Why business incubations often falter

MICRO-, Small, and Medium-sized Enterprises (MSMEs) Day is observed on June 27 to recognise the important role of MSMEs in economic growth and development.

- GOOSAIN SOLOMON

They represent 90% of businesses globally, while their contribution to employment is more than 50% and 40% to GDP according to the World Bank. In South Africa, MSMEs' contributions to GDP and employment are 34% and 60% respectively, according to the Small Enterprise Development Agency.

Given their substantial economic role, supporting MSMEs is a strategic public investment that can unlock inclusive and sustainable growth and development.

Since 1995, the South African government has implemented various policy measures to support the development and promotion of small businesses.

Business incubation, in particular, has gained prominence in both policy and academic discourse for its potential to accelerate the growth, innovation, and sustainability of MSMEs in South Africa. However, recent research highlights persistent performance disparities among South African business incubators. Many incubators fall short when benchmarked against best practices, pointing to ongoing challenges in service quality and effectiveness. Others struggle to survive due to chronic financial constraints. This has led to a pattern of decoupling, where organisational activities become disconnected from core developmental goals, often prioritising legitimacy over impact.