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The effect of financial literacy on the sustainability of SMMEs in South Africa Gauteng province
Author(s)
Masingili, Esona
Date Issued
2022
Type
Thesis
Publisher
Cape Peninsula University of Technology
Abstract
Small, Medium and Micro-sized Enterprises (SMMEs) play a crucial role in South Africa, where they create jobs, prevent poverty eradication, and boost the economy. However, the significance of SMMEs demonstrates a low rate of sustainability. Despite the challenges SMMEs face in combating poverty in the country due to a lack of financial literacy, SMMEs in South Africa are struggling and have limited viability. According to observational studies, financial literacy and business management skills are the primary causes of this failure and the low survival rate (Eniola & Entebang, 2015). A thorough literature review and empirical research were conducted to investigate the effect of financial literacy on the sustainability of SMMEs. The literature review revealed a direct relationship between financial literacy and sustainability and a positive relationship between financial literacy and sustainability.
In this study, a mixed research method was used. An electronic or online questionnaire and follow-up interviews were utilised, and the study had a sample size of 200 people. The questionnaire was completed by SMMEs from South Africa's Gauteng province. The research was carried out using the pragmatism research paradigm and the random sampling technique.
The findings revealed that SMMEs have insufficient knowledge of finance, financial concepts, and understanding and that the owners have primarily failed to plan their businesses. Concerns were identified and related to understanding inflation and interest rates. It was also discovered that using the services of accountants, lawyers, and other professionals for business purposes is uncommon among SMMEs, and the owners' numeracy abilities were called into question after poor results in the questions that required calculations.
Recommendations for improving SMME financial literacy to increase sustainability rates include the establishment of government support programs aimed at improving financial literacy and basic accounting capabilities, as well as the implementation of financial literacy mentorship programs in which the government provides an incentive (via BEE points, grants, subsidies, and other means) to enterprises that provide mentoring.
In this study, a mixed research method was used. An electronic or online questionnaire and follow-up interviews were utilised, and the study had a sample size of 200 people. The questionnaire was completed by SMMEs from South Africa's Gauteng province. The research was carried out using the pragmatism research paradigm and the random sampling technique.
The findings revealed that SMMEs have insufficient knowledge of finance, financial concepts, and understanding and that the owners have primarily failed to plan their businesses. Concerns were identified and related to understanding inflation and interest rates. It was also discovered that using the services of accountants, lawyers, and other professionals for business purposes is uncommon among SMMEs, and the owners' numeracy abilities were called into question after poor results in the questions that required calculations.
Recommendations for improving SMME financial literacy to increase sustainability rates include the establishment of government support programs aimed at improving financial literacy and basic accounting capabilities, as well as the implementation of financial literacy mentorship programs in which the government provides an incentive (via BEE points, grants, subsidies, and other means) to enterprises that provide mentoring.
Additional information
Thesis (Management Accounting (MGCMAR))--Cape Peninsula University of Technology, 2022
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