The impact of the South African business enviroment on the availability of debt finance to new small and medium enterprises

[摘要] South Africa suffers from high unemployment with an official estimate of approximately24.5% of the economically active population unemployed (Statistics South Africa, 2009). Inaddition, the country experiences high levels of poverty and income inequality. SMEs areexpected to be an important vehicle to address the challenges of job creation, sustainableeconomic growth, equitable distribution of income and the overall stimulation of economicdevelopment. According to Maas & Herrington (2006) the contribution of the SME sectorcannot be sustained without the creation of new SMEs. New SMEs are seen as a significantcomponent 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 TotalEarly-Stage Entrepreneurial activity is one of the lowest in the world. In addition, the failurerate of new SMEs is one of the highest in the world. Non-availability of finance is one of theprimary causes of failure for new SMEs in South Africa. The two major external sources offinance for new SMEs are equity and debt. External equity is generally unavailable for newSMEs in both developed and developing countries. New SMEs in developed countries, unlikedeveloping countries such as South Africa, are able to access debt finance from commercialbanks and trade creditors.The primary objective of this study was to determine how to improve the availability of debtfrom commercial banks and trade creditors to new SMEs. The argument of this study wasthat there are factors in the business environment that cause debt not to be available to newSMEs. Understanding the causes of non-availability of debt is important to determining howto improve the availability of debt to new SMEs. For this purpose an initial 52-itemquestionnaire was developed after a thorough review of the literature on the businessenvironment and debt finance and administered to 100 respondents from commercial banksand 100 respondents that were trade creditors in a pilot study. Exploratory factor analysisresulted in the reduction of 52-item questionnaire to a 43-item questionnaire and nineunderlying factors for commercial banks and 39-item questionnaire and nine underlyingfactors for trade creditors. The nine factors included four internal factors and five externalfactors. The internal factors were labelled as managerial competencies, collateral, networkingand business information. The external factors were labelled the macro-economy, the legalenvironment, ethics, crime and corruption. Another objective of the study was to investigateempirically 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 availabilityof debt to new SMEs. The instrument used was the self-administeredquestionnaire. The statistical analyses included descriptive statistics, frequencies, factoranalysis, 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 businessenvironment and the availability of debt. Eight out of the nine variables in the businessenvironment have significant relationships with the availability of either bank credit ortrade credit. The findings also indicated that are some similarities and differences withrespect to why debt is not available to new SMEs from commercial banks and tradecreditors. In addition, the findings suggested that internal factors are more important thanexternal factors with respect to why debt is not available from both commercial banks andtrade creditors. The study suggested some recommendations to improve the availability ofdebt finance to new SMEs. The recommendations included the need to improve theinvestment readiness of new SMEs. To access debt, new SMEs must have collateral andadequate owners' equity. Training and communication can also help new SME owners toget investment ready. In addition, owners of new SMEs should network by attendingseminars and trade fairs. The legal system has to be made more efficient in practice toreduce unethical behaviour, crime and corruption.

[发布机构] University of the Free State