Original Research

The impact of the South African business environment on SMEs trade credit management effectiveness

Werner H. Otto, Ilse Botha, Gideon Els
The Southern African Journal of Entrepreneurship and Small Business Management | Vol 14, No 1 | a563 | DOI: https://doi.org/10.4102/sajesbm.v14i1.563 | © 2022 Werner H. Otto, Ilse Botha, Gideon Els | This work is licensed under CC Attribution 4.0
Submitted: 04 April 2022 | Published: 20 October 2022

About the author(s)

Werner H. Otto, Department of Commercial Accounting, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa
Ilse Botha, Department of Accounting, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa
Gideon Els, Department of Accounting, College of Business and Economics, University of Johannesburg, Johannesburg, South Africa

Abstract

Background: Given that the impact of the South African business environment on small and medium-sized enterprises’ (SMEs) management of trade credit is largely unknown, this article argues that certain internal or external business environment variables could significantly impact SMEs’ management of trade credit effectiveness, making it necessary to ask the impact of business environment in South Africa on SMEs’ trade credit management effectiveness.

Aim: To determine the impact of internal (managerial competencies, collateral, financial and business information and networking) and external (legal system, ethics, macroeconomy and corruption) business environment variables on SMEs’ management of trade credit effectiveness.

Setting: This study was conducted by administering an online questionnaire.

Method: Quantitative research design with purposive sampling as the sampling method, administrated to 10 450 SMEs within South Africa.

Results: The results reveal several internal (5) and external (4) business environment factors significantly impacting SMEs’ effectiveness in managing trade credit.

Conclusion: The article reveals how internal and external business environment factors contribute to increased SME effectiveness in managing trade credit and, in so doing, helps mitigate financial problems associated with SMEs’ trade credit as a result of asymmetric information such as adverse selection, moral hazard and credit rationing, while also understanding the significance of corruption on SMEs’ effectiveness in managing trade credit.


Keywords

trade credit; effectiveness; internal business environment; external business environment; management; small and medium-sized enterprises

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Crossref Citations

1. Assessing the Impact of Digitalisation on SME Policy: A Comparative Analysis of Approaches to Support the Manufacturing Sector in the Digital Age – South Africa
Michael M Willie, Nokonwaba A Mbongwe
Journal of Public Administration  vol: 58  issue: 2  first page: 337  year: 2023  
doi: 10.53973/jopa.2023.58.2.a8