The impact of the South African business enviroment on the availability of debt finance to new small and medium enterprises
| dc.contributor.advisor | Van Aardt Smit, A. | |
| dc.contributor.author | Fatoki, Olawale Olufunso | |
| dc.date.accessioned | 2017-04-24T10:01:26Z | |
| dc.date.available | 2017-04-24T10:01:26Z | |
| dc.date.issued | 10-Jul | |
| dc.description | Thesis (Ph.D.(Business Management))--University of the Free State, 2010 | en_ZA |
| dc.description.abstract | South Africa suffers from high unemployment with an official estimate of approximately 24.5% of the economically active population unemployed (Statistics South Africa, 2009). In addition, the country experiences high levels of poverty and income inequality. SMEs are expected to be an important vehicle to address the challenges of job creation, sustainable economic growth, equitable distribution of income and the overall stimulation of economic development. According to Maas & Herrington (2006) the contribution of the SME sector cannot be sustained without the creation of new SMEs. New SMEs are seen as a significant component of the solution to South Africa's development issues. Maas & Herrington (2006) also point out that the creation rate of new SMEs in South Africa, as measured by the Total Early-Stage Entrepreneurial activity is one of the lowest in the world. In addition, the failure rate of new SMEs is one of the highest in the world. Non-availability of finance is one of the primary causes of failure for new SMEs in South Africa. The two major external sources of finance for new SMEs are equity and debt. External equity is generally unavailable for new SMEs in both developed and developing countries. New SMEs in developed countries, unlike developing countries such as South Africa, are able to access debt finance from commercial banks and trade creditors. The primary objective of this study was to determine how to improve the availability of debt from commercial banks and trade creditors to new SMEs. The argument of this study was that there are factors in the business environment that cause debt not to be available to new SMEs. Understanding the causes of non-availability of debt is important to determining how to improve the availability of debt to new SMEs. For this purpose an initial 52-item questionnaire was developed after a thorough review of the literature on the business environment and debt finance and administered to 100 respondents from commercial banks and 100 respondents that were trade creditors in a pilot study. Exploratory factor analysis resulted in the reduction of 52-item questionnaire to a 43-item questionnaire and nine underlying factors for commercial banks and 39-item questionnaire and nine underlying factors for trade creditors. The nine factors included four internal factors and five external factors. The internal factors were labelled as managerial competencies, collateral, networking and business information. The external factors were labelled the macro-economy, the legal environment, ethics, crime and corruption. Another objective of the study was to investigate empirically if commercial banks and trade creditors perceive new SMEs as beneficial to their business. Empirical research was conducted to investigate the impact of the nine factors on non availability of debt to new SMEs. The instrument used was the self-administered questionnaire. The statistical analyses included descriptive statistics, frequencies, factor analysis, T-test, ANOVA and Pearson correlation. The Cronbach's alpha was used as a measure of reliability. The research findings were: • There is a significant positive relationship between lack of managerial competency and non-availability of debt from commercial banks and trade creditors to new SMEs. • There is a significant positive relationship between lack of business information and non-availability of debt from commercial banks and trade creditors. • There is a significant positive relationship between lack of collateral and non-availability of debt from commercial banks and an insignificant relationship for trade creditors. • There is a significant positive relationship between lack of networking and non-availability of debt from commercial banks and trade creditors. • There is a significant positive relationship between bad macro-economic environment non-availability of debt from commercial banks and trade creditors. • There is a significant positive relationship between the inefficiency of the legal environment and non-availability of debt from trade creditors and an insignificant relationship for commercial banks. • There is a significant positive relationship between ethical perception of new SMEs and non-availability of debt from trade creditors and an insignificant relationship for commercial banks. • There is a significant positive relationship between crime and non-availability of debt from commercial banks and trade creditors. • There is no significant relationship between corruption and non-availability of debt from commercial banks and trade creditors. • Commercial banks and trade creditors perceive new SMEs as beneficial to their business. The findings suggested that there is a significant relationship between the business environment and the availability of debt. Eight out of the nine variables in the business environment have significant relationships with the availability of either bank credit or trade credit. The findings also indicated that are some similarities and differences with respect to why debt is not available to new SMEs from commercial banks and trade creditors. In addition, the findings suggested that internal factors are more important than external factors with respect to why debt is not available from both commercial banks and trade creditors. The study suggested some recommendations to improve the availability of debt finance to new SMEs. The recommendations included the need to improve the investment readiness of new SMEs. To access debt, new SMEs must have collateral and adequate owners' equity. Training and communication can also help new SME owners to get investment ready. In addition, owners of new SMEs should network by attending seminars and trade fairs. The legal system has to be made more efficient in practice to reduce unethical behaviour, crime and corruption. | en_ZA |
| dc.description.sponsorship | University of Fort Hare | |
| dc.identifier.uri | http://hdl.handle.net/11660/6139 | |
| dc.language.iso | en | en_ZA |
| dc.publisher | University of the Free State | en_ZA |
| dc.rights.holder | University of the Free State | en_ZA |
| dc.subject | Small business -- South Africa -- Finance | en_ZA |
| dc.subject | Small business -- Economic aspects -- South Africa | en_ZA |
| dc.subject | Financial institutions -- South Africa | en_ZA |
| dc.subject | South Africa -- Economic conditions -- 21st century | en_ZA |
| dc.title | The impact of the South African business enviroment on the availability of debt finance to new small and medium enterprises | en_ZA |
| dc.type | Thesis | en_ZA |