Thesis (MBA)--Stellenbosch University, 2015. / ENGLISH ABSTRACT: Khayelitsha was developed as a dormitory town on the outskirts of Cape Town in the late 1980’s with little intention by the government of the time to actively stimulate local economic development within the area. Since 1994 one of the biggest South African challenges is to ensure that dormitory townships, like Khayelitsha, are developed appropriately to create jobs and to allow for the evolution of quality living environments. Many types of government investment initiatives came to life in the past 20 years, complemented by initiatives to draw in private sector investment in these areas. Nevertheless, the economic development discrepancy between Khayelitsha and other areas in Cape Town remains stark. This study shows that to date development initiatives did not focus enough on the stimulation and development of local entrepreneurial enterprises. Clustering of these enterprises occurs around key areas, like shopping centres, which act as a catalytic factor for other support initiatives aimed at SMME development. The study identifies key areas of local small and micro-businesses clustering in Khayelitsha and evaluates the underlying growth factors. It then presents key suggestions regarding policy interventions to support local entrepreneurial development. These suggestions were two pronged. Spatial interventions focused on recommendations regarding development nodes, activity routes and alternative zoning practices. General business support initiatives relates to access to finance, education and training, mentoring, business incubators and business networks. In general the study highlights the importance of public-private partnerships in small business support.