Abstract
Small and medium-sized enterprises (SMEs) are a crucial component of both advanced and emerging economies, driving economic progress through job creation, opportunity expansion, and innovation. Despite their significant contributions, SMEs in South Africa confront many obstacles that impede their progress and sustainability. Among the factors contributing to their failure, poor financial practices stand out as a key issue, as studies show that SMEs generally do not employ formal accounting systems (Collis & Jarvis, 2002; Vohra & Dhillon, 2014).
In order to examine the financial practices and barriers to sustainable growth among SMEs in South Africa, the study reviewed the literature and utilised Porter’s five-force model to account for the context in which SMEs operate. By using the document analysis method, the study explored the subject in-depth, collecting secondary data from 20 published documents and reports on SMEs from the Small Enterprise Development Agency (SEDA) and the Department of Small Business Development (DSBD) websites between 2012 and 2022.
The research findings indicate that SMEs lack adequate financial practices due to skills shortages, limited time, funds, and a lack of proper accounting systems. The study also identified critical factors for SME growth and sustainability, including adequate record-keeping, strong customer relations, research and development, education and training, technical skills, and the ability to hire skilled staff. These results align with existing literature and form the basis for recommendations, which include training and equipping SME owners and employees with the necessary technical skills, particularly in financial management practices and marketing, to increase their chances of growth and sustainability.
Keywords: SMEs, Failure, Sustainability, Growth, Strategies, South Africa Environment