally risk-averse and are adamant about their request for stringent underwriting conditions before offering financial assistance and credit to SMMEs. This makes it hard for entrepreneurs to access this credit. In several cases, most of the bank lending is biased towards bigger and more established businesses rather than the SMMEs which fight to meet bank lending requirements. This systematic sidelining of the SMMEs exposes them to financial crises and leads to bankruptcy. According to the SARB (2021) credits, loans and advances to companies and businesses dropped somewhat at the end of 2020 because of gloomy credit environments which remained adamant because of the fears and uncertainty brought about by the COVID-19 pandemic. Ramlee and Berma (2013) indicate that the low and erratic level of SMME financing can emanate from both supply-side and demand-side issues. On the demand side, this Chapter 9 211 happens when several SMMEs disclose that they do not have access to financial organisations while the supply side includes the extreme costs of financing together with high collateral obligations. In the South African case, government financing for SMMEs is provided through grants and funding from development finance institutions (DFIs). Financial governance challenges for small, medium and microenterprises The financial governance component of SMME operations has an extremely important position in the modern business environment. Firstly, the management of the movement of capital in the business is core for modern SMMEs’ operations management. The efficiency of financial governance will wholly affect the total operational benefit. Secondly, whether the SMME’s turnover is smooth, reasonable and effective will also determine its survival and development. To achieve fluency in business operations, SMMEs must overcome various financial governance challenges. Financial governance systems are not sufficient The majority of SMMEs lack adequate financial governance systems. They do not maintain financial records, have unclear hierarchical structures for financial governance activities and lack defined reporting systems (Brijlal, Enow & Isaacs 2014). They also do not have detailed evaluations, control and monitoring systems. The management styles are normally dictated by the owner-managers. In addition, they often have problems such as interference between relatives of management and a lack of distinctive roles for staff, which easily leads to unclear responsibilities. The structure of financial reports is inconsistent and irregular Records of critical assets are not accounted for such components as total assets, accounts receivable and inventory. The structure of current assets is normally badly managed which exposes the SMMEs’ business operations. The neglect of financial records often leads to bad debts as funds flow cannot be tracked. This increases operational and financial risks and reduces investor confidence (Mintah et al. 2022). The cost system is not perfect The SMMEs cost management systems do not have a complete working system and do not follow accounting standards. The accountability systems are often implemented badly and randomly. It is not easy to establish the Financial governance practices and sustainable development 212 standards that SMMEs follow, cost forecasts, financial decisions, evaluations, analyses, etc. For example, SMMEs have challenges estimating data on production quotas, personnel workloads, evaluation indexes for material consumption per unit area or production cost estimates. This may be because of poor corporate governance and this deters their growth. Poor planning of financing options The SMMEs lack a detailed plan for fund management and precise prediction of funds on demand. The production and corporate operational events restricted by the market conditions are often poorly planned (Mahambehlala 2019). As the production plans are rarely available, financial officers most often fail to predict the funds-on-demand accurately, leading to financing gaps or costly options. In addition, unclear funding availability causes a high cost of funding. As managers do not recognise ways to increase capital, they acquire materials on loans from financial institutions when facing cash-flow difficulties, which increases the burden of the SMMEs. Minimal to no use of accounting information software Very few SMMEs select suitable accounting or management information software for their operations or accounting information systems (AIS) (Amanamah, Morrison & Asiedu 2016). Although these options are available on the market, SMMEs do not utilise software that integrates basic cashier functions with overall accounting and management activities. Accounting and management systems can enable non-centralised management of products and assist financial staff in timely examining invoicing, receivables, accounts payable and costs to provide relevant decision-making information. Small, medium and microenterprises access to finance and information There is harmony in the literature acknowledging good financial governance skills as key to the sustainable development of SMMEs. Efficient financial governance practices give a past analysis of the outlook of the business, which may then be used to predict prospective future performance and give ways to forecast any future financial crisis. Optimal utilisation of financial governance enhances the growth of SMMEs and contributes to improving the overall growth of the economies in general. To enhance growth among SMMEs, Bhorat et al. (2018) recommend that SMMEs should consider seeking business and financial advice from Chapter 9 213 outside sources like accountants. This is because the market for assistance, particularly concerning the regulations that affect SMMEs, is continuously changing. Asa result, many field experts are offering a broader range of services. Recently, the quality, quantity and type of information provided by accountants have evolved to meet the needs of SMMEs and reflect the deliberate intent of accountants. Many studies on financial information, financial literacy and financial inclusion continue to attract interesting investigations on various conceptual dimensions (Ozili 2018). There is a notable dearth of collaboration between policy and academic research on financial information (Prabhakar 2019), particularly as it relates to SMMEs. Ozili (2018) posits that practitioners feel that theories of financial information and inclusion are a waste of time and that such theories could lead to a lack of significance to practitioners and policymakers. Researchers argue that it is advisable to focus on the accumulation of facts regarding financial information and inclusion, which will lead to informed decisions (Ozili 2020), rather than concentrating on opinions about the extent of constructs embedded in theories. Despite the divergent views, there is a need for a structure, framework or principles to the understanding of financial information, and how it will benefit SMMEs programmes. Financial information can enhance the provision of financial services to SMMEs at a reasonable cost and improve the use of, together with access to, official financial services (Sahay et al. 2015). The increased need to expand the collation and dissemination of financial information on the SMMEs will enable addressing potential shortfalls and avert their financial exclusion (Ozili 2020). Such interventions would make it easier for financial service providers to ascertain viability and increase transparency, potentially lowering the risk perceptions towards SMMEs. Financial information is important both from the SMMEs’ perspective and from the viewpoint of the financial services providers (Demirgüc-Kunt, Klapper & Singer 2017). On one side, SMMEs require information to identify their potential suppliers for funding and other financial needs and to evaluate the cost of the financial services available on the market. On the other hand, financial services providers need financial information which can assist them in estimating the risks related to the SMME which pertains to applying for funding and assessing the prospects of the SMME within the operational segment. Success stories and efforts at policy level Financial information and overall inclusivity have been key policy intent for governmental policies of many emerging and developing countries. There is a Financial governance practices and sustainable development 214 strong belief that financial information will help bring SMMEs and the unbanked population into the formal financial services sector, allowing them access to formal financial products and services. Many economies are making significant efforts to achieve optimal levels of financial information and inclusion. Small, medium and microenterprises that operate in informal spaces will have access to cheaper banking facilities with minimal documentation requirements. The expectation is that SMMEs should be able to obtain debit cards and bank identification numbers, access cheaper credit facilities, insurance policies, and mobile banking technology and adopt optimised payment systems without having to make compulsory equity down payments. Various countries have had some notable success stories of access to banking and financial information around the world. Good examples of developing economies are India (Demirguc-Kunt et al. 2017), Kenya (Hove & Dubus 2019), Rwanda (Otioma, Madureira & Martinez 2019) and Peru (Cámara & Tuesta 2015). In India, financial inclusion was seen to have a direct link to poverty reduction, which contributes to economic growth and development. The case of Rwanda involves the community savings and credit cooperatives (SACCOs), a community-driven cooperative bank, commonly known as Umurenge SACCOs. In 2019, they attracted more than 1.6 million customers in only 3 years. Over 90% of Rwandans are reported to live within a 5-km radius and freely access the financial information of an Umurenge SACCO (Otioma et al. 2019). The case of Kenya involves the popular M-Pesa innovative banking system. M-Pesa has, over the years, been the chief instrument in achieving great financial information access for the Kenyan population and the SMMEs in Kenya. Peru saw the introduction of an interoperable mobile banking platform popularly known as Modelo Peru. Modelo Peru was introduced to create mobile financial services and banking for the people who need it such as the SMMEs, with the prime objective of promoting financial information flow and access to financial services. There is no question that the financial services programmes and procedures adopted in some of these nations have been successful. However, two key concerns often arise: the financial information stream and access to banking services pose risks to SMMEs and at-risk customers in society. The second concern is whether this financial information flow and banking services should be aimed at SMMEs that have never been involved in the recognised financial sector or at individuals who have been distant from formal financial products. Financial governance and good corporate governance practices Good corporate governance in organisations leads to an improvement on the part of financial governance. Danoshana and Ravivathani (2019) Chapter 9 215 concur that the success of an organisation regarding finance depends on the management’s efficacy and innovativeness, together with its compliance with the principles of corporate governance. Corporate governance standards lead to an improvement in the company’s financial performance, where enhanced disclosures are meant to protect stakeholder interests (Al Mansoori, Alsaud & Yas 2021). The core is that if the corporate governance within a company is in order, trust is built between the company and all stakeholders. As a result, in the SMMEs, corporate governance improves their ability to access funds by creating investment opportunities on a long-term basis. Several studies have been carried out on SMME development, both in developed and developing countries. These studies have taken various focuses and directions. Some focused on SMME development (Lichtenstein 2018; Rogerson 2008), and some on their survival and operations (Adam & Alarif 2021; Dubihlela & Sandada 2014). The other branch of studies explored the linkage between organisational performance using both financial and non-financial indicators and competitive priorities (Chakabva et al. 2020). These studies have made meaningful contributions to the body of knowledge. However, despite the unanimous agreement that SMMEs play a significant role in the economies’ performances, many are still troubled by financial governance and constraints (Tharmini & Lakshan 2021). This chapter will, therefore, focus on the financial governance and corporate governance practices adopted in the SMMEs. Conclusion The chapter investigated the contribution of SMMEs to the economy and provided their overview in South Africa. In South Africa, the SMMEs’ success is largely aligned with the history of the country where those operating in previously marginalised regions still struggle in terms of support, and this limits their growth and prosperity. The government of South Africa has since introduced several policies including the NDP which aims at creating jobs even through the SMMEs. However, external shocks like the outbreak of COVID-19 have decelerated all these efforts. Financial governance, being a factor of corporate governance is a concept that involves planning, organising, handling and controlling the financial and investing activities of any business type. The importance of proper financial governance cannot be overemphasised as it leads to business survival, growth and sustainability among the SMMEs. The concept of financial governance is broad and covers investment decisions, financial decisions and dividend decisions. Good financial governance results in minimisation of errors, improved compliance, ability to measure growth, improved productivity, data and financial transparency. Among the SMMEs, financial governance is a challenge because of low staffing resulting in some workers holding Financial governance practices and sustainable development 216 multiple tasks in which they are not trained. In some cases, the owner runs all departments including finance and this creates problems where financial issues are not well managed. In such cases, financial governance systems are not sufficient, the structure of financial reports is inconsistent and irregular, the cost system is not perfect, there exists poor planning of financing options and there is minimal to no use of accounting information software. The benefits of financial governance and theories have been explained. Access to financial information and funds is closely linked to the growth of the business. There is harmony in the literature that most established finance providers are reluctant to lend their funds to small businesses because of insecurity and lack of securities. Based on the contents of this chapter, the financial difficulties that SMMEs face, proper financial governance systems and good corporate governance are needed for the sustainability and growth of SMMEs. Recommendations Small, medium and microenterprises should practice good corporate governance by clarifying the roles of the chief executive officer (CEO), finance director and managers. It is important to understand that governance and the establishment of a sound financial risk management system are the responsibilities of the financial manager. Effective financial risk management enhances survival and sustainability. Small, micro and medium enterprises should develop effective governance infrastructures in the form of specific policies to guide their behaviour regarding processes, procedures, information and communication on financial matters. Financial information and overall inclusivity should be considered in the governmental policies of many poor, developing and emerging nations. There is a strong belief that financial information will help bring SMMEs and the unbanked population into the official financial services sector, granting them access to these services. This will enhance good financial governance among SMMEs. Small, medium and microenterprises operating in informal spaces can access cheaper banking facilities with minimal documentation requirements. Small, medium and microenterprises should be able to obtain insurance policies, bank debit cards and mobile banking technology, as well as access cheaper credit facilities and adopt optimised payment systems, without being forced to make mandatory equity down payments. The introduction of an interoperable mobile banking platform is intended to promote financial governance and access to financial services among SMMEs. A master policy for SMMEs should be developed, targeting the creation of strong and sustainable policy conditions that place SMMEs at the centre of faster economic growth and development. Policies that hinder Chapter 9 217 the growth and sustainability of SMMEs, including access to training, credit and skills development, should be interrogated. The Department of Small Business Development should be empowered to play a key role in establishing a policy and regulatory environment for SMMEs that facilitates their growth, sustainable development, job creation and empowerment while addressing key constraints to SMME development. This also includes ensuring good corporate governance. 219 How to cite: Sibanda, K & Hove-Sibanda, P 2024, ‘Sustainable entrepreneurship performance through adoption of sound corporate governance practices’, in M Magocha & M Matashu (eds.), Corporate governance practices promoting the sustainability of small, medium and microenterprises in South Africa, AVARSITY Books, Cape Town, pp. 219–242. https://doi.org/10.4102/aosis.2024.BK404.10 Abstract Small businesses, especially small and medium enterprises (SMEs) today experience various risks emanating from economic, environmental and social failures. As such strategies to mitigate climate change, protect the environment and generate social gains towards sustainable development must be complemented by a good corporate governance structure that can be prioritised both in governments’, business practitioners’ and policy makers’ agendas. As such, corporate governance is critical for sustainable Sustainable entrepreneurship performance through adoption of sound corporate governance practices Kin Sibanda Business Management and Economics Department, Faculty of Economic and Financial Sciences, Walter Sisulu University, Mthatha, South Africa Progress Hove-Sibanda Logistics Department, School of Management Sciences, Faculty of Business and Economic Sciences, Nelson Mandela University, Port Elizabeth, South Africa Chapter 10 Sustainable entrepreneurship through corporate governance 226 Availability of government support The availability of government support is key to promoting the SME sector as most SME-sized businesses, particularly in developing countries, are established primarily for survival (Ahmed et al 2020, p. 158). This means that if left with no external financial and non-financial support, SMEs are likely to prioritise operational cost efficiency to stay afloat and shy away from any additional costs such as those from sustainable entrepreneurship initiatives implementation. Ahmed et al (2020, p. 158) defined government support as the external support or assistance made available by various governmental institutions to help develop SMEs. This can be financial (in the form of financial incentives) or non-financial, for example through promoting easy access to advanced technologies, product recovery facilities, markets, scarce and yet low-cost resources, social support and tax breaks/reliefs, among others (Han et al. 2017, p. 8). Government support is needed to drive the SME sector in general, promote the successful implementation of sustainable entrepreneurship practices and boost sustainable entrepreneurship performance in SMEs (Ahmed et al 2020, p.158; Alkahtani, Nordin & Khan 2020, p. 3). Previous studies have so far associated government support with improved product quality, technological development and capability, enterprise growth, enhanced firm performance and new job creation from SMEs in developing countries (Guan & Yam 2015; Han et al. 2017, p. 8; Wei& Liu 2015). A study by Alkahtani et al. (2020, p. 3) reports a strong positiveand significant impact of government support on the sustainable competitive performance of SMEs in Pakistan. As such, lack of government support can deter SME performance in general, and hinder SMEs’ and their value chains’ ability to achieve sustainable entrepreneurship performance. This can in turn hinder these enterprises’ ability to generate new employment and ultimately shrink the growth of the economy. Access to adequate resources The successful achievement of sustainable entrepreneurship performance also depends on the SME’s access to available resources. These resources include the available technologies, infrastructure, financial resources and skilled personnel. Generally, SMEs in developing countries are reported to be either slow or unwilling to take action to address environmental issues because of a lack of formal structures and limited access to time, financial and other non-financial resources like technology (Chongoo etal.2016). These SMEs have also been reported to have caused environmental and societal challenges such as environmental degradation, exhaustion of natural resources, poverty, disease, unemployment and emission of dangerous gases in developing countries Chapter 10 227 (Latip et al. 2022, p. 51; Ogujiubaetal. 2020, p. 14). All these are consequences of poor sustainableentrepreneurship performance of SMEs, and given the challenges faced by these SMEs in most developing countries, the only rational decision for these enterprises to make is that of prioritising firm survival at the expense of societal and environmental needs. Cant and Wiid (2013) point out that SMEs in South Africa find it difficult to successfully adopt sustainable programmes because of a lack of access to adequate finance, technology, information and rising crime rate. This deters SMEs from successfully achieving sustainable entrepreneurship performance. In the case of Zambia, a study by Chongoo et al. (2016) found insignificant effects of the SMEs’ knowledge of the natural/social environment and the threats to the natural/social environment on the identification of sustainable opportunities. This could be because the SMEs did not have adequate knowledge of environmental issues and how to capitalise on the opportunities in a manner that benefits the SME, society and the environment. This resonates with Chongoo et al.’s (2016, p. 1) study which recommends that SMEs need to be trained even on environmental and social issues because this might impact the sustainability opportunities, as well as their sustainable entrepreneurship action and orientation. Organisational culture Organisational culture is the reflection of the predominant norms, values, beliefs and ideological underpinnings that guide the way in which things are carried out in an organisation (Adebayo et al. 2020, p. 1). It can serve as an enterprise’s core competence that generates differential value for organisations regardless of size (Adebayo et al. 2020, p. 1). Previous studies have identified organisational culture as a key reason why enterprises fail to successfully implement their organisational change programmes and strategies such as digitisation and corporate sustainability (Gutterman 2020; Linnenluecke & Griffiths 2010, p. 357). This is especially the case when the change strategies and programmes are not aligned with an enterprise’s organisational culture. Even in SMEs, change strategies such as those that seek to promote sustainable entrepreneurship performance can only succeed once the owner/manager tries to properly align such change programmes and strategies to the values, norms, beliefs and ideological underpinnings of the SME’s culture. This is congruent with Linnennluecke and Griffiths’ (2010, p. 258) and Medina-Alvarez and Sanchez-Medina’s (2023, p. 399) supposition that organisational culture impacts the way in which corporate sustainability is implemented as well as predicts the extent of success or failure that may be observed by introducing such change initiatives into the organisation. Sustainable entrepreneurship through corporate governance 228 In their study, Linnennluecke and Griffiths (2010, p. 258) also cautioned enterprises which seek to foster a commitment to corporate sustainability and yet are dominated by internal process values, of the possibility of experiencing tension between existing organisational culture based on stability and control, a need to introduce curiosity, exploration as well as flexibility. Considering the above, Gutterman (2020, p. 29) recommended that sustainability leaders must implement both formal and informal organisational cultural practices to achieve positive long-term benefits from the implementation of sustainability programmes and strategies. The formal organisational cultural practices (i.e. rules and procedures) will help bring some form of structure and serve as support for the foundation of innovation and other future changes in the organisation. Implementing informal organisational cultural practices will create the needed momentum for change in the enterprise and support a sustainable innovation culture by generating the latest ideas necessary to bring the organisation closer to its long-term sustainability goals (Gutterman 2020, p. 29). Bertels (2010) argued that to make sustainability an enduring part of the organisation, there is a need to embed sustainability goals in the organisational culture. Organisational sustainability culture has been defined as a culture in which the members of the enterprise have shared assumptions, ideologies and beliefs about the need to balance economic efficiency, social equity and environmental stewardship, responsibility and accountability (Gutterman 2020, p. 29). Bertels’ (2010) study further elaborated that enterprises with a strong organisational sustainability culture endeavour to promote the health of the environment and enhance the livelihoods of the society while enjoying long-term survival, efficiency and profitability growth. Small and medium enterprise leadership’s sustainability orientation, commitment and support Small and medium enterprise leaders (owners/managers) are the key decision makers of the SMEs. They provide direction for the SME’s vision, mission, strategies, and long-term goals and values (Jahanshahi, Brem & Bhattacharjee 2017, p. 1636). Likewise, these leaders can cultivate a culture that either favours or discourages any sustainability actions in the enterprise. According to Closs, Speier and Meacham (2011, p. 102), enterprise leaders play a significant role in making decisions related to the enterprise’s sustainability engagements. Lopez-Torres (2022, p. 1) points out that, recently, SMEs have been reported to present low sustainability interest, commitment and maturation levels and are seemingly neglecting and questioning the actual impact of transforming sustainability as a priority in Chapter 10 229 their enterprise’s operations. Given the current hardships and disruptions (the current COVID-19 pandemic, the 2022 Russia-Ukraine war and the current economic recession), it is unusual for SME leaders to deliberately ignore social and environmental matters while prioritising the decisions on SME financial well-being to help ensure the long-term survival and growth of the SME. A study by Jahanshahi and Brem (2017) explored the relationship between top management teams’ behavioural integration with their innovativeness and sustainability orientation in 40 Iranian SMEs. Their study found that highly behaviourally integrated top management teams will pursue more sustainability-oriented actions than their counterparts who are less behaviourally integrated (Sarango-Lalangui, Alvarez-Garcia & Rio-Rama 2018). This can be achieved through a culture of knowledge sharing that will encourage fruitful collaborations as well as high behavioural integration between SME leaders, which will, in turn, promote sustainability engagements and thus enhance sustainable entrepreneurship performance in SMEs. Enterprise leaders’ behaviour and attitudes are shaped by numerous factors, including their experiences, education, knowledge and competence. For instance, if an SME leader has had prior positive experiences with sustainability actions, they are more likely to make decisions that favour sustainability initiatives in the SME. Conversely, previous negative experiences may lead the leader to adopt a negative attitude towards sustainability-related decisions. Also, in cases where the leader has more knowledge of the importance of pursuing sustainability engagements, and the expertise in the implementation of such sustainability engagements, the leader will show a positive attitude, and show more commitment and support towards such sustainability engagements in the enterprise. Where SME owners and managers show a positive attitude, as well as provide better support and commitment towards sustainability issues, the SME will not only excel in generating more profits, but it will achieve profits through prioritisation of environmental health and society’s well-being. As such, it is crucial that SME leaders attain knowledge on sustainability engagements to make informed decisions on sustainability matters in the enterprise. Previous studies have linked the SME owner/manager’s level of education and knowledge to improved decision-making abilities, self-reliance, the promotion of a new set of attitudes and culture, as well as the long-term survival and growth of SMEs (Arogundade 2011, p. 26; Mhlongo & Daya 2023, p. 7; Peters et al. 2014, p. 1127). Such knowledge can be obtained through formal education, as well as by attending sustainability-related workshops and symposiums. These events allow SME leaders to interact with other enterprise leaders, facilitating the sharing and exchange of Sustainable entrepreneurship through corporate governance 230 knowledge on sustainability issues. This interaction is especially important, as it informs the decisions made by SME leaders. The SME leader’s level of education and knowledge is also linked to the SME leader’s competency level in engaging in the enterprise’s activities, which justifies its success in terms of quality and effectiveness. An SME leader’s competency level can encompass the leader’s abilities to assess risk, manage time, define the circle of personal interests, plan, analyse situations, solve problems, formulate viable strategies, resolve disputes and lead the enterprise (Ismail & Wright 2022, p. 1). Existing literature (Cuevas-Vergas, Parga-Montoya & Estrada 2020, p. 69; Daradkeh 2021, p.42; Sihotang et al. 2020, p. 1607) have reported direct links between SME leaders’ competencies, sustainability engagement and SME performance. According to Ismail and Wright (2022, p. 1), although these competencies are also associated with sustainability-oriented activities, they should be complemented by other factors to enhance the sustainable entrepreneurship performance of SMEs, particularly during times of hardship. Ismail and Wright (2022, p. 1) further note that SMEs must manage their competencies successfully and innovatively to succeed in their sustainability engagements. Small and medium enterprise sustainable entrepreneurship performance evaluation metrics and approaches According to Lysons and Farrington (2016, p. 606), performance evaluation often employs both subjective/qualitative and objective/quantitative approaches. Similarly, the performance of sustainable entrepreneurship in SMEs can be assessed using either quantitative or qualitative methods. Various approaches for evaluating performance include accounting methods (e.g. profit centres, activity-based costing and standard and budgetary control), sustainability audits (such as innovative continuous sustainable audits) and comparative methods (like benchmarking and ratio analysis) (Lysons & Farrington, 2016, p. 606). Pisar and Kupec (2021, p. 193) describe innovative sustainability audits as cost-efficient, dynamic and continuous, involving the remote collection of audit data. Because of their cost efficiency, these audit methods can also be applied to micro and small-sized enterprises. In the case of deviations from target sustainable entrepreneurship performance, audit data can be transmitted to sustainability remote control centres, which can either provide the SME with appropriate remedies online or determine the corrective course of action offline (Pisar & Kupec 2021, p.193). Small and medium enterprises can also use formal or informal control measures to evaluate their sustainable entrepreneurship performance. The formal control approaches can be informed by standardised environmental management practices such as the sustainability standards Chapter 10 231 provided by the International Standards Organisation ISO 14001, while the informal controls are shaped by the organisational culture. A study by Johnstone (2021, p. 560), although conducted on SMEs in a developed country (Northern Europe) context, found that SMEs adopted formal control measures that are primarily oriented towards quantitative measures relating to resource efficiency and environmental impacts of discrete targets and controls. In the same study, process efficiency related to waste management or carbon emissions was cited by the surveyed SMEs as one of the fundamental environmental performance measures. Figure 10.2 describes corporate governance practices and sustainable entrepreneurship performance metrics for small and medium enterprises. Sustainable entrepreneurship performance can be evaluated using various metrics and metrics dimensions. Chedli (2016) considers the evaluation of entrepreneurial enterprises’ performance to encompass actions that span beyond economic/objective measures and perspectives. In other words, entrepreneurial enterprise performance should factor in good corporate governance practices. For example, in most enterprises, what most shareholders are concerned with is no longer the idea of corporate profitability, but rather a socially responsible governance model that is responsive to the needs of the organisation as well as those of the society and environment. Nhemachena and Murimbika (2018, p. 117) documented the steps that address environmental, economic and social goals to measure the performance of sustainable entrepreneurs. Based on the above, this chapter broadly categorises SME sustainable entrepreneurship performance evaluation metrics into three dimensions, namely, social, environmental and economic (see Figure 10.2). Small and medium enterprises’ environmentally sustainable entrepreneurship performance assesses how successfully an SME can use its products, processes, policies and strategies to minimise its negative impacts and enhance its positive effects on the natural environment (Adebayo et al. 2020, p. 3; Babalola 2012). As shown in Figure 10.2, SME environmental entrepreneurship performance can be evaluated based on the SME’s percentage reduction of emissions, solid waste, water consumption, energy consumption and waste disposed, along with the amounts of products reused, materials recycled as well as products recovered per given period. For SMEs to achieve positive environmental entrepreneurship performance, the enterprises’ sustainability strategies need to be embedded in the SMEs’ organisational culture. Collaborations with stakeholders that facilitate the transfer of the required knowledge and technology are required to enhance the environmental entrepreneurship performance of SMEs and that of their value chains. This will also enable a conducive environment for effective innovative continuous sustainability audits and controls that will show the SMEs any gaps in performance as well as the remedial actions required to keep their environmental performance on a positive trajectory. Sustainable entrepreneurship through corporate governance 232 Source: Adapted from Nhemachena & Murimbika (2018), p. 117; Rosario, Raimundos & Cruz (2022), pp. 6–8; Sarango-Lalangui, Alvarez-Garcia & Rio-Rama (2018), p. 12. Key: SME, small and medium enterprise. FIGURE 10.2: Corporate governance practices and sustainable entrepreneurship performance evaluation metrics for small and medium enterprises. SME sustainable entrepreneurship performance metrics SME environmental entrepreneurship performance •% of reduction of emissions •% of reduction of solid waste • Waste material recycled as a % of material consumed •% of reduction in water consumption • Volumes of product recovery •% of reduction in energy consumption • Volumes of waste disposed or incinerated • Volumes of products reused SME social entrepreneurship performance • Number of stakeholder engagements on sustainability issues • Number of initiatives that fully and actively engages SME stakeholders in sustainability initiatives • Number of SME iniatives aimed to promote community engagement • Number of SME programmes conducted to promote social well being and diversity • Employee rewards and incentives in place for sustainability excellecnce SME economic entrepreneurship performance •% of SME market share growth •% of cost savings associated with sustainability activities •% of profit growth from sustainability activities •% of sales growth from sustainability activities Corporate governance practices As earlier noted in the arguments above, sustainable entrepreneurship plays a leading role in solving societal and environmental issues through the achievement of the long-term profitability and growth goal of SMEs. Thus, SME social entrepreneurship performance is perceived as a dimension that evaluates sustainable entrepreneurship performance based on the social value created through the SME’s initiatives to promote equality and diversity, social well-being, community development, livelihood security, as well as human rights (Rosario et al. 2022, p. 12). As shown in Figure 10.1, this dimension also focuses on metrics such as the number of stakeholder engagements on Chapter 10 233 sustainability issues as well the employee rewards and incentives to promote a culture of social sustainability excellence in SMEs. Such a performance dimension requires SME owners/managers to constantly perform a community need analysis, as well as benchmark their social sustainability initiatives against the industry standards and world-class standards as well as against the needs of the communities in which these enterprises operate. It is also important that clear lines of transparent dialogue between the SMEs and society be established to minimise the gaps in community needs and maximise the generated social value by the SMEs. Small and medium enterprise economic entrepreneurship performance dimension is another fundamental premise for SME existence which is crucial in understanding the basis of SME sustainability (Tshiaba et al. 2021, p. 1). It evaluates the economic viability of an SME and generates employment benefits, creates social value and promotes environmental welfare (Sarango-Lalangui et al. 2018, p. 6). However, what is missing in most SMEs is the understanding of how to effectively incorporate good governance practices to achieve sustainable entrepreneurship performance. Good corporate governance, as such, ensures that the SMEs’ capital structure, perception of the market, profitability and stability are sustainably hinged on good governance. According to Rosario et al. (2022, p. 12), the economic entrepreneurship performance dimension assesses the enterprise’s economic value through the profit, return on investments, financial resilience, long-term viability and business stability measures. Thus, as shown in Figure 10.2, the SME economic entrepreneurship performance dimension evaluates the SME’s long-term viability, stability and financial resilience using the percentage of SME market share growth, cost savings and sales growth associated with the enterprise’s sustainability activities. As noted earlier, to promote long-term viability, stability and financial resilience, it is imperative for SMEs to pursue this dimension simultaneously with the social and environmental entrepreneurship performance dimensions. Clearly, for SMEs to achieve long-term positive economic performance outcomes, key factors include proper resource planning and utilisation, training staff on sustainability matters, aligning sustainability programmes and strategies with organisational culture and policies, and cultivating mutually beneficial collaborative relationships with stakeholders (Gutterman 2020, p. 29). Ways in which corporate governance can enhance the sustainable performance of small and medium enterprises Corporate governance plays a fundamental role in the sustainable performance of SMEs. Although there have been limited studies on the link Sustainable entrepreneurship through corporate governance 234 between corporate governance practices and sustainable entrepreneurship performance, few of the studies like Arora and Dharwadkar (2011) claim that corporate governance plays a crucial role in the sustainable performance of SMEs by promoting effective decisions about sustainability practices. Moreover, corporate governance is particularly important in the achievement of sustainable entrepreneurship performance of SMEs because it enhances better monitoring of environmental and social performance (Ajeigbe & Ganda 2022, p. 155). Apart from the above, pursuing sustainable entrepreneurship performance through the implementation of corporate governance practices in SMEs can prove to be too costly because such initiatives must be regularly evaluated against the legal systems in the country in which the SMEs operate before mandating other or additional sustainable entrepreneurship initiatives. This is critical because it will ultimately assist regulators in enhancing corporate governance effectiveness and corporate social responsibility. Moreover, improving corporate governance in the sustainable entrepreneurship performance of SMEs benefits not only managers, employees and shareholders but is also vital for the survival of these SMEs, especially in light of growing environmental and social concerns. In fact, most SMEs struggle with corporate identity. Corporate identity is a key governance issue because it reflects what the SME truly represents, rather than what it might advocate for. In this context, most SMEs would benefit from incorporating branding into their corporate governance strategies to enhance sustainable entrepreneurship performance. Effective branding can help SMEs create and maintain a competitive advantage over their rivals. This, in turn, can enable SMEs to align their operations with societal values during a time of rapid change. Given this, ethical behaviour becomes essential for all SMEs. Such ethical behaviour forms the SME’s culture, which consists of a shared set of values and guiding principles deeply ingrained throughout the organisation (Aidt 2010; Mhlongo & Daya, 2023, p. 7). Consequently, ethical behaviour and culture become integral to the definition of corporate identity. Sustainable entrepreneurship: Trendsandpractices Entrepreneurship has gained prominence as an initiative for generating economic benefits (Munoz & Cohen 2018, p. 313). However, a critical aspect of entrepreneurship is the concept of sustainable development, which has emerged as a pressing issue affecting the global system. Moreover, as sustainable development takes centre stage in the entrepreneurial activities of SMEs and larger established businesses, there have been increasing calls Chapter 10 235 for entrepreneurship to focus not only on generating wealth (Schaltegger et al. 2018, p. 140). Given the significant focus on preserving the natural environment, there have been calls to embrace sustainable entrepreneurship. Sustainable entrepreneurship, in its simplest form, involves conducting business without neglecting the environment. In other words, while profit-making is the core function of any business, it should never take precedence over environmental considerations. Likewise, the environment should not overshadow business interests, which is the essence of sustainable entrepreneurship. However, as awareness of the world’s escalating environmental problems has grown, entrepreneurs now need to integrate social and environmental agendas with their primary commercial operations (Mason & Brown 2014, p. 25). Hart and Milstein (1999, p. 18) were among the first scholars to connect the concepts of entrepreneurship and sustainable development. They argued that sustainable development presents a promising opportunity for entrepreneurs and innovators. In this context, entrepreneurs must demonstrate that they are taking measures to minimise their adverse effects on the environment (Choi & Gray 2008, p. 347) and incorporate pro-socio-environmental values into their core business activities (Gast,Gundolf & Cesinger 2017, p. 48; Muñoz et al. 2018, p. 320). South Africa has promoted the idea of transformation as a means to address pressing socio-economic issues such as poverty, unemployment and inequality. Additionally, the country has been grappling with high graduate unemployment, excessive bureaucracy, corruption and poorquality infrastructure, all of which hinder sustainable entrepreneurship. Recently, South Africa, through the Department of Cooperative Governance and Traditional Affairs (COGTA), adopted a model based on the concept of Environmental and Social Governance (ESG) (Cooperative Governance & Traditional Affairs, 2021). These initiatives encourage SMEs to pursue sustainability in various ways, including recycling. Moreover, there have been moves to embrace e-commerce. Uber Eats is one enterprising company that has leveraged e-commerce to its advantage. For example, people can order their food online and have it delivered to them. The same applies to grocery stores, such as Shoprite and Pick n Pay. It should be highlighted that this trend gained prominence during the COVID-19 pandemic. In all these businesses, corporate governance is a key feature, especially regarding products that align with environmental protection. For example, instead of using plastics, most of the aforementioned businesses prefer to use biodegradable materials while encouraging their customers to adopt the same sustainable practices. More so, there are also calls by most of these businesses not to do business with other companies that might be involved in child labour or Sustainable entrepreneurship through corporate governance 242 sustainable corporate governance through research and education. By emphasising its importance and providing the necessary tools and knowledge, they can empower the next generation of business leaders to make informed and responsible decisions. Investors and stakeholders also have a role to play by integrating corporate governance and sustainability into their investment criteria. This shift towards responsible investment not only mitigates risks but also encourages businesses to adopt more sustainable practices. The creation of industry-specific sustainability forums or networks within the broader business community can facilitate knowledge-sharing and collective action, accelerating progress towards a sustainable future. Ultimately, the dynamic nature of sustainability and corporate governance necessitates continuous improvement and adaptability. These recommendations collectively emphasise that fostering a culture of responsibility and ethical behaviour is fundamental to sustainable entrepreneurship in South Africa. 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