Abstract
South Africa is facing enormous socio-economic issues which introduce several
challenges to the economic growth and development of the country. Amongst these
issues is the high unemployment rate of 27.5% (Trading Economics, 2018), income
inequality and poverty. In examining the role of small and medium enterprises in local
economic development, Ayandibu and Houghton (2017) found that SMEs are more
efficient than large enterprises since they use more labour-intensive production
processes as compared to large corporations. Therefore, SMEs help to break the cycle
of poverty by contributing towards meeting the financial needs of individuals and their
families through creating employment opportunities. Governments offer a wide range
of support to small and medium enterprises in both developed and developing
countries (Hallberg, 2000). Since most SMEs have no access to finance, several
economies across the globe have introduced SME financing programmes as mediums
of intervention, (Kersten, Harms, Liket and Maas 2017; Quartey, Turkson, Abor, and
Iddrisu 2017). Despite SMEs contributing to the local economic growth of
Johannesburg, the 2008 financial crisis was detrimental to the economic growth of
Johannesburg. As a result of the financial crisis, there was contraction in domestic and
foreign demand, affecting employment, exports and sales. It is recommended that the
Government introduces support programmes and policies that will help SMEs should
there be another negative external shock. These programmes will provide a buffer
when external shocks impact the demand of goods and services. Such programmes
and policies will also help to prevent many SMEs from closing, thus preventing the
loss of jobs as a result. Additionally, more research focussing on the Government
support towards SMEs and the impact of external shocks should be undertaken.
M.Com. (Local Economic Development)