Proceedings of the 19th International Academic Conference, Florence

MACRO-ECONOMIC FACTORS INFLUENCE ON SOUTH AFRICAN SMME BUSINESS PERFORMANCE

JANINE KRUGER, ROOTMAN CHANTAL, SHELLEY SAUNDERS

Abstract:

Purpose of study: To determine the influence of selected macro-economic factors (Transportation costs, Government regulations, Access to finance, Interest rates and Inflation and economic growth) on SMME business performance in the Eastern Cape, South Africa. Research design and methodology: The positivistic research paradigm adopting a quantitative research approach was followed in the study. A structured self-administered questionnaire was used to obtain the primary data from 200 SMME’s business owners/managers in the Eastern Cape region, South Africa. Convenience and snowball sampling were used to obtain the respondents in the sample. The literature review included the effect of macro-economic factors influencing SMME business performance and the environment in which SMMEs operate. Five hypotheses were constructed from literature and empirically tested. An exploratory factor analysis confirmed the validity and Cronbach’s alpha coefficients determined the reliability of the questionnaire. Descriptive statistics (mean and standard deviation) and inference statistics were calculated. The Pearson correlation coefficients determined the strength of the relationships between the independent (Transportation costs, Government regulations, Access to finance, Interest rates and Inflation and economic growth) and dependant variables (Business Performance) and the multiple regression analysis determined if relationships exist between the independent and dependant variables. Research findings: A statistically significant relationship was found between the Access to finance and Business performance. Although the relationships between the Business performance and Transportation costs as well as Interest rates were not statistically significant, negative correlations were found. Positive correlations were found between the Business performance and Government regulations, and Inflation and economic growth although the relationships were not statistically significant. Research limitations: The study was limited to only the Eastern Cape region, South Africa. The SMME definition is broad in scope and may differ from one industry to another. Practical implications: Managers/owners need to take care when selecting transportation methods and obtaining debt capital as an increase in these factors may negatively influence business performance. However, an increase in Government regulations, and Inflation and economic growth may lead to improved business performance. In addition, the more access to finance SMME’s have the more likely business performance will be positively influenced. Contribution of paper: This paper contributes towards the body of knowledge regarding SMME’s in a developing region in South Africa. Although it is well-known that macro-economic factors influence business performance, little is known regarding the extent of the influence, especially within a developing country.

Keywords: Macro-economic factors; SMME; Business performance

DOI: 10.20472/IAC.2015.019.078

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