<?xml version="1.0" encoding="ISO-8859-1"?><article xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance">
<front>
<journal-meta>
<journal-id>0038-2353</journal-id>
<journal-title><![CDATA[South African Journal of Science]]></journal-title>
<abbrev-journal-title><![CDATA[S. Afr. j. sci.]]></abbrev-journal-title>
<issn>0038-2353</issn>
<publisher>
<publisher-name><![CDATA[Academy of Science of South Africa]]></publisher-name>
</publisher>
</journal-meta>
<article-meta>
<article-id>S0038-23532012000300014</article-id>
<title-group>
<article-title xml:lang="en"><![CDATA[Proportionality in enterprise development of South African towns]]></article-title>
</title-group>
<contrib-group>
<contrib contrib-type="author">
<name>
<surname><![CDATA[Toerien]]></surname>
<given-names><![CDATA[Danie F]]></given-names>
</name>
<xref ref-type="aff" rid="A01"/>
</contrib>
<contrib contrib-type="author">
<name>
<surname><![CDATA[Seaman]]></surname>
<given-names><![CDATA[Maitland T]]></given-names>
</name>
<xref ref-type="aff" rid="A01"/>
</contrib>
</contrib-group>
<aff id="A01">
<institution><![CDATA[,University of the Free State Centre for Environmental Management ]]></institution>
<addr-line><![CDATA[Bloemfontein ]]></addr-line>
<country>South Africa</country>
</aff>
<pub-date pub-type="pub">
<day>00</day>
<month>00</month>
<year>2012</year>
</pub-date>
<pub-date pub-type="epub">
<day>00</day>
<month>00</month>
<year>2012</year>
</pub-date>
<volume>108</volume>
<numero>5-6</numero>
<fpage>38</fpage>
<lpage>47</lpage>
<copyright-statement/>
<copyright-year/>
<self-uri xlink:href="http://www.scielo.org.za/scielo.php?script=sci_arttext&amp;pid=S0038-23532012000300014&amp;lng=en&amp;nrm=iso&amp;tlng=en"></self-uri><self-uri xlink:href="http://www.scielo.org.za/scielo.php?script=sci_abstract&amp;pid=S0038-23532012000300014&amp;lng=en&amp;nrm=iso&amp;tlng=en"></self-uri><self-uri xlink:href="http://www.scielo.org.za/scielo.php?script=sci_pdf&amp;pid=S0038-23532012000300014&amp;lng=en&amp;nrm=iso&amp;tlng=en"></self-uri><abstract abstract-type="short" xml:lang="en"><p><![CDATA[We investigated proportionalities in the enterprise structures of 125 South African towns through examining four hypotheses, (1) the magnitude of enterprise development in a town is a function of the population size of the town; (2) the size of an enterprise assemblage of a town is a function of the town's age; (3) there are statistically significant relationships, and hence proportionalities, between the total number of enterprises in towns and some, if not all, of the enterprise numbers of different business sectors in towns; and (4) the implications of proportionalities have far-reaching implications for rural development and job creation. All hypotheses were accepted on the basis of statistically significant (p < 0.05) correlations, except for the second hypothesis - the age of a town does not determine the size of its enterprise assemblage. Analysis for the fourth hypothesis suggested that there are two broad entrepreneurial types in South African towns: 'run-of-the-mill' entrepreneurs and 'special' entrepreneurs, which give rise to different enterprise development dynamics. 'Run-of-the-mill' enterprises are dependent on, and limited by, local demand and if there is only a small demand, the entrepreneurial space is small. By comparison, 'special' enterprises have much larger markets because their products and/or services are exportable. We propose that the fostering of 'special' entrepreneurs is an imperative for local economic development in South African towns.]]></p></abstract>
</article-meta>
</front><body><![CDATA[ <p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>RESEARCH    ARTICLES</b></font></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="4"><b><a name="top"></a>Proportionality    in enterprise development of South African towns</b></font></p>     <p>&nbsp;</p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Danie F. Toerien;    Maitland T. Seaman</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Centre for Environmental    Management, University of the Free State, Bloemfontein, South Africa</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><a href="#back">Correspondence    to</a></font></p>     <p>&nbsp;</p>     <p>&nbsp;</p> <hr noshade size="1">     ]]></body>
<body><![CDATA[<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>ABSTRACT</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">We investigated    proportionalities in the enterprise structures of 125 South African towns through    examining four hypotheses, (1) the magnitude of enterprise development in a    town is a function of the population size of the town; (2) the size of an enterprise    assemblage of a town is a function of the town's age; (3) there are statistically    significant relationships, and hence proportionalities, between the total number    of enterprises in towns and some, if not all, of the enterprise numbers of different    business sectors in towns; and (4) the implications of proportionalities have    far-reaching implications for rural development and job creation. All hypotheses    were accepted on the basis of statistically significant <i>(p</i> &lt; 0.05)    correlations, except for the second hypothesis - the age of a town does not    determine the size of its enterprise assemblage. Analysis for the fourth hypothesis    suggested that there are two broad entrepreneurial types in South African towns:    'run-of-the-mill' entrepreneurs and 'special' entrepreneurs, which give rise    to different enterprise development dynamics. 'Run-of-the-mill' enterprises    are dependent on, and limited by, local demand and if there is only a small    demand, the entrepreneurial space is small. By comparison, 'special' enterprises    have much larger markets because their products and/or services are exportable.    We propose that the fostering of 'special' entrepreneurs is an imperative for    local economic development in South African towns.</font></p> <hr noshade size="1">     <p>&nbsp;</p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Introduction</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The primary concept    considered here - proportionality in enterprise development - was an aspect    of the studies of South African towns during the 1960s and 1970s,<sup>1,2</sup>    but was later neglected. We have revisited it here because of new ideas about    economic and regional development that have developed over the past three decades,    which also touch upon current South African economic development challenges    and realities.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Paul Krugman, winner    of the 2009 Nobel Prize in Economics, and his collaborators (Fujita and Venables)    remarked that<sup>3</sup>:</font></p>     <blockquote>        <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">It should not,      in other words, be hard to convince economists that economic geography - the      study of where economic activity takes place and why - is both an interesting      and important subject. Yet until a few years ago it was a subject mainstream      economics largely neglected.</font></p> </blockquote>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Fujita et al.<sup>3</sup>    added that 'new trade' and 'new growth' theories have been developed that have    provided a core of useful new insights. Romer, for example, has promoted the    concept that it is ideas, not objects, which poor countries and regions lack.<sup>4</sup></font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Fujita et al.<sup>5</sup>    pursued two concepts, (1) in a world where increasing returns and transport    costs are both important, forward and backward linkages can create a circular    logic of agglomeration - producers want to be located close to their suppliers    and customers; and (2) the immobility of some resources, for example, land,    and in some cases labour, acts as a centrifugal force that opposes the centripetal    force of agglomeration. The tension between centrifugal and centripetal forces    shapes the evolution of an economy's spatial structure. Fujita et al.<sup>5</sup>    suggested that their approach should be buttressed amongst others by empirical    work; a suggestion acted upon in this investigation.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Florida examined    the rise of the 'creative class' in the USA.<sup>6</sup> He sketched the importance    of three 'Ts' - technology, talent and tolerance - for urban and enterprise    development. Creative people, the drivers of the 'knowledge economy', do not    necessarily settle where jobs are but strive to settle in places that are open    and tolerant, and where many different types of people feel at home. Knowledge    era enterprises now have to follow the creative talents they need and not vice    versa.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Beinhocker elaborated    on Complexity Economics,<sup>7</sup> which views economies as complex adaptive    systems subject to the Second Law of Thermodynamics. Economies consist of realistically    rational agents that interact dynamically with each other in essentially evolutionary    systems. He stated that:</font></p>     <blockquote>        <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Economic wealth      and biological wealth are thermodynamically the same sort of phenomena, and      not just metaphorically. Both are systems of locally low entropy, patterns      of order that evolved over time under the constraint of fitness functions.      Both are forms of fit order.</font></p> </blockquote>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Each individual    enterprise, like each living organism, is therefore in constant competition    for survival and only the fittest survive. Therefore, at any point in time,    the size and composition of enterprise assemblages in an economy present a time-integrated    picture of the forces that drove that economy over previous periods.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Toerien and Seaman<sup>8</sup>    extended the ideas of Beinhocker<sup>7</sup> by examining the hypothesis that    if enterprises are analogous to living organisms in the sense that they are    both forms of fit order, towns must be analogous to natural ecosystems, that    is, they are enterprise ecosystems. They accepted this hypothesis on the basis    of a study that applied methods widely used in ecological studies to the enterprise    assemblages of towns in the Great Karoo in South Africa.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Toerien and Seaman<sup>9</sup>    also successfully applied the Species Equilibrium Model of island biogeography<sup>10</sup>    in an examination of the enterprise dynamics of 12 Karoo towns in the Eastern    Cape. The ecological model predicts that the rate of new immigrant species arriving,    the rate of species extinction and the rate of speciation on an island will    reach an equilibrium, where the number of species on the island will be a function    of the size of the island and its isolation from a mainland (the source of new    species). Toerien and Seaman<sup>9</sup> found that enterprises in the selected    Karoo towns behaved like species on natural islands, exhibiting statistically    significant correlations (in other words proportionalities) between enterprise    numbers and the size of the town. They concluded that the towns are 'enterprise    islands', in addition to being enterprise ecosystems.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The primary purpose    of this contribution was to examine proportionalities in enterprise development    in a large number of South African towns. The implications of such proportionalities    for local economic development (LED) planning were secondarily considered. The    South African government has for more than a decade struggled with the recalcitrant    issues of rural poverty and unemployment,<sup>11</sup> particularly with regard    to previously disadvantaged individuals. Developing a deeper understanding of    the enterprise dynamics of South African towns, particularly about enterprise    proportionalities, is an imperative in LED planning.</font></p>     <p>&nbsp;</p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Threshold populations</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Van der Merwe and    Nel<sup>1</sup> explained that the threshold population, that is, the minimum    population size necessary to support a specific type of enterprise in an urban    settlement, is important in economic geography. Based on the South African population    size in 1970 and trade statistics for 1966/1967, they provided threshold numbers    for many different types of enterprises (e.g. grocers, general dealers, butcheries    and pharmacies). They argued that thresholds are determined by free competition    between enterprises and that maximisation of profits drives a process in which    the number of a specific type of enterprise in a region balances the need for    such enterprises in the region.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The above implies    that there must be proportionalities amongst different enterprise types. For    example Van der Merwe and Nel<sup>1</sup> provided the following thresholds    for a town: grocers = 1719, general dealers = 2129, butchers = 5770 and pharmacies    = 12 661. It follows that for every pharmacy in a town there should have been    approximately seven grocers, six general dealers and two butchers. They did    not, however, explicitly study this kind of proportionality. If such proportionality    still exists, useful norms could be developed against which the enterprise evolution    of specific towns can be assessed.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Christaller's central    place theory has long dominated thinking about towns and their functions in    South Africa.<sup>1</sup> For instance, Davies and Cook<sup>2</sup> employed    55 central functions to classify 601 South African urban settlements into eight    levels of hierarchy. Nel and Hill<sup>12</sup> presented a hierarchy of Karoo    towns with specific hierarchy levels defined as the functions of lower levels    plus some additional ones. For instance, the level 5 functions of Karoo towns    were defined as levels 6, 7 and 8 functions plus additional functions providing    services with regard to roads, libraries, schools, public administration, financial    management, wholesales and cinemas.<sup>12</sup> Implicit in the definition    of these hierarchies is an acceptance of the fact that towns at higher ranks    in the hierarchy would have more types of service providers than towns of lower    ranks and, thus, proportionally more of the total number of services provided    in all towns. The latter kind of proportionality has been neither formally quantified    nor used as a concept to understand the enterprise dynamics of South African    towns.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Complexity economics</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The philosophy    embodied in complexity economics theory provides an opportunity for new economic    models to help us to expect and understand proportionalities in the enterprise    development of towns.<sup>7</sup> According to Beinhocker<sup>7</sup>, economic    activity is fundamentally about order creation, and evolution is the mechanism    by which order is created. Businesses (enterprises) are 'interactors' that struggle    in a 'survival-of-the-fittest' competition in economic evolution. Enterprises    produce and/or deliver and sell either products or services. The enterprises    that best (but not necessarily the most cheaply) meet the needs of their clients    are bound to win the struggle for survival. The composition of an enterprise    structure of a town (enterprise ecosystem) should, therefore, reflect the balance    in the spectrum of the needs of clients of the town's enterprises.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Beinhocker<sup>7</sup>    pointed out that the economy, and therefore all enterprises, are subject to    the Second Law of Thermodynamics (the law of entropy). Products and services    having a higher level of order than their constituent parts can only be produced    or delivered by an increase in disorder (i.e. higher entropy, e.g. pollution)    elsewhere. Energy inputs are needed to counter the ravages of entropy but energy    costs money. Accordingly, the flow of money from clients who purchase the products    and/or services must, (1) recompense businesses for their expenses, including    the cost of energy and materials, wages, and costs in dealing with waste and    pollution; (2) provide their profits; and (3) enable them to excel (or fail)    in the 'survival-of-the-fittest' competition.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The total amount    of money from whatever source (farming, wages, welfare payments, pensions and    profits) that is available to be spent on products and services in a specific    town, determines the number of the town's enterprises.<sup>8</sup> The composition    of the needs of the buyers of products and services (clients) of the town's    enterprises determines the composition of its enterprise structure. Once the    number of clients for the products or services delivered by a particular kind    of enterprise exceeds the threshold numbers for such enterprises, 'entrepreneurial    space' opens up. Conversely, if the number of clients falls below particular    threshold numbers, entrepreneurial space retracts.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Toerien and Seaman<sup>9</sup>    showed that Eastern Cape Karoo towns can be considered to be 'islands' in a    'sea' of farms and exhibit typical 'island effects' recorded in island biogeography.<sup>10</sup>    Foremost in this regard were enterprise equilibriums where the rate at which    new enterprises appeared, and the rate at which existing enterprises disappeared    from towns, evened out. This balance resulted in enterprise numbers that were    proportional to the size of the Karoo towns. Larger towns were able to house    a higher number and more types of enterprises than smaller towns because their    entrepreneurial spaces were larger.<sup>9</sup></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Hinterlands    and towns</b></font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Services to rural    agricultural hinterlands have long been recognised as a primary reason for the    development of towns in South Africa. For instance, Fransen<sup>13</sup> referred    to towns that developed around churches established in new parishes as 'church    towns'. In contrast to the South African government's focus on farming concerns    during the 20th century, the post-apartheid government adopted a policy with    a strong urban focus that reflects the reality that the majority of the South    African population is now urbanised.<sup>12</sup> The implications of the above    are that rural hinterlands have become less important to towns and their enterprises    are more dependent on clients who are town residents. The enterprise numbers    of a town should, therefore, at least in part reflect (in numbers and composition)    the total needs of the clients of these towns.</font></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Hypotheses</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Specific hypotheses    were developed to test the proportionalities in enterprise structures of towns:</font></p>     <blockquote>        <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">1.&nbsp;The magnitude      of enterprise development in South African towns should be a function of the      population sizes of these towns. The null hypothesis is that there is no statistically      significant relationship between the population size of a town and the size      of its enterprise assemblages.</font></p>       <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">2.&nbsp;Because      factors other than agriculture (e.g. mining) have contributed to the development      of specific towns, the size of enterprise assemblages of towns is not a function      of town age. The null hypothesis is that, in general, there is no statistically      significant correlation between the number of enterprises in a town and the      age of a town.</font></p>       <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">3.&nbsp;People      have proportional needs for different products and/or services (e.g. for food,      liquor, furniture and clothes).<sup>1</sup> Therefore, if the first hypothesis      is correct, there should also be proportionalities (measured as statistically      significant correlations) between the number of enterprises of different business      sectors and the total number of enterprises in a town. The null hypothesis      is an absence of such statistically significant correlations.</font></p>       <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">4.&nbsp;Proportionalities,      if they exist, could have far-reaching implications for rural development      and job creation. The null hypothesis is that there are few, if any, useful      sector proportionalities to assist in LED planning and execution.</font></p> </blockquote>     <p>&nbsp;</p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Proportionality    in enterprise numbers of selected South African towns</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Selection of    towns</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">An enterprise structure    database of 125 South African villages and towns was used (<a href="/img/revistas/sajs/v108n5-6/14t01.jpg">Table    1</a>). There was no specific logic to the selection of the towns other than    that they represented all the towns for which enterprise structures had been    determined at the time of writing this contribution. The selection included    towns of different origins (e.g. mining, tourism, agricultural, former Homelands,    river and arid area towns) from seven South African provinces.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Determination    of enterprise structures</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The rapid method    developed by Toerien and Seaman<sup>8</sup> was used to determine the formal    enterprise structures of towns. The method is based on listings of businesses    in the telephone directories for the towns selected (<a href="/img/revistas/sajs/v108n5-6/14t01.jpg">Table    1</a>). Enterprises were counted and categorised using 19 major business sectors    (<a href="#t2">Table 2</a>), which included economic drivers as well as service    providers.<sup>8</sup> The economic drivers are the principal business sectors    that bring money into towns whilst the service sectors are probably more important    in circulating money in towns than in bringing new money in.<sup>8</sup></font></p>     <p><a name="t2"></a></p>     <p>&nbsp;</p>     <p align="center"><img src="/img/revistas/sajs/v108n5-6/14t02.jpg"></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Data analysis</b></font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Pearson correlations    were performed to determine proportionalities. Microsoft Excel software was    used to perform the analyses and a statistically significant correlation <i>(p</i>    &lt; 0.05) resulted in rejection of the null hypothesis.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Proportionality    and the number of residents in towns</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The first hypothesis    was tested by calculating the Pearson correlation coefficient between the populations    of towns (independent variables) and the enterprise numbers per town (dependent    variables) for a subgroup of South African towns.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">A subgroup of towns    was used because formal population numbers for towns are not readily available.    The exercise was complicated by a number of issues, (1) the resident numbers    for South African towns are not readily available from the most recent formal    census data because the latter was focused on local authorities that often include    more than one town; (2) little separation is made between urban and rural (hinterland)    data; and (3) the last census was done in 2001, nearly a decade ago. Consequently,    estimates of town populations for 2006 reported by Hans Fransen, a well-known    town planner, in his book on old Cape towns<sup>14</sup> were used for towns    that were included both in Fransen's book and in the database on which this    contribution is based (<i>n</i> = 35).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">There was a strong    proportionality between population numbers per town and the number of enterprises    per town as shown by a highly significant correlation coefficient (<i>r</i>    = 0.92, <i>p</i> &lt; 0.01; <a href="#f1">Figure 1</a>). The first hypothesis    was therefore accepted, a conclusion confirmed by an additional calculation    of the correlation coefficient between the 2004 urban population numbers presented    by Nel and Hill<sup>12</sup> for 10 Eastern Cape towns (Cradock, Aberdeen, Jansenville,    Steytlerville, Graaff-Reinet, Middelburg, Willowmore, Hofmeyr, Steynsburg and    Venterstad) and enterprise numbers recorded for these towns in this study (<a href="/img/revistas/sajs/v108n5-6/14t01.jpg">Table    1</a>). A statistically significant (<i>p</i> &lt; 0.01) relationship with <i>r</i>    = 0.99 was recorded:</font></p>     <p><a name="f1"></a></p>     <p>&nbsp;</p>     <p align="center"><img src="/img/revistas/sajs/v108n5-6/14f01.jpg"></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Enterprise number    in town = 0.0106 (urban population number) - 21.8.</font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Proportionality    and the age of towns</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">To test the second    hypothesis, a Pearson correlation coefficient was calculated between the age    of the selected towns and enterprise numbers. The founding dates of towns were    found in either Fransen<sup>14</sup>, Erasmus<sup>15</sup>, or, if these did    not provide the information, Internet searches. The only town for which a founding    date could not be established was Klipplaat, which was excluded from the analysis.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The correlation    coefficient (<i>r</i> = 0.057, <i>n</i> = 124) was not statistically significant    (<i>p</i> &gt; 0.05); consequently the null hypothesis was accepted. Town age    is therefore not an important general factor in determining the size of enterprise    assemblages of South African towns, except for towns with similar origins.<sup>9</sup></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Proportionality    and enterprise structures</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">To examine the    third hypothesis, Pearson correlation coefficients and regression equations    were calculated between the total number of enterprises per town (independent    variable) and the number of sector enterprises per town (dependent variables)    for each of the 19 different business sectors selected (<a href="#t2">Table    2</a>).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Because the magnitude    of the enterprise assemblages of towns varied from 8 for a small village such    as Norvalspont, to more than 1800 for a town such as Welkom, care had to be    exercised to prevent the use of spurious correlations (and spurious interpretations)    resulting from the size differentials of enterprise structures of towns. Knowing    that smaller towns have fewer service functions<sup>1</sup> it was also necessary    to ask if observed proportionalities extended over the whole range of enterprise    assemblages in the selected town group. To examine these questions the selected    group of towns was divided into three approximately equally sized subgroups:    40 large (&gt; 130 enterprises per town), 38 medium (between 50 and 130 enterprises    per town) and 47 small (fewer than 50 enterprises per town) towns. Just as for    the total group of towns, Pearson correlation coefficients and regression equations    were calculated and tested for each of the subgroups.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Significant correlations    (<i>p</i> &lt; 0.05) were registered between the total number of enterprises    per town (independent variable) and the number of sector enterprises of all    19 different business sectors (dependent variables) for the total town group    (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Tables 3</a>, <a href="/img/revistas/sajs/v108n5-6/14t04.jpg">4</a> and    <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>). Some of the regression equations explained    almost all of the variance in sector enterprise numbers and others only a limited    amount. Strong proportionalities were observed within the business sectors of    large towns whilst fewer proportionalities were observed in smaller towns.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Three broad groups    of business sectors were identified (<a href="#t6">Table 6</a>), (1) sectors    such as agricultural products and services, and the processing and the factory    sector, where only about 25% - 30% of the variance was explained by the regression    equations, (2) sectors such as mining, tourism and hospitality, news and advertising,    and real estate services, where 50% - 60% of the variance was explained by the    regression equations and (3) sectors such as construction, engineering and technical    services, financial services, telecommunications services, trade, vehicle, general,    professional, personal, health services, and transport and earthworks, where    in excess of 75% (and sometimes more than 90%) of the variance was explained    by the regression equations. Proportionality occurs in different business sectors    of South African towns and comes in more than one guise.</font></p>     <p><a name="t6"></a></p>     <p>&nbsp;</p>     ]]></body>
<body><![CDATA[<p align="center"><img src="/img/revistas/sajs/v108n5-6/14t06.jpg"></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Sector proportionalities:    Economic drivers</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Toerien and Seaman<sup>8</sup>    identified six business sectors as the economic drivers of South African towns    (<a href="#t2">Table 2</a>). With the exception of the construction sector,    these sectors all had regression equations that explain a fairly limited part    of the variance of sector enterprise numbers (<a href="#t6">Table 6</a>). This    phenomenon required further consideration because of its potential impact on    LED planning.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Many South African    towns were founded to meet the spiritual needs of farmers and their families    who had settled in inland areas (the so-called 'church towns'<sup>14</sup>)    but soon also catered for the commercial needs of farmers. The majority of South    African towns, therefore, started with strong initial links to agriculture.    Thus, one would expect that the enterprise structures of especially smaller    rural towns should be strongly influenced by the business sector that caters    for the agricultural client (i.e. the agricultural products and services sector).    Although the data reveal statistically significant correlations and thus proportionality    (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>), only limited amounts of the variances    in enterprise numbers of this sector are explained by the regression equations    (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>). Some small towns are very strong in    this sector, others are very weak and the historically strong link to agriculture    now appears to be tenuous. These findings support the contention that hinterlands    are now less important than they were in the past for most rural towns.<sup>12</sup>    Agriculture should not be readily positioned as the 'saviour economic activity'    for rural local authorities struggling with LED; yet, this approach is precisely    the chosen rural development strategy of the provincial government of the Western    Cape.<sup>16</sup></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Tourism has been    promoted as an economic activity that can contribute significantly to rural    economic development in South Africa.<sup>17</sup> The number of tourism and    hospitality sector enterprises in towns was significantly correlated with the    total number of enterprises per town, but only 58% of the variance in the enterprise    numbers of this sector was explained by the regression equation (<a href="#t6">Table    6</a>). Larger towns are nevertheless likely to have reasonably strong tourism    and hospitality sectors. In the medium and small town groups much less of the    variance in the sector was explained by the regression equations (<a href="#t6">Table    6</a>). Some towns in these groups have strong tourism and hospitality sectors    but others have very weak tourism and hospitality sectors. Successful positioning    of towns in the tourism and hospitality sector is neither an automatic nor an    easy process.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Value addition    has been promoted as a means of adding economic value in South African towns.<sup>18</sup>    Two business sectors that add value to either local and/or external primary    and/or intermediary materials are the processing and factory sectors.<sup>8</sup>    Success in these sectors had little association with the size of the enterprise    assemblages of South African towns (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Tables 3</a>    and <a href="#t6">6</a>) and smaller towns often had more processors and/or    factories than did larger towns. Success in these sectors depends on aspects    such as 'special' entrepreneurship, talented individuals and management according    to the key success factors of a specific business model.<sup>19</sup> In this    study, relatively small towns were quite successful in the processing sector,    suggesting that it is not beyond the capabilities of small towns to achieve    success.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The mining sector    needs special consideration. The statistically significant correlations (and    hence proportionalities) registered between the numbers of mining-related enterprises    and the total number of enterprises for the total town group, as well as for    the large town groups (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>), could be spurious    and might have been caused by the impact on the calculations of the large mining    sector of Welkom.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">However, a large    mining sector is not a precondition for significant business development, because    some other large towns in this study did not have significant mining sectors.    The mining sector also did not have a major impact on the enterprise assemblages    of medium and small towns and there were no proportionalities (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table    3</a>).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The only economic    driver sector that showed significant proportionality throughout is the construction    industry (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>). This proportionality only    really applied to large towns, because although there was a positive correlation    between the number of construction enterprises and the total number of enterprises    in the medium and small towns, the degree to which the variance could be explained    was low and towns of equal size can differ widely in the number of their construction    enterprises. The fact that large towns have proportionally larger construction    sectors and small towns sometimes have few, if any, suggests that some, if not    all, construction activities in smaller towns might be provided by suppliers    from the informal sector.</font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Sector proportionalities:    Service sectors</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Proportionalities    in the service sectors (<a href="#t2">Table 2</a>) were much higher than in    the economic driver sectors (with the exception of the construction sector)    (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Tables 4</a> and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>)    and more of the variance was explained by the regression equations (<a href="#t6">Table    6</a>). The outstanding example of service sector proportionality that extends    right through all of the size ranges of towns is the trade sector (<a href="#t6">Table    6</a>). Amongst the medium and small towns there were larger variances than    what was encountered for the large town group. Nevertheless, proportionality    remained strong over all of the groups (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Tables 4</a>    and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>). Other service sectors with reasonably    strong extended proportionalities were the financial services, legal services,    general services, personal services, health services, and the transport and    earthworks sectors (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Tables 4</a> and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The engineering    and technical services, telecommunication services, news and advertising services,    vehicle, professional services, and real estate services sectors showed strong    proportionalities as far as the large towns were concerned (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Tables    4</a> and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>). These proportionalities apparently    broke down for smaller towns. Just as in the construction industry, shifts across    the interface between the formal and informal economies might be the cause.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">In summary, whilst    the economic driver sectors, with the exception of the construction industry,    exhibited limited proportionalities (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>),    the service sectors had more pronounced proportionalities, especially for large    towns (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Tables 4</a> and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"> <b>Proportionality    and thresholds</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Van der Merwe and    Nel<sup>20</sup> provided estimates of threshold numbers for a variety of different    types of service suppliers. Using total population and total enterprise numbers    to calculate threshold values assumes a linear relationship between the population    and the number of enterprises.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">This study confirmed    the existence of a linear relationship (<a href="#f1">Figure 1</a>). A further    question arose as to whether linear relationships also applied to sector enterprises.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Some of the towns    in this study were towns for which Fransen<sup>13</sup> provided population    estimates (<a href="#t7">Table 7</a>), which allowed investigation of the relationship    for sector enterprises. Regression equations were calculated for town population    numbers (independent variable) and sector enterprise numbers for those business    sectors with extended proportionalities (<a href="#t8">Table 8</a>). Because    some of these business sectors did not have strong proportionalities in the    medium and small town groups, distortions of the regression equations could    have resulted. To check if this had happened the above calculations were repeated    (<a href="#t9">Table 9</a>) for those large towns (more than 130 enterprises)    included in <a href="#t7">Table 7</a>. Comparison of <a href="#t8">Tables 8</a>    and <a href="#t9">9</a> indicates that, if distortion was introduced, it was    not severe.</font></p>     <p><a name="t7"></a></p>     <p>&nbsp;</p>     ]]></body>
<body><![CDATA[<p align="center"><img src="/img/revistas/sajs/v108n5-6/14t07.jpg"></p>     <p>&nbsp;</p>     <p><a name="t8"></a></p>     <p>&nbsp;</p>     <p align="center"><img src="/img/revistas/sajs/v108n5-6/14t08.jpg"></p>     <p>&nbsp;</p>     <p><a name="t9"></a></p>     <p>&nbsp;</p>     <p align="center"><img src="/img/revistas/sajs/v108n5-6/14t09.jpg"></p>     <p>&nbsp;</p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The precision of    the above regression equations is confounded by the reality that population    estimates of town populations rather than hard census data had to be used. The    2011 South African census should provide better estimates of town populations    for future analyses.</font></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Discussion</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Enterprise proportionality    is worthwhile investigating for a number of reasons.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">This study augmented    the original observations about threshold populations<sup>1</sup> by revealing    that there are currently still strong proportionalities between the total number    of enterprises per town and the number of sector enterprises per town for most    of the services sectors presented in <a href="#t2">Table 2</a>. Regression equations    quantified these relationships (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Tables 3</a>, <a href="/img/revistas/sajs/v108n5-6/14t04.jpg">4</a>    and <a href="/img/revistas/sajs/v108n5-6/14t05.jpg">5</a>) and much of the variances of particular    sector enterprise numbers were explained (<a href="#t6">Table 6</a>). Proportionalities    were also linked to the population numbers of towns in general (<a href="#t8">Table    8</a>) and especially to those of the large towns (<a href="#t9">Table 9</a>).</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">A comprehensive    literature search revealed that little has been reported, internationally as    well as locally, on the reasons why proportionalities are present and could    be expected in the enterprise structures of towns. For instance, a recent report    on the regeneration of small towns in South Africa paid little attention to    this issue.<sup>21</sup> The exception is provided by Toerien and Seaman<sup>9</sup>    who likened enterprise development in South African rural towns to islands rising    above the sea and over time being colonised by all kinds of living organisms.    As new space becomes available on a natural island, some immigrant organisms    will use it.<sup>10</sup> Toerien and Seaman<sup>9</sup> showed that the Species    Equilibrium Model of MacArthur and Wilson<sup>10</sup> can be used to describe    the dynamics of enterprise development in South African towns. They suggested    that when a new town is founded, entrepreneurial space becomes available and    is utilised by entrepreneurs who, similar to their organism counterparts, have    to move across a 'sea' to reach the opportunities. Not all entrepreneurs are    successful in the competitive business environment and some enterprises go under.    Over time equilibrium is reached between the rate of development of new enterprises    and the rate of disappearance of existing enterprises and this phenomenon plays    a major role in defining enterprise proportionalities. In addition, issues such    as town size, population size and town age also played a role in determining    the proportionalities of the 12 Karoo towns.<sup>9</sup></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The question as    to why there are such marked differences in proportionalities between most of    the economic driver sectors and the service sectors deserves attention. In particular,    the difference(s) between the utilisation of entrepreneurial space in the trade    sector (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Table 4</a>) in contrast to, for example,    the processing sector (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>), needs clarification.    A specific question can be posed: why is there such a strong correlation in    the trade sector over 125 towns of different sizes, ages, physical localities    and origins, and why is it not the case for the processing sector?</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Considering Beinhocker's<sup>22</sup>    discussion of competition between business plans, and hence between enterprises,    different proportionalities in the two sectors probably suggest that entrepreneurial    space is used differently by the entrepreneurs of the two sectors. In the trade    sector, entrepreneurs are able to 'see' business opportunities easily and exploit    them. As a consequence, when one business disappears as a result of competition    it is rapidly replaced, usually by the actions of a different entrepreneur who    is willing to take on the risks involved. This phenomenon represents 'run-of-the-mill'    entrepreneurship with entrepreneurs that can 'see' and react to 'standard' business    opportunities with perceived limited risks.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">In contrast to    the above, value addition in the processing and factory sectors is not pursued    effectively in South Africa and small towns may have more of these enterprises    than very large towns (<a href="/img/revistas/sajs/v108n5-6/14t03.jpg">Table 3</a>). Obviously, available    entrepreneurial space is not being utilised fully, perhaps because it is much    more difficult to 'see' these business opportunities and they probably are more    risky and require significantly higher capital inputs. Success in these sectors    is dependent on 'special' entrepreneurs.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The basic differences    between enterprises founded upon 'run-of-the-mill' and 'special' entrepreneurship    are fundamental. 'Run-of-the-mill' enterprises are dependent on, and limited    by, local demand and if there is only a small demand, the entrepreneurial space    is small. In contrast, 'special' enterprises have much larger markets because    their products and/or services are exportable, or in other words, they are potential    global players and have an unlimited scope.</font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">The implications    for rural development and regeneration of these two broad entrepreneurial types    are considerable. For instance, the results (<a href="/img/revistas/sajs/v108n5-6/14t04.jpg">Table    4</a>) suggest very strongly that the trade sector offers little scope to expand    local economies because the entrepreneurial space in the trade sector is already    fully exploited and there is little chance to create additional opportunities    for emergent entrepreneurs. When a new enterprise is started in a sector that    is already congested and in balance with the market demand of this sector, it    will be subject to strong competition. If it manages to scrape out a place in    the sector, it will do so at the expense of another enterprise that already    operates in that sector. A system of 'musical chairs' will ensue where one enterprise    is merely replaced by another but the total 'game' has not grown.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">To expand the economies    of South African towns, the money spent in the economies of these towns must    be grown. This challenge is huge. Nel and Hill<sup>12</sup> outlined some of    the complicating factors, for example, agriculture being under pressure resulting    in a loss of farmers and farm workers as clients of towns' enterprises; better    roads and transport infrastructure resulting in rural and town residents making    their purchases in the larger towns of a region; the loss of personnel (and    their wages) of government departments and organisations such as the South African    Railways, and the loss of schools. Sharp contrasts exist in LED practice between    large cities with their focus on competitiveness, secondary cities with a focus    on economic readjustment and small towns in which LED practice is limited or    laggard.<sup>17</sup> Given these challenges, it is clear that development strategies    must focus on how the flow of money into towns can be enhanced. Success in the    mining sector depends on the presence of mineral resources, which cannot be    planned. Therefore, growing the processing, factory, tourism and hospitality,    and construction sectors must be a serious consideration in most strategic LED    plans for towns because these sectors offer opportunities to increase the flow    of money into towns.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Several studies    have indicated that many municipalities lack an understanding of their economic    spaces.<sup>17,21</sup> The hypothesis outlined here, of two broad kinds of    entrepreneurship in South African towns, offers a new way of thinking about    rural development and job creation. It needs to be investigated further and    a better understanding of the proportionality phenomena is a key to such an    endeavour.</font></p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="3"><b>Acknowledgements</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">We gratefully acknowledge    the financial support of the Centre for Environmental Management, University    of the Free State; the library support of Annamarie du Preez and Estie Pretorius;    and the analytical support of Marie Toerien.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Competing interests</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">We declare that    we have no financial or personal relationships which may have inappropriately    influenced us in writing this article.</font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b>Authors' contributions</b></font></p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">D.F.T. was responsible    for the conceptualisation of the basic ideas, the analyses of the enterprise    assemblages of towns, the interpretation of the results and writing the manuscript.    M.T.S. refined some concepts and provided advice from an ecological perspective.</font></p>     ]]></body>
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Boston: Harvard Business School Press, 2006; p. 287-297.</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[&#160;<a href="javascript:void(0);" onclick="javascript: window.open('/scielo.php?script=sci_nlinks&ref=751472&pid=S0038-2353201200030001400022&lng=','','width=640,height=500,resizable=yes,scrollbars=1,menubar=yes,');">Links</a>&#160;]<!-- end-ref --><p>&nbsp;</p>     <p>&nbsp;</p>     <p><font face="Verdana, Arial, Helvetica, sans-serif" size="2"><b><a name="back"></a><a href="#top"><img src="/img/revistas/sajs/v108n5-6/seta.jpg" border="0"></a>    Correspondence to:    <br>   </b> Danie Toerien    <br>   Postal address: PO Box 339, Bloemfontein 9300, South Africa    <br>   Email: <a href="mailto:Toeriend@ufs.ac.za">Toeriend@ufs.ac.za</a></font></p>     ]]></body>
<body><![CDATA[<p><font face="Verdana, Arial, Helvetica, sans-serif" size="2">Received: 12 Jan.    2011    <br>   Accepted: 06 Dec. 2011    <br>   Published: 08 May 2012</font></p>      ]]></body>
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