Operational Efficiency and Small and Medium Enterprise Growth in South Africa

SMEs are pivotal in South Africa’s economic growth path and the sector is identified as the key provider of employment, projecting that by 2030, ninety percent of jobs in SA will be created through SMEs. Unemployment in South Africa is at an all-time high, more than 30 percent of the economically active population is without jobs since South Africa’s democratically elected government. Thus, this study explored the operational efficiency factors that are largely controlled by SMEs, which could impact their growth. Data from a quantitative research design using an online survey was analyzed using descriptive and inferential statistical techniques. It was ascertained that operational efficiency (OE) is positively related to SME growth. The study tested eight (8) factors of growth, namely, the number of people employed, sales, revenue, gross profit, value of assets, number of customers, number of vendors and number of suppliers. The findings reveal that all eight (8) growth measures combine to form a reliable composite variable that can be used to measure growth in small businesses. A significant contribution of the study is that the seven OE practices, namely, Lean practice, Supply Chain Management, Human Resource Management, Technology, Innovation, Marketing, and Quality, that comprise sub-elements of OE, Technological Practices and Innovation are significant predictors of small business growth. Thus, SMEs that embrace technological and innovation practices are more likely to survive and grow and consequently create jobs.