Effects of a state subsidy programme in the small business sector: The case of the emerging market

Timothy Olaniyi Aluko,Nicolaas Booyse

doi:10.22495/jgrv11i1siart5

Timothy Olaniyi Aluko, Nicolaas Booyse

Open Access

https://doi.org/10.22495/jgrv11i1siart5

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Abstract

This paper examines the effects of the state subsidy programme on the beneficiary’s firm operating status in the small business sector. The state subsidy is a matching grant-funded programme to black small businesses in South Africa to improve their competitiveness within the mainstream economy. A cross-sectional time-series secondary dataset of 945 beneficiary firms from 2012 to 2016 was utilised in the study. Data were analysed using a descriptive, multiple comparison Scheffé test and binary logistic regression technique estimated at 95% confidence intervals level of significance. The findings revealed that the state subsidy programme is a pivotal contributor to the black firm’s operating status; firms in the services and construction sectors show significant improvement in their operating status and had about twice the odds of being in operation compared to firms in the manufacturing and agricultural sectors. This study will assist state programme administrators and policymakers to realise the importance of the services sector, which emerged as a major driver of innovation in the growth of local economies (Kazekami, 2017). Neglecting the sector might be counterproductive in case of a similar programme in the future. This study is limited by scope as only one state subsidy programme in South Africa was studied which may not be enough to make an inference.

Highlights

In post-apartheid South Africa, the government introduced various initiatives and policy programmes to support start-up and existing small businesses on improving their performance and sustainability (Rogerson, 2004; Mason & Brown, 2013; Spigel, 2017)
This paper examines the effects of the state subsidy programme on the beneficiary’s firm operating status in the small business sector
The findings revealed that the state subsidy programme is a pivotal contributor to the black firm’s operating status; firms in the services and construction sectors show significant improvement in their operating status and had about twice the odds of being in operation compared to firms in the manufacturing and agricultural sectors

Summary

Introduction

In post-apartheid South Africa, the government introduced various initiatives and policy programmes to support start-up and existing small businesses on improving their performance and sustainability (Rogerson, 2004; Mason & Brown, 2013; Spigel, 2017). Government initiatives include a statutory and strategic policy that guides the institutionalisation of small business support processes, systems, and procedures within and among the programme management, administrations, and the targeted beneficiary (Koens & Thomas, 2016). Government support for the development and growth of small businesses has been controversial and inconsistent due to various challenges affecting their operating status post-1994 (du Plessis, 2014). Most programmes are controversial or have not been tested or successful due to their structural and functional approach (Peters & Naicker, 2013) One such programme is the Black Business Suppliers Development Programme (BBSDP). Beneficiaries of the grant consist of formal small businesses in operation for a year or more with their shareholding held by the black majority

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