UNIVERSITY OF SOUTH AFRICA
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
ETP2601: Entrepreneurial Skills
Assignment 3 — 40 Marks
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
ETP2601
Module Code:
Entrepreneurial Skills
Module Name:
Assignment 3
Assessment:
Dr W Sambo / Dr NM Mmako
Lecturer:
40
Total Marks:
Submitted in partial fulfilment of the requirements for ETP2601 — UNISA
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
Question 1: Entrepreneur or Small Business Manager? A Critical Evaluation
of Baloyi and Hlungwani
1.1 Theoretical Framework: Distinguishing the Entrepreneur from the Small Business
Manager
The distinction between an entrepreneur and a small business manager is not merely one of
scale or legal form; it is a distinction rooted in behaviour, intent, and attitude toward oppor-
tunity. A small business manager operates within a stable, known environment, managing
existing routines and maintaining a business rather than growing or transforming it. An en-
trepreneur, by contrast, introduces change, seizes opportunities that others have not yet seen,
and mobilises resources under conditions of genuine uncertainty (Schumpeter, 1934).
Schumpeter’s theory of entrepreneurship centres on the concept of creative destruction: the
entrepreneur creates new value by finding novel combinations of resources, displacing older,
less efficient arrangements in the process (Schumpeter, 1934). Kirzner (1997) offers a comple-
mentary view, arguing that the entrepreneur’s defining characteristic is alertness: the ability
to notice and act on profit opportunities that others have overlooked. Both frameworks agree
that the entrepreneur is not a mere administrator; they are an agent of change.
Shane and Venkataraman (2000) further propose that entrepreneurship requires three condi-
tions: the existence of opportunities, differential access to information about those opportuni-
ties, and individuals willing to bear the risk of acting on them. This framework is particularly
useful for evaluating Baloyi and Hlungwani, as it directs attention to what they noticed, how
they responded, and what they were prepared to risk.
1.2 Opportunity Recognition
The first dimension of entrepreneurial classification is opportunity recognition. Baloyi and
Hlungwani identified a clear and specific gap in the market: dignified and reliable funeral
services were not adequately available in rural and peri-urban settlements in the Bushbuck-
ridge region. This is not a minor administrative observation. It reflects genuine alertness in
the Kirznerian sense: the two founders noticed a mismatch between what the market was pro-
viding and what communities actually needed, and they chose to act on it (Kirzner, 1997).
Their decision to acquire operational territories and an existing client base from an estab-
Page 2 of 16
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
lished funeral operator is also significant. Rather than starting entirely from scratch, they pur-
chased market access strategically, which is consistent with the behaviour of resource-aware
entrepreneurs who exploit existing structures to reduce entry costs while still creating new
value in under-served areas.
1.3 Risk Orientation
Risk-taking is a second critical dimension. Baloyi and Hlungwani did not enter the funeral ser-
vices market from a position of financial safety. They secured a loan of R130,000, financed two
vehicles, and drew on their personal salaries to cover operational shortfalls. During the first
year, the business operated below the break-even point. This profile fits squarely within the
entrepreneurial conception of risk: they committed personal financial resources to an uncer-
tain outcome without a guarantee of recovery (Shane and Venkataraman, 2000).
A small business manager, by definition, manages an established concern with known income
flows and routine expenses. The founders of Ndzalama Funeral Services were doing something
quite different during their early phase: they were absorbing personal financial exposure in
pursuit of a business model that had not yet proved viable in their specific market context.
1.4 Resource Mobilisation
The resource mobilisation practices of Baloyi and Hlungwani also reflect entrepreneurial rather
than managerial behaviour. Facing capital constraints, they did not simply reduce ambitions.
They found creative alternatives: renting storage from a competitor in Thulamahashe, subcon-
tracting tents, and hiring vehicles on demand rather than purchasing them outright. Penrose
(1959) argues that entrepreneurs are distinguished precisely by this capacity to reconfigure
available resources in ways that allow the firm to function beyond what its owned assets alone
would permit.
This kind of improvised resource leverage, what the literature sometimes calls bricolage, is a
recognised entrepreneurial response to resource scarcity (Baker and Nelson, 2005). It reflects
not the behaviour of someone maintaining a steady operation, but that of someone actively
building a business under constraint.
Page 3 of 16
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
1.5 Limitations and the Manager Dimension
That said, a nuanced assessment must acknowledge where their profile deviates from the Schum-
peterian ideal. They are both still employed by the municipality, meaning the venture is not
their sole occupation. The business is also not introducing a fundamentally new product or
service; funeral services exist. In Schumpeter’s framework, this would place them closer to the
Kirznerian archetype of alert market arbitrage than to the disruptive innovator. Their innova-
tion is geographic and service-quality based rather than product-based.
1.6 Conclusion: Classification
On balance, Baloyi and Hlungwani should be classified as entrepreneurs. Their behaviour
across all four analytical dimensions, including opportunity recognition, risk orientation, re-
source mobilisation, and strategic intent, aligns with established entrepreneurial theory rather
than small business management. They identified an unmet need, accepted personal finan-
cial risk, assembled resources creatively, and are actively scaling a business in a geographically
dispersed and underserved market. The absence of radical product innovation does not strip
them of the entrepreneurial label; Kirzner’s framework confirms that alertness to and exploita-
tion of overlooked market gaps constitutes genuine entrepreneurship (Kirzner, 1997).
Key Distinction
Entrepreneur vs. Small Business Manager: The critical distinction lies not in
the size of the business but in the behaviour of its founder. A small business manager
maintains existing operations within known parameters. An entrepreneur creates or
reorganises value under uncertainty, accepts personal risk, and recognises opportunities
others have missed. Baloyi and Hlungwani satisfy all three criteria.
Page 4 of 16
, UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
Question 2: The Partnership as a Legal Form for Ndzalama Funeral Services
2.1 The Nature of a Partnership in South African Law
In South Africa, a partnership is a legal relationship formed between two or more persons
who contribute money, property, labour, or skills for the purpose of conducting a business and
sharing in its profits and losses (SARS, 2024). Unlike a private company or close corporation,
a partnership is not a separate legal entity in the eyes of the law. It is governed by the com-
mon law rather than by dedicated statute, and it carries no requirement for formal registra-
tion with the Companies and Intellectual Property Commission (CIPC) (GCM Legal, 2017).
This legal architecture has both practical advantages and serious structural risks, particularly
for an enterprise like Ndzalama Funeral Services, which is expanding, employing staff, and
seeking external capital.
2.2 Positives of the Partnership Structure
Several aspects of the partnership structure align well with the founders’ situation at the time
of registration.
Speed and low cost of formation. There are essentially no legal formalities required to
establish a partnership in South Africa, making it considerably cheaper and faster to set up
than a private company (GCM Legal, 2017). For two individuals starting out with limited
capital (a loan of R130,000 and personal salaries), this reduced formation cost was a mean-
ingful advantage.
Complementary resource pooling. A partnership allows the two founders to combine
their respective skills, networks, and financial contributions in a structured way (SME South
Africa, 2025). Both Baloyi and Hlungwani bring municipal employment experience and com-
munity embeddedness in the Bushbuckridge region, and the partnership formalises this com-
plementarity.
Simplified taxation. Partnerships are not taxed as separate entities. Each partner is taxed
individually on their share of the profits, avoiding the double taxation that can arise in a cor-
porate structure (SARS, 2024). Given that both founders supplement business income with
salaries, this pass-through tax treatment is manageable.
Fewer compliance requirements. Partnerships face limited audit and reporting require-
Page 5 of 16
College of Economic and Management Sciences
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
ETP2601: Entrepreneurial Skills
Assignment 3 — 40 Marks
⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄ ⋄⋄
ETP2601
Module Code:
Entrepreneurial Skills
Module Name:
Assignment 3
Assessment:
Dr W Sambo / Dr NM Mmako
Lecturer:
40
Total Marks:
Submitted in partial fulfilment of the requirements for ETP2601 — UNISA
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
Question 1: Entrepreneur or Small Business Manager? A Critical Evaluation
of Baloyi and Hlungwani
1.1 Theoretical Framework: Distinguishing the Entrepreneur from the Small Business
Manager
The distinction between an entrepreneur and a small business manager is not merely one of
scale or legal form; it is a distinction rooted in behaviour, intent, and attitude toward oppor-
tunity. A small business manager operates within a stable, known environment, managing
existing routines and maintaining a business rather than growing or transforming it. An en-
trepreneur, by contrast, introduces change, seizes opportunities that others have not yet seen,
and mobilises resources under conditions of genuine uncertainty (Schumpeter, 1934).
Schumpeter’s theory of entrepreneurship centres on the concept of creative destruction: the
entrepreneur creates new value by finding novel combinations of resources, displacing older,
less efficient arrangements in the process (Schumpeter, 1934). Kirzner (1997) offers a comple-
mentary view, arguing that the entrepreneur’s defining characteristic is alertness: the ability
to notice and act on profit opportunities that others have overlooked. Both frameworks agree
that the entrepreneur is not a mere administrator; they are an agent of change.
Shane and Venkataraman (2000) further propose that entrepreneurship requires three condi-
tions: the existence of opportunities, differential access to information about those opportuni-
ties, and individuals willing to bear the risk of acting on them. This framework is particularly
useful for evaluating Baloyi and Hlungwani, as it directs attention to what they noticed, how
they responded, and what they were prepared to risk.
1.2 Opportunity Recognition
The first dimension of entrepreneurial classification is opportunity recognition. Baloyi and
Hlungwani identified a clear and specific gap in the market: dignified and reliable funeral
services were not adequately available in rural and peri-urban settlements in the Bushbuck-
ridge region. This is not a minor administrative observation. It reflects genuine alertness in
the Kirznerian sense: the two founders noticed a mismatch between what the market was pro-
viding and what communities actually needed, and they chose to act on it (Kirzner, 1997).
Their decision to acquire operational territories and an existing client base from an estab-
Page 2 of 16
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
lished funeral operator is also significant. Rather than starting entirely from scratch, they pur-
chased market access strategically, which is consistent with the behaviour of resource-aware
entrepreneurs who exploit existing structures to reduce entry costs while still creating new
value in under-served areas.
1.3 Risk Orientation
Risk-taking is a second critical dimension. Baloyi and Hlungwani did not enter the funeral ser-
vices market from a position of financial safety. They secured a loan of R130,000, financed two
vehicles, and drew on their personal salaries to cover operational shortfalls. During the first
year, the business operated below the break-even point. This profile fits squarely within the
entrepreneurial conception of risk: they committed personal financial resources to an uncer-
tain outcome without a guarantee of recovery (Shane and Venkataraman, 2000).
A small business manager, by definition, manages an established concern with known income
flows and routine expenses. The founders of Ndzalama Funeral Services were doing something
quite different during their early phase: they were absorbing personal financial exposure in
pursuit of a business model that had not yet proved viable in their specific market context.
1.4 Resource Mobilisation
The resource mobilisation practices of Baloyi and Hlungwani also reflect entrepreneurial rather
than managerial behaviour. Facing capital constraints, they did not simply reduce ambitions.
They found creative alternatives: renting storage from a competitor in Thulamahashe, subcon-
tracting tents, and hiring vehicles on demand rather than purchasing them outright. Penrose
(1959) argues that entrepreneurs are distinguished precisely by this capacity to reconfigure
available resources in ways that allow the firm to function beyond what its owned assets alone
would permit.
This kind of improvised resource leverage, what the literature sometimes calls bricolage, is a
recognised entrepreneurial response to resource scarcity (Baker and Nelson, 2005). It reflects
not the behaviour of someone maintaining a steady operation, but that of someone actively
building a business under constraint.
Page 3 of 16
,UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
1.5 Limitations and the Manager Dimension
That said, a nuanced assessment must acknowledge where their profile deviates from the Schum-
peterian ideal. They are both still employed by the municipality, meaning the venture is not
their sole occupation. The business is also not introducing a fundamentally new product or
service; funeral services exist. In Schumpeter’s framework, this would place them closer to the
Kirznerian archetype of alert market arbitrage than to the disruptive innovator. Their innova-
tion is geographic and service-quality based rather than product-based.
1.6 Conclusion: Classification
On balance, Baloyi and Hlungwani should be classified as entrepreneurs. Their behaviour
across all four analytical dimensions, including opportunity recognition, risk orientation, re-
source mobilisation, and strategic intent, aligns with established entrepreneurial theory rather
than small business management. They identified an unmet need, accepted personal finan-
cial risk, assembled resources creatively, and are actively scaling a business in a geographically
dispersed and underserved market. The absence of radical product innovation does not strip
them of the entrepreneurial label; Kirzner’s framework confirms that alertness to and exploita-
tion of overlooked market gaps constitutes genuine entrepreneurship (Kirzner, 1997).
Key Distinction
Entrepreneur vs. Small Business Manager: The critical distinction lies not in
the size of the business but in the behaviour of its founder. A small business manager
maintains existing operations within known parameters. An entrepreneur creates or
reorganises value under uncertainty, accepts personal risk, and recognises opportunities
others have missed. Baloyi and Hlungwani satisfy all three criteria.
Page 4 of 16
, UNISA | ETP2601 Assignment 3 — Entrepreneurial Skills
Question 2: The Partnership as a Legal Form for Ndzalama Funeral Services
2.1 The Nature of a Partnership in South African Law
In South Africa, a partnership is a legal relationship formed between two or more persons
who contribute money, property, labour, or skills for the purpose of conducting a business and
sharing in its profits and losses (SARS, 2024). Unlike a private company or close corporation,
a partnership is not a separate legal entity in the eyes of the law. It is governed by the com-
mon law rather than by dedicated statute, and it carries no requirement for formal registra-
tion with the Companies and Intellectual Property Commission (CIPC) (GCM Legal, 2017).
This legal architecture has both practical advantages and serious structural risks, particularly
for an enterprise like Ndzalama Funeral Services, which is expanding, employing staff, and
seeking external capital.
2.2 Positives of the Partnership Structure
Several aspects of the partnership structure align well with the founders’ situation at the time
of registration.
Speed and low cost of formation. There are essentially no legal formalities required to
establish a partnership in South Africa, making it considerably cheaper and faster to set up
than a private company (GCM Legal, 2017). For two individuals starting out with limited
capital (a loan of R130,000 and personal salaries), this reduced formation cost was a mean-
ingful advantage.
Complementary resource pooling. A partnership allows the two founders to combine
their respective skills, networks, and financial contributions in a structured way (SME South
Africa, 2025). Both Baloyi and Hlungwani bring municipal employment experience and com-
munity embeddedness in the Bushbuckridge region, and the partnership formalises this com-
plementarity.
Simplified taxation. Partnerships are not taxed as separate entities. Each partner is taxed
individually on their share of the profits, avoiding the double taxation that can arise in a cor-
porate structure (SARS, 2024). Given that both founders supplement business income with
salaries, this pass-through tax treatment is manageable.
Fewer compliance requirements. Partnerships face limited audit and reporting require-
Page 5 of 16
