The financing of small businesses in the Greater Soweto Area

Abstract

Small business plays an important role in the economies of all countries where the free enterprise system is the accepted economic system. Small business, firstly, accounts for a large proportion of the economic activity, and secondly plays a major role in job creation. According to Sunter (1993a:82), 95 per cent of the jobs being created worldwide are in the small business and informal sectors. However, small businesses mostly find it difficult to raise funds to operate due to a number of problems as indicated by Vos loo (1989d: 1). This study seeks to investigate the financing of small businesses in the Greater Soweto Area with particular reference to the different sources of finance available to small business, the factors that influence the capital requirements of small businesses, the actual sources of finance utilized by small businesses in the greater Soweto Area, the extent of the use of informal finance by small businesses .and the financing problems experienced by small businesses in the Greater Soweto Area. The study is divided into three main sections. Firstly, a literature study of the subject is undertaken. Secondly, an empirical study i"s conducted by means of data collected from 400 small businesses in the Greater Soweto Area. The data is analyzed and reported on. Thirdly, a number of conclusions are drawn from the analyses of the data (see section 5.2) and a number of recommendations are made (see Section 5.4). In Section 5.5 areas for further research are proposed