The impact of financial support on the success of small, medium and micro enterprises in the Eastern Cape province

Ellen C Rungani,Marius Potgieter

doi:10.4102/ac.v18i1.591

Abstract

Orientation: In developing economies, the growth of the economy could be fostered and enhanced by the expansion of the private sector, as this sector is the engine of economic growth. Consequently, it is necessary to accelerate the success of small, medium and micro enterprises (SMMEs) to achieve sustainability in this sector of the economy.Research purpose: The main aim of this article was to determine the relevance of financial support offered to SMMEs by both private and public sectors on the success of businesses.Motivation for the study: The impact of finance on SMME performance is well documented from an international perspective. However, what lacks in extant literature is the understanding of whether the financial support being offered by both public and private sectors is relevant to the success of businesses.Research design, approach and method: A post-positivist paradigm was used with a quantitative research design, which made use of self-administered questionnaires to assess the relevance of financial support offered to SMMEs by both private and public sectors. Multiple regressions and correlations were computed to test the research hypotheses.Main findings: The findings suggest that SMME success is positively and significantly correlated with financial support for both private and public sectors.Practical/managerial implications: Although financial support is important, it needs to be restructured so as to incorporate practical aspects. Furthermore, private and public sectors should create an enabling environment that encourages the effective use of finances, which, in turn, will improve the success of businesses.Contribution/value-add: This article is of particular value to policymakers for ways to improve the success of SMMEs.

Highlights

IntroductionThe growth of the economy could be fostered and enhanced by the expansion of the private sector, as this sector is the engine of economic growth
Introduction and backgroundIn developing economies, the growth of the economy could be fostered and enhanced by the expansion of the private sector, as this sector is the engine of economic growth
Main findings: The findings suggest that SMME success is positively and significantly correlated with financial support for both private and public sectors

Summary

Introduction

The growth of the economy could be fostered and enhanced by the expansion of the private sector, as this sector is the engine of economic growth. The role of SMMEs is increasingly recognised all over the world in terms of their capacity for employment creation, social development and economic growth. Many SMMEs are unable to achieve their business goals by themselves. They need support and resources from both internal and external stakeholders, such as public and private institutions, and from close associates who might be friends and relatives. In a growing and developing economy like South Africa, channelling resources towards the SMME sector leads to a range of benefits for the entire South African population and economy

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