Research on the Performance of the Services Sector

Challenges, Obstacles and Opportunities

General Challenges

During the survey process the businesses were asked to outline the current challenges that they face in the day to day operation of their business. From this analysis there are three key problem areas that small business in this sector have identified, these are:

Finance (43%)- the biggest challenge for tourism businesses was access to finance, the need for start-up capital, expansion capital and cash flow during low season affected almost half of the business interviewed.

Building client base (17%)- the high number of tourism businesses and the low number of tourists visiting some areas made it difficult for some businesses to attract and maintain a client base

Marketing (14%)- is a challenge for businesses as they need to have strong marketing techniques to differentiate their businesses and attract clients.

Specific Challenges

Specific challenges faced by tourism businesses stem from the general challenges which are finance, building client bases and marketing. Finance related challenges include the following:

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  Access to working capital
  
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  Maintaining cash flow
  
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  Managing overheads
  
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  Increase in transport costs which in turn increases general costs and reduces the available cash flow and annual profits as companies cannot increase their prices to meet the petrol price increases
  

Specific challenges faced by businesses in terms of building client bases include:

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  Limited knowledge of marketing which leads to low numbers in client bases
  
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  Increased competition from other companies
  
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  Limited knowledge of the tender processes in order to gain government clients and increase current client bases
  

Marketing specific challenges that businesses faced included;

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  Lack of resources to market the business efficiently which in turn leads to low exposure and poor numbers of clients
  
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  Lack of marketing knowledge and understanding
  
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  Increased competition from other businesses particularly established businesses with better marketing tools and market access
  

Outcomes, Needs and Requirements

The biggest effect of obstacles and challenges on businesses was a decline in sales (33%), and businesses stagnating (33%).

Figure : Effects of Challenges to Business

Eight percent of the businesses reported that the challenges and obstacles faced by the entity have not affected the operation of the business yet.

A significant number (23%) of businesses interviewed did not require assistance from public or private organisations; however the majority (77%) required various interventions to ensure the sustainability of their businesses. The most requested interventions were:

Grants and finance (20%), businesses were need of financial assistance to help expand and grow the entity and in some cases it was required to maintain the business.

Training (18%) was required by businesses for both owners, and staff. The relatively high number of skilled workers in the industry and the need for further skills show the growth potential for job creation in the sector.

Access to resources (16%) such as business support or networks was required by business to ensure sustainability and longevity of entities.

General Opportunities

Opportunities that exist in the tourism sector range from accommodation to tourism facilities and eco-tourism activities. Furthermore these opportunities can be developed across South Africa.

The province specific opportunities are outlined in the table below.

Table 24: Opportunities in Tourism

Opportunities	Province
	WC	EC	NC	KZN	GAU	Limp	MPA	FS	NW
Accommodation	x	x	x	x	x	x	x	x	x
Beach Tourism Activities	x	x
Catering/Food outlets					x			x
Conference Facilities			x		x		x	x
Cultural Tourism				x				x	x
Eco Tourism Activities	x	x	x	x			x
Shuttle Services/Transport	x		x		x			x	x
Tourism Facilities	x	x	x			x		x	x
Training facilitators	x		x

Specific Opportunities

Accommodation opportunities exist within the tourism sector, in particular these opportunities are for cheaper accommodation packages and facilities. There is a need for Bed and Breakfast type accommodation and backpacker facilities as well as more affordable family friendly accommodation. Furthermore SMMEs can access opportunities in the accommodation industry by offering accommodation related services. These services include:

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  cleaning services
  
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  catering services
  
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  laundry services
  
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  gardening services
  
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  delivery services
  

Furthermore these services have very little entry challenges or barriers and are accessible for SMMEs.

Beach tourism, cultural tourism and eco-tourism activities are more suited to small scale operators offering personalised services and activities. These activities include:

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  shuttle services
  
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  Personalised guided tours
  
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  Hiring of bicycles or equipment such as surfboards and kites etc.
  

Tourism and Conference facilities would be opportunities more suited to big businesses as the start-up costs would be quite large but the opportunities for SMMEs would be in provided services to these facilities. Again these services would include:

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  Cleaning
  
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  Catering
  
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  Transport
  
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  Delivery services
  

All of which are all quite easily accessed. Furthermore these opportunities would create employment in the areas where they are developed.

Outcomes, Needs and Requirements

In order to access the abovementioned opportunities entrepreneurs would require finance, marketing and training, 29% of the businesses surveyed felt that finance and training were needed to access opportunities. Government support and marketing and training were also regarded as key to accessing opportunities in the tourism sector.

Figure : Access to Opportunities

The expected outcomes of these opportunities and accessing them are job creation and skills development in the tourism sector.

Conclusion

The tourism businesses that were surveyed in the research process play key roles in providing accommodation, information to tourists and transportation services. The businesses face challenges such as lack of finances and inefficient marketing which in turn affects the access to clients. The effect of these challenges on the businesses is declining sales and poor growth. To combat these challenges and effects, the businesses require assistance in accessing training and funding. Despite these challenges there are opportunities that exist in the tourism sector across the provinces. These include developing cheaper accommodation facilities and offering shuttle services to tourists. These opportunities are accessible with finance, marketing and training.