Authors: Jacques de Jongh, Suné Ferreira, Zandri Dickason–Koekemoer, and Tafirenyika Sunde
Year: 2020, Volume 20 Number 1
The role of Development Finance Institutions (DFIs) has gained profound significance in their effort of driving the South African economy to a globally recognized developmental state. In light of prevailing lackluster economic conditions, such as high poverty levels, unemployment rates, and a subdued domestic investment climate, their mandate has far surpassed addressing purely market failures. Modern perspectives have come to characterize their ability to address more broadly the national development failure and their potential to promote SMME development, in particular. The ability to direct financial as well as technical support towards catalyzing venture creation proves to be pivotal drivers for economic revitalization and employment creation. The objective of this research is to analyze the impact of technical DFI support on the development of small, medium, and micro enterprises (SMMEs) in the Gauteng Province in South Africa. The study adopted a quantitative research approach and a pre-post single sample research design. A convenience sampling technique was used to select the sample, which comprised of 365 SMME owners involved in one of the country’s national DFIs’ technical support programs. Data were analyzed through the use of descriptive statistics, including frequency distributions. Furthermore, a non-parametric approach to the analysis through the use of the Wilcoxon Signed-rank test was utilized for a pre-post analysis. The results of the study provide evidence of a substantial impact of technical DFI support towards the development of SMMEs in the province. This was centered around an improvement in financial aspects, including annual turnover, gross fixed asset values, as well as quality assurance of the businesses. Further results revealed noteworthy expansions regarding the businesses’ client base as well as employment figures. Key recommendations towards taking full advantage of the potential of DFI in the enhancement of SMME development include enhanced private-public sector linkages through creating enabling environments. Furthermore, these institutions need to adopt a more local and regional strategic focus, prioritizing assistance towards SMMEs specifically located in geographically disbursed areas.
Keywords: DFIs, economic development, SMMEs, non-financial support, Gauteng, South Africa.