Original Research

South African firm-level evidence of the links between finance and efficiency

Waldo Krugell, Marianne Matthee
Journal of Economic and Financial Sciences | Vol 5, No 1 | a317 | DOI: https://doi.org/10.4102/jef.v5i1.317 | © 2018 Waldo Krugell, Marianne Matthee | This work is licensed under CC Attribution 4.0
Submitted: 28 June 2018 | Published: 30 April 2012

About the author(s)

Waldo Krugell, School of Economics, North West University, South Africa
Marianne Matthee, School of Economics, North West University, South Africa

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Abstract

Small and medium-sized enterprises are often seen as drivers of economic growth and development by generating employment opportunities. However, for SMEs to be successful they need finance. Access to finance has been found to be a major obstacle to SMEs’ ability to do business in South Africa. This paper takes a closer look at firms, their access to finance and output per worker in South Africa, by using data from the World Bank Enterprise Survey 2007. The results show that firms that are financially constrained are more vulnerable to shocks and competition, and are weaker contributors to employment creation and growth. These firms are typically small and less established. They hold less inventory, have lower capacity utilisation and are unlikely to be exporters or to introduce new products in response to competition. The results from the regression model confirm that access to finance and different sources of finance are drivers of productivity at firm level.

Keywords

efficiency; finance; access to finance; sources of finance; small and medium enterprises; South Africa

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