Investigating the finance needs of small manufacturing businesses in the eThekwini metropolitan area.

Abstract

The manufacturing sector is one of the drivers of economic empowerment, job creation and poverty alleviation through its stimulation of growth. This is possible due to the nature and clustering of this sector. SMMEs in this sector are facing many challenges, including access to markets, the inability to export their products, access to finance as well as basic cyclical cash flow management. The study was conducted to tackle the issue of access to finance. In particular, it investigated the needs of the small manufacturers operating within the eThekwini Metropolitan area. The study was quantitative in nature and targeted owners and managers of these businesses. The study revealed that the lack of access to finance was a hindrance to the growth of these small businesses. Consequently, this also made it difficult for these manufacturers to service their existing clients due to low cash flow and the inability to produce on demand. Most of the financial assistance that manufacturing business owners used to start up their businesses was sourced from family and friends. This form of access to funding could not be repeated nor was it available on demand. Therefore, there is a need for financial institutions from both the government and private sector to create financial instruments based on the needs of these small manufacturers. Despite the challenges experienced by these business owners, the study revealed opportunities for creative or specialised funding mechanism such as cash flow cycle management, opening of credit lines and invoice discounting. These schemes will go a long way in assisting small manufacturers in staying liquid and being able to produce and deliver on time.