The Impact of Human, Social and Financial Capital on the Performance of Small and Medium-Sized Enterprises (Smes) in South Africa

© Kamla-Raj 2011

J Soc Sci, 29(3): 193-204 (2011)

The Impact of Human, Social and Financial Capital on the Performance of Small and Medium-Sized Enterprises (SMEs) in South Africa
Olawale Olufunso Fatoki Department of Business Management, University of Fort Hare, Alice, P.B. X1314, Eastern Cape, 5700, South Africa Fax: [phone] E-mail: [e-mail]
KEYWORDS Human Capital. Social Capital. Financial Capital. SMEs. Performance ABSTRACT The study investigates the impact of human, social and financial capital on the performance of Small and Medium-Sized Enterprises (SMEs) in South Africa. The failure rate of SMEs is very high in South Africa and it is important to investigate factors that can impact on the performance of SMEs. Objective and subjective methods were used to measure performance. Data was collected through the use of self-administered questionnaire in a survey. Data analysis was done through descriptive statistics, chi square, Pearson correlation and regression analysis. The results indicate that there is a significant positive relationship between human, social and financial capital and the performance of SME.

I. INTRODUCTION The SME sector plays a vital role in creating jobs and wealth in an economy. SMEs (refer to Table 1 for the definition of SMEs in South Africa) are an essential source of jobs, entrepreneurial spirit and innovation and are thus crucial for fostering competitiveness (Temtime and Pansiri 2004; Wong et al. 2005). The South African economy is characterised by a low growth rate, a high inflation and a high rate of unemployment. SMEs employ half of the working population and contribute 50% to the gross domestic product of South Africa (Gumede 2004; Mutezo 2005; Rogerson 2008). However, despite the noted contribution of SMEs as pointed out above, SMEs in South Africa suffer from a high failure rate. According to Brink et al. (2003), it is estimated that the failure rate of SMEs in South Africa is between 70% and 80%.

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