An analysis of the factors that lead to SMME failure.

Abstract

The purpose of this research was to investigate and analyse the factors that lead to the failure of SMMEs, especially the businesses owned by previously disadvantaged individuals in Durban. The study was motivated by the fact that SMMEs are not growing but instead there seems to be an increase in the failure rate of SMMEs. A range of literature was reviewed that included past research papers and journals on the subject of SMMEs, government papers and acts, information from NGOs, financial institutions and government agencies to help understand the role players in the SMME sector. Primary data was collected in the form of a questionnaire which was given to SMME owners to complete in order to get their views on the sector. The findings show that SMMEs owned by previously disadvantaged individuals are dealing with issues such as lack of finance, insufficient government support and lack of information on services available to them from government and NGOs, which if left unattended, can cause their businesses to fail. Among other things, it was recommended that business owners be mentored and trained in both financial and business management in order to be able to take advantage of the services available to them. It was also recommended that government assess its position on SMME policies in order to be readily available to the SMME sector.