RISK FACTORS FOR FAILURE IN SMALL BUSINESSES IN THE FOOTWEAR AND TEXTILE INDUSTRY OF GAUTENG PROVINCE, SOUTH AFRICA

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Abstract

The study was based on the 5-yearlong study (2007 to 2012) of Small, Micro and Medium-sized Enterprises (SMMEs) that conduct business in Gauteng Province, South Africa conducted by Marivate (2014) from 2007 to 2012. The sample consisted of 187 businesses (36.52%) that utilized financial services routinely provided by the South African Small Enterprises Development Agency (SEDA), and 325 businesses (63.48%) that utilized non-financial services provided by SEDA. Out of the 187 businesses that utilized financial services, 85.42% of them were viable, whereas 14.58% of them were not viable. Out of the 325 businesses that utilized non-financial services, 43.25% of them were viable, whereas 56.75% of them were not viable. The degree of entrepreneurial skills in each of the 512 businesses that were selected for the study was measured by using a composite index defined by Le Brasseur, Zannibbi & Zinger (2013). The multilevel logistic regression model (Hosmer and Lemeshow) was used for identifying and quantifying predictors of utilization of financial and non-financial services provided by SEDA to SMMEs. Predictors of long-term survival were estimated by using the Cox Proportional Hazards Model (Cleves, Gould & Gutierrez, 2004). The results showed that the 187 businesses that utilized financial services (36.52%) were relatively more viable in comparison with businesses that utilized non-financial services (63.48%). Results obtained from the Cox Proportional Hazards Model showed that long-term viability in the 512 businesses that were selected for the study was significantly influenced by utilization of financial services, degree of entrepreneurial skills, and the ability to order large volumes of stock in bulk, in a decreasing order of strength. The top 3 predictors of utilization of financial services in the 187 businesses that utilized financial services were degree of entrepreneurial skills, the ability to order large volumes of stock in bulk, and access to training opportunities on entrepreneurial or vocational skills, in a decreasing order of strength. The top 3 predictors of utilization of non-financial services in the 325 businesses that utilized non-financial services were the age of business, past history of bankruptcy, and the practice of selling on credit, in a decreasing order of strength.

Keywords: SMME, Gauteng Province, Footwear and Textile Industry, Semi-parametric Models for Survival Analysis

How to cite this paper: Worku, Z. (2015). Risk factors for failure in small businesses in the footwear and textile industry of Gauteng Province, South Africa. Risk governance & control: Financial markets & institutions, 5(3-1), 114-125. https://doi.org/10.22495/rgcv5i3c1art3