Hindrance to Benefit from the Potential Sources of Finance to Enhance the Growth of Small and Medium Size Enterprises in South Africa

Abstract

Small and Medium Size Enterprises are increasing playing an important role in economic development of most countries all over the world nowadays. For these small businesses to grow and be sustainable, they require sufficient capital in the form of financial resources to go operational because the lack of funding or access to finance could hamper their growth. The lack of access to finance has been reported to be one of the major causes of small business failure and discontinuity in South Africa. The purpose of this study is to identify the available sources of financial support for the growth of SMEs in South Africa. The study anticipates to find out why despite government's effort to offer financial support for the growth of the SME sector, the rate of small business failure and discontinuity in South Africa is still one of the highest in the world. A qualitative methodological approach was utilized and interviews were conducted on SME managers on the subject under investigation. It was found that most SME managers in South Africa are ignorant about available sources of finance offered by government to boost the sector. It is imperative for the relevant authorities to revise and improve on the means and mechanisms used to support SMEs such that all small business managers are aware of the availability of this assistance and where and how to access it. In this regard, the government need to set up education and training facilities in different communities where intending and existing small business managers would be educated on the available sources of finance and how to access this funding to start up and grow their businesses.

AN EVALUATION OF GOVERNMENT SUPPORT SERVICES FOR SMMEs IN THOHOYANDOU, SOUTH AFRICA

“…The level of unemployment stood at 29.1% in 2016 (Mulaudzi & Ajoodha, 2020). Relatedly, a high number of these businesses end up failing (Saah & Musvoto, 2020;Shiyuti, Zainol & Ishak, 2021;Seid, 2020).…”

“…There is a direct link between the lack of access to business finance and the failure of SMMEs (Fosu, 2020;Refiloe, Derera, McArthur & Ndayizigamiye, 2020;Saah & Musvoto, 2020). The failure of SMMEs is directly related with lack of support structures, poor infrastructure, lack of access to markets, onerous labour laws and government bureaucracy (Schirmerl & Visser, 2021, Wiid & Cant, 2021Worstall, 2016).…”

“…The failure of SMMEs is directly related with lack of support structures, poor infrastructure, lack of access to markets, onerous labour laws and government bureaucracy (Schirmerl & Visser, 2021, Wiid & Cant, 2021Worstall, 2016). The estimated failure rate of SMMEs in South Africa is between 70 and 80% (Nkwinika & Mashau (2020) as survival rates decline to 3 to 5 years (Asah, Louw & Williams 2020;Botha, Smulders, Combrink, & Meiring 2021;Saah & Musvoto 2020).…”

“…This is in concurrence with a study conducted by Tala (2021) who discovered that 75% of SMMEs were denied loans by banks, and only a fraction of the small businesses that apply for loans have their applications granted. , Tala (2021), Saah & Musvoto (2020) also list several reasons why SMMEs find it difficult to access finance -these include poor business plans, lack of collateral security and lack of the required bank loan. The minority that is getting the requested amount may be since they had the needed collateral, projected statements may be realistic, and the requested amount may be lower with limited formalities as different businesses require different capital injections (Asah, Louw & Williams, 2020).…”