Abstract
The study used the Small and Medium Enterprises Business Conditions Survey and Eskom data to evaluate the impact of constraints on the growth of small and medium construction enterprises from 2008 to 2023. This analysis was essential because small and medium enterprises are vital for helping the government achieve its job creation and transformation targets. This study used various empirical techniques, including principal component analysis, cross-sectional autoregressive distributed lags and fixed effects. More specifically, due to the presence of cross-sectional dependence and slope heterogeneity, an advanced econometric approach, the CS-ARDL was employed. By using this methodology, the study contributes and adds new knowledge to the existing literature in various ways. This approach provides a new perspective and deeper insights that may have yet to be captured in previous studies. In addition, it helps validate the existing knowledge, thereby enriching the body of knowledge. Consistent with broader literature, this study found that an insufficient demand for building and construction work has the most significant impact on the growth of small and medium-sized contractors, affecting both individual firms and sectors. Insufficient demand was found to reduce firm growth by 36% and 35% in the short and the long run respectively. This highlights the severity of IDBCW as the most binding, emphasising that the lack of projects is a critical issue. Another constraint impacting the growth of construction firms is inadequate access to credit. Since the firms are not homogenous across provinces, sectors, and group sizes, the findings suggest that the recommended small and medium construction enterprises’ development policies should be developed specifically for distinct sub-groups within the construction industry’s diverse sectors. The buy-in and collaboration of all stakeholders is essential for successful implementation.