What characterises high-growth firms in South Africa? Evidence from World Bank Enterprise Survey

Abstract

In the past two decades, considerable efforts have been made to promote small and medium enterprises as a catalyst for job creation in many countries, including South Africa. However, globally a growing body of evidence shows that only a small segment of small and medium enterprises in an economy accounts for 50 to 70% of net new jobs. Using the World Bank Enterprise Survey and logit and quantile regressions, this paper empirically explores the characteristics of high growthfirms in South Africa. The study finds that firms that are less than 6 years create more jobs than the average firm in the sample. The results further suggest that the typical high-growth firms are black-owned.

Lending Technologies, Firm Characteristics and Small Business Efficiency in South Africa

“…Several studies on technical efficiency have been conducted in South Africa. However, these have mainly focused on sector-by-sector analysis, such as technical efficiency in the banking sector, agricultural cooperatives and local government municipalities, with little focus on SMMEs (Akinloye et al 2010;Gwebu and Matthews 2018;Mazorodze 2019;Mbonigaba and Oumar 2016;Xaba et al 2018) while the few targeting SMMEs largely assess the impact of internal factors of firms on technical efficiency only (Castillo et al 2012;Gwebu and Matthews 2018;Mthimkhulu and Aziakpono 2016). Some studies (Tenaye 2020) show that technical efficiency can be amplified by external factors, for example, the technical efficiency of small-scale farmers in Ethiopia was higher for farms issued with land certification than those without based on the national land fragmentation policy.…”

“…Thirdly, we added race as the final variable. In the South African context, the race of an individual is an important factor that influences economic activities among different production units including the flow of funds from financial institutions to individuals and businesses, hence influencing business activity along racial lines (Gwebu and Matthews 2018;Mthimkhulu and Aziakpono 2016). As a result, it is expected that race affects the technical efficiency of firms.…”