This study investigates the impact of networking on access to finance and performance of small and medium enterprises (SMEs) in the Buffalo City Municipality in the Eastern Cape Province of South Africa. The objectives of this study are to examine (1) whether entrepreneurial characteristics of the SME owner and the firm characteristics of the SME are related to networking by SMEs, (2) whether networking is related to access to bank loans and trade credit by SMEs, (3) whether networking is related to the performance of SMEs and (4) whether access to debt finance by SMEs mediates the relationship between networking and performance of SMEs. The results reveal that the gender and education of SME owners and the age, size and legal status of SMEs are the entrepreneurial and firm characteristics that are positively related to networking by SMEs. In addition, the results indicate that there is a positive relationship between networking and access to finance and performance of SMEs. The results of this study further reveal that access to debt finance partially mediates the relationship between networking and performance of SMEs. Lastly, the study recommended that SMEs should network more to gain access to information, resources and contact sharing. This will increase the likelihood of SMEs obtaining finance, and will also improve the performance of SMEs.

Gauteng, one of the nine provinces of South Africa, has a high number of households as compared to the other provinces. Geographically the province has the smallest land size, however it forms the central part of the South African economy. From the total value of credit granted in all provinces, Gauteng has the highest. The province has a high number of registered debt counsellors and an increasing number of consumers who apply for debt counselling because of over-indebtedness. The high number of the registered debt counsellors and consumers seeking debt counselling service gave rise to the purpose of the study. The purpose of the study was to assess the role of debt counselling services provided by debt counsellors to consumers on the one hand, and to also assess whether debt counselling has had a positive effect on the personal financial well-being of consumers who participated in the debt counselling process on the other hand. Furthermore, the study aimed at developing a framework that will empower consumers to be self-sufficient with their finances. From the purpose of the study, two research questions were proposed: (1) How does the debt counselling service provided by debt counsellors assist consumers to manage their finances effectively? (2) Which role does the debt counselling service provided by debt counsellors play in terms of the personal financial well-being of consumers? In an attempt to answer research questions, the theoretical framework of both personal finance and debt counselling were studied. The importance of personal finance, personal financial planning, the evolution of debt counselling, the effectiveness and the ineffectiveness of debt counselling services were identified. A two-phased sequential design (qualitative and quantitative) was used. Fifteen debt counsellors were selected (for the first phase of the study) by making use of a purposeful sampling. These debt counsellors were interviewed and further requested to identify and send questionnaires to consumers whom they have rendered debt counselling service between the years 2007 and 2013. In the second phase of the study, 300 over-indebted consumers were surveyed through a snowball non-probability sampling technique and a response rate of 61% was realised. Data was analysed using ATLAS.ti and the Statistical Package for Social Science (SPSS) for the first and the second data collected respectively. Furthermore, the exploratory factor analysis was used to analyse the data, and the factorability of the data was assessed by means of two statistical measures, namely Bartlett’s test of sphericity and Kaizer Meyer-Olkin. It was observed that most debt counsellors lack financial management knowledge and do not have mechanisms to verify their clients’ financial well-being after debt counselling service had been completed. In addition, there was no evidence that consumers who received debt counselling improved in their financial well-being and that consumers also lacked personal financial management skills. The study concluded that, although debt counselling is essential, it does not necessarily assist consumers to effectively manage their finances. The study purports to suggest the following: Debt counsellors should be subjected to formal financial management training prior to their registration, debt counsellors should provide personal financial management education to their clients, and assess the financial management conduct of their clients once debt counselling process is complete, and debt counsellors should establish debt counsellors’ forums. The South African government (in conjunction with the Department of Education and Training) should introduce and implement personal financial management education in both primary and high schools’ curricula. Personal financial management should continue to be offered at adult learning centres as well as other institutions of higher learning. Employers should appoint employee wellness officers who will provide personal finance training to employees. Credit providers should take the responsibility of educating their clients on how to manage their accounts and the importance of paying debts on time. The South African media should also be used by the government and the NCR to educate and inform consumers about finance-related matters. Finally consumers should seek guidance and advice before making financial commitments. The study concluded by suggesting a framework that should help consumers to manage and sustain their financial well-being. / Business Management / DCOM (Business Management)

Investments in productive assets by broad-based black economic empowerment (BEE) enterprises in South Africa (SA) during the 1990s have been constrained, in part, by a lack of access to capital. Even if capital can be sourced, BEE businesses often face a liquidity problem, as conventional, equally amortized loan repayment plans do not take into account the size and timing of investment returns, or there are lags in the adjustment of management to such new investments. The aim of this dissertation, therefore, is to compare five alternative loan products to the conventional fixed repayment (equally amortized) loan (FRL) that lenders could offer to finance BEE investments in productive assets that are faced with liquidity stress, namely: the single payment non-amortized loan (SPL); the decreasing payment loan (DP); the partial payment loan (PPL); the graduated payment loan (GPL); and the deferred payment loan (DEFPLO-2). This is done firstly by comparing loan repayment schedules for the six loans using a loan principal of R200 000, repaid over 20 years at a nominal contractual annual interest rate of 10%. Secondly, data from five actual BEE loan applications to ABSA Bank and Ithala in KwaZulu-Natal (KZN) during 2003 are used to compare how the FRL, SPL, DP, GPL, and DEFPLO-l, affect investment profitability, and both the borrower's and the lender's cash-flows, assuming that the lender sources funds from a development finance wholesaler. Results for the first part of the study show that the SPL has smaller initial annual repayments than the FRL (R20 000 versus R23 492) that ease liquidity stress in the early years after asset purchase, but requires a nominal balloon repayment of both interest and principal in year 20 of R220 000. The SPL is also the most costly loan, with total nominal and real repayments that are R130 162 and R43 821, respectively, more than the FRL. The PPL has the lowest total nominal and real repayments assuming that the borrower can make the nominal balloon repayment in year 5 of R202 173. If not, the ending balance of the loan in year 4 would have to be refinanced at current market interest rates. In this situation, the PPL uses very similar financing terms to that of the variable rate long-term loans already used in SA, and thus may not be a useful option to consider for BEE investments facing a liquidity problem. Interest rates may have risen over the last four years of the loan, encouraging lenders to add a premium into the interest rate for the refinanced loan, which could worsen the liquidity position of the BEE enterprise. The DP requires higher initial nominal annual loan repayments (R6 508 more than the FRL) that do not ease the liquidity problem in the early years of operation. The DP loan, however, has total nominal and real repayments that are R59 838 and R23 118, respectively, less than the FRL. A GPL with diminishing, finite interest-rate subsidy seems to have the most potential to ease the BEE investment's liquidity stress. The 17YRGPL used to buy land had total nominal and real repayments that were R84 634 and R67 726 (after subsidy), respectively, less than the FRL. If the GPL was used to purchase machinery-type assets, then the 6YRGPL would have required total nominal and real repayments of R13 957 and R12 596, respectively, less than the FRL. Finally, the DEFPLO-2 loan required a total nominal repayment of R531 128 (R61 290 more than the FRL) and a total real repayment of R345 358 (R26 095 more than the FRL). Clearly, the GPL and DEFPLO-2 loan repayment schedules can partly resolve the liquidity problem in the early years (assuming no major income shocks), although the DEFPLO-2 plan requires higher total repayments than the FRL. The question remains whether lenders would be prepared to implement these two financing plans for BEE investments in productive assets, where the funds to finance the diminishing, finite interest-rate subsidy or the deferment would be sourced, and how the interest-rate subsidy would affect asset values. In the second part of the study, the profitability of the five proposed BEE investments in KZN during 2003 was compared for the five loan products using the Net Present Value (NPV) and the Internal Rateof- return (lRR) capital budgeting procedures. The loan terms, interest rates, principal and characteristics of each BEE firm are different with current rates of return on equity varying by business type. Companies A (five-year loan) and C (10-year loan) are agribusinesses with a higher expected current rate of return of 8% on machinery investments, while companies B (eight-year loan), D (15-year loan), and E (20-year loan) invest in farmland with a lower expected current annual rate of return of 5%. The five business plans may not be representative in a statistical sense of all BEE firms in KZN, but were used because they were readily available. Initially it was assumed that donor/grant funds from a development finance wholesaler were lent to an intermediary (like a commercial bank), which in turn, could finance the five investments using any of the five alternative loans, with the lender's repayment to the wholesaler being via a FRL. It was then assumed that the lender could repay its borrowed funds using the same loans, or combinations of them, that it had granted to these companies. Results show that GPLs and DEFPLs can resolve the liquidity problem associated with investments like land in the early years after purchase provided that projected business performance is adequate, while the SPL and GPL are preferred for BEE projects with stronger initial cash-flows like machinery investments. The study also shows that the loan product that best improves the borrower's liquidity is not always best suited to the lender. In most cases, the GPL suited the borrower, but in four of the five cases, the lender would prefer the SPL and to repay the wholesaler using the SPL. The SPL, however, is unlikely to be used, given the large negative real net cash-flows that it generates when the final payments are due. Recent SA experience with the GPLs (interest rate subsidies funded by private sector sugar millers via Ithala) and the DEFPLs (via the Land Reform Empowerment Facility (LREF) which is a wholesaler of funds in SA) suggests that there is scope to alleviate the liquidity problem if a wholesaler of funds can offer such terms to private banks and venture capital investors who then on-lend to finance BEE asset investments that are otherwise considered relatively high credit risks. This would shift the liquidity problem away from the client to the wholesaler of the funds, but requires access to capital at favourable interest rates. Such capital could be sourced from dedicated empowerment funds earmarked by the private sector, donors and the SA government. The lesson for policymakers is that broad-based BEE could be promoted in other farm and non-farm sectors in SA using similar innovative loan products to complement cash grant funds via financial intermediaries, bearing in mind the limitations of the GPL and DEFPL - such as how to finance the subsidy or deferment, and the impact of income shocks. Donor and National Empowerment Fund capital could be used to allocate grants to provide previously disadvantaged individuals with own equity and also to fund finite, diminishing interest-rate subsidies via GPLs, or to fund DEFPLs (many LREF loans have been leveraged by a cash grant component). This could create an incentive for public/private partnerships, as public/donor funds could be then used to attract private sector funds to finance broadbased BEE investments in SA that satisfy empowerment criteria. The five case studies did not show how the GPLs and DEFPLs could make all profitable (positive net present value) but financially infeasible (returns do not match the size and timing of the lender's financing plan) BEE investments in productive assets under the FRL feasible, except for Company E that showed a positive NPV and IRR when the 19YRGPL was used. They did, however, show how the alternative loans could improve liquidity for investments with either strong or poor cash-flows. The financiers consulted to source case studies in KZN in 2003 at the time of the study could not provide the researcher with any profitable, but financially infeasible, BEE business plans. This raises some concern about how effective these empowerment loan products could be in the future as there is uncertainty over how many potential BEE investments in productive assets in SA are likely to be profitable but financially infeasible. Further research is thus needed to assess the impact of these alternative loans on a wider range of broad-based BEE investments, particularly non-farm projects, than considered in this dissertation. / Thesis (M.Agric.Mgt.)-University of KwaZulu-Natal, Pietermaritzburg, 2005.

The potential of small and medium enterprises (SMEs) in promoting economic growth in both developed and developing countries is widely accepted and documented by both scholars and policy makers. Particularly lacking are studies on the evidence in support of the importance of credit rationing to the sustainability of SMEs in an emerging economy like South Africa’s. This specific problem, especially in the developing countries, has been identified as the major bottleneck in realising socio-economic potentials of SMEs in those countries. However, one of the major ways of addressing the challenge of inadequate funding that exists within the SME sector is the use of bank credit. This study was therefore undertaken to explore the role of commercial banks in the provision of credit to the SMEs in South Africa. This study focuses on the issue of the relationship between the banking industry and SMEs. In particular, the problem of credit rationing of, and discrimination against SMEs by commercial banks was investigated. Because credit rationing and finance gaps can stem from imperfections on either supply-side (banks), or demand-side (SMEs), or both, the intention of the study was to examine both of these variables in order to uncover the implications of their relationships. The empirical analysis is based on survey data collected by means of a structured questionnaire which was distributed amongst banks and SME borrowers in the Gauteng Province of South Africa. Contrary to the general view that commercial banks are disinclined to provide credit to SMEs, the study found that South African banks are keen to serve the SMEs and are therefore making efforts to penetrate this potentially profitable market segment. However, several obstacles are potentially restricting the involvement of banks with SMEs in South Africa. The findings revealed that regulations such as the Financial Intelligence Centre Act (FICA) and the National Credit Act (NCA) came out strongly as major hindrances of bank financing to SMEs. Furthermore, it was shown that compliance with the NCA was ranked higher than credit history and profitability as a factor hindering the approval of SME loans. - iii - However, by using the structural equation modelling (SEM), the results also show that there is a positive and significant influence of lending technology and collateral on the supply of credit to SMEs. Variables such as creditworthiness, collateral and e-banking were found to have a positive and significant impact on the provision of credit to SMEs by commercial banks. For both the supply- and demand-side analysis, technology came out as the most important predictor of SME access to finance. This means that banks should strive to align their lending techniques with the dynamic technological developments so as to reach as many SMEs as possible even in the geographically dispersed regions. It is anticipated that improving SME access to bank credit could be the key to the growth and sustainability of SMEs, the alleviation of poverty and unemployment; and consequently leading to the growth of the South African economy. / Business Management / D. Com. (Business Management)

The objective of this research is to investigate the existence of structural changes in unsecured lending time series data and analyse the impact thereof on trends in consumer demand for unsecured credit spanning the years from 2008 to 2015. This is achieved by identifying dates when structural changes occurred over this period. The identified structural break date is linked to an influential economic event or monetary policy change that took place in South Africa of which the impact on three unsecured credit categories are analysed. Unsecured credit growth in South Africa has been subjected to intensive scrutiny since the inception of the National Credit Act (Act No. 34 of 2005) by various regulatory bodies. In 2012 the National Credit Regulator (NCR) commissioned a research study into examining the impact that the National Credit Act (Act No. 34 of 2005) has had on the consumer credit market. The empirical part of this study involved the gathering of time series data on unsecured loans approved, unsecured credit granted per income category and unsecured credit granted from the National Credit Regulator (NCR) database and performing descriptive and econometric analysis. The Zivot-Andrews (1992) and augmented Dickey-Fuller tests determined the break dates which were linked to a significant economic event while the one sample t-test of means compared average loan values before and after the break date. Results of the study indicate that the break dates determined coincided with economic events and monetary policy changes in South Africa, such as the collapse of African Bank, the implementation of the National Credit Amendment Act, prime interest rate movements and the introduction of a debt counselling program by the government. These events, coupled with stricter lending criteria and no further loans being granted to customers already more than three months in arrears, restrained the uptake of unsecured loans to lower and middle income groups. The introduction of new affordability criteria and increasing interest rates in 2014 further negatively impacted demand for unsecured loans. However, higher income earners had the advantage of being able to apply for higher loan amounts. Findings could be used by monetary policymakers and financial institutions to constantly monitor credit trends, improve credit assessment techniques and review lending criteria. / Business Management / M. Com. (Financial Management)

Gauteng, one of the nine provinces of South Africa, has a high number of households as compared to the other provinces. Geographically the province has the smallest land size, however it forms the central part of the South African economy. From the total value of credit granted in all provinces, Gauteng has the highest. The province has a high number of registered debt counsellors and an increasing number of consumers who apply for debt counselling because of over-indebtedness. The high number of the registered debt counsellors and consumers seeking debt counselling service gave rise to the purpose of the study. The purpose of the study was to assess the role of debt counselling services provided by debt counsellors to consumers on the one hand, and to also assess whether debt counselling has had a positive effect on the personal financial well-being of consumers who participated in the debt counselling process on the other hand. Furthermore, the study aimed at developing a framework that will empower consumers to be self-sufficient with their finances. From the purpose of the study, two research questions were proposed: (1) How does the debt counselling service provided by debt counsellors assist consumers to manage their finances effectively? (2) Which role does the debt counselling service provided by debt counsellors play in terms of the personal financial well-being of consumers? In an attempt to answer research questions, the theoretical framework of both personal finance and debt counselling were studied. The importance of personal finance, personal financial planning, the evolution of debt counselling, the effectiveness and the ineffectiveness of debt counselling services were identified. A two-phased sequential design (qualitative and quantitative) was used. Fifteen debt counsellors were selected (for the first phase of the study) by making use of a purposeful sampling. These debt counsellors were interviewed and further requested to identify and send questionnaires to consumers whom they have rendered debt counselling service between the years 2007 and 2013. In the second phase of the study, 300 over-indebted consumers were surveyed through a snowball non-probability sampling technique and a response rate of 61% was realised. Data was analysed using ATLAS.ti and the Statistical Package for Social Science (SPSS) for the first and the second data collected respectively. Furthermore, the exploratory factor analysis was used to analyse the data, and the factorability of the data was assessed by means of two statistical measures, namely Bartlett’s test of sphericity and Kaizer Meyer-Olkin. It was observed that most debt counsellors lack financial management knowledge and do not have mechanisms to verify their clients’ financial well-being after debt counselling service had been completed. In addition, there was no evidence that consumers who received debt counselling improved in their financial well-being and that consumers also lacked personal financial management skills. The study concluded that, although debt counselling is essential, it does not necessarily assist consumers to effectively manage their finances. The study purports to suggest the following: Debt counsellors should be subjected to formal financial management training prior to their registration, debt counsellors should provide personal financial management education to their clients, and assess the financial management conduct of their clients once debt counselling process is complete, and debt counsellors should establish debt counsellors’ forums. The South African government (in conjunction with the Department of Education and Training) should introduce and implement personal financial management education in both primary and high schools’ curricula. Personal financial management should continue to be offered at adult learning centres as well as other institutions of higher learning. Employers should appoint employee wellness officers who will provide personal finance training to employees. Credit providers should take the responsibility of educating their clients on how to manage their accounts and the importance of paying debts on time. The South African media should also be used by the government and the NCR to educate and inform consumers about finance-related matters. Finally consumers should seek guidance and advice before making financial commitments. The study concluded by suggesting a framework that should help consumers to manage and sustain their financial well-being. / Business Management / DCOM (Business Management)

Small Businesses (SBs) in the city of Tshwane increasingly engage in export activities due to higher growth rates. The South African government recognises the significance of SBs, resulting in support programmes to increase involvement in export markets. However, SBs still face export challenges from internal and external sources. This study explored export involvement processes of SBs in the City of Tshwane. 20 participants took part in a qualitative data collection method using observation and semi-structured interviews. Atlas.ti software was used to analyse the data. Findings suggest that SBs are confronted with varying constraints affecting commitment in export involvement processes. Low levels of awareness and participation in export programmes make it difficult to determine their contribution to the export involvement of SBs. Recommendations are for an evaluation of government export programmes accompanied by export education and training programmes to ensure that SBs achieve desirable outcome of export involvement in various export markets. / Business Management / M. Com. (Business Management)

The emerging financial industry of asset-backed short-term finance was investigated by this study. Literature indicated that banks, locally and globally, are forced by regulation and the use of information technology, to rely less on human judgement and more on programmed decision-making, when evaluating loan applications. This leads to time-consuming processes with non-standard loan applications and loss of opportunities for business persons. Asset-backed short-term finance is a market response to this tendency. Due to the emerging nature of this industry, no previous academic description of or investigation into this industry could be found – a gap in academic literature which this study aims to fill. The industry is strategically positioned in relation to banks by focusing on functionality for urgent non-standard loan applications (period between application and decision, and access to decision-makers) as value proposition, where banks are found lacking. Relatively high interest rates form the profit proposition, as firms in this industry have limited access to funds. Collateral is central as risk-mitigating strategy, forming a part of the profit proposition. The people proposition is essential, as the industry is distinguished by individualised decision-making. A survey among customers of this industry identified four clusters of potential customers: The first had no needs unfulfilled by banks, while the other three clusters were attracted by either functionality, or the evaluation of collateral in contrast to repayment ability, or a combination of the two. A survey among providers revealed hesitance to supply information and a low level of agreement on strategic matters – possibly due to the emergent nature of the industry. It is asserted that the basis for further study was laid. / Business Management / D. Com. (Business Management)