OpenUCT :: Browsing by Author "Abor, Joshua"

Browsing by Author "Abor, Joshua"

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Open Access
Communication and its impact on enterprise financial sustainability
(2014) Kapepula, Annie; Abor, Joshua
This study investigates the impact of value communication on financial sustainability of not for profits set up as small to medium scale enterprises. The major objective is to determine whether there is a significant impact on the financial sustainability if not for profits create a more aggressive approach and innovate way of communicating with financiers and donors on matters concerning their strategic plans and budgets. The four pillars of financial sustainability have been considered focusing mostly on Strategic and financial planning or budgeting. Measuring sustainability for a not for profit differs from that of a profit making enterprise in that measures such as return on capital employed would be meaningless since most not for profit have a low capital base and are not bottom-line focused. The independent variable has been identified as value communication of strategic and financial planning or budgeting with donors or potential funders while the dependent variable is financial sustainability defined as meeting current budgetary demands. Moderating and Intervening variables identified include ; global financial environment ,operating environment, policy position of donor funding states, donor funding policies, goals and objectives, structure of donor funding towards development programmes and projects and CEO charisma and communication attributes. The study followed a survey design, and employed Times Series as evaluative method for quantitative analysis. Analysis was based on primary data generated through a structured questionnaire administered on respondents. Respondents were employees in selected not for profit organizations working in the four key development services supporting the Millennium Development Goals and Sixth National Development Plan, namely Health, Education, Agriculture and Water and Sanitation in Zambia. Interviews were also conducted with various financiers and donors of the selected not for profit enterprises. Responses to research statements were scaled and converted to quantitative data via Likert scale developed for the study to enable segmentation of the data responses into dependent and independent variables based on communication and financial sustainability variables. This study will help not for profits create an innovative communication strategy so as not to risk losing funding to other competitors or new comers on the scene.
Open Access
Cooperative financial institutions (CFIs) as a source of development finance - a case study on Sub-Saharan Africa
(2014) Nzila, Michelo M; Abor, Joshua
The lack of access to finance is cited as one of the major barriers preventing developing countries from attaining economic development. While traditional sources of financing such as Official Development Assistance (ODA), Foreign Direct Investment (FDI) and Remittances have done much to alleviate the problem, they have left what is termed the missing middle; a financing gap created by failure to provide financing particularly for Micro, Small and Medium Enterprises (MSMEs) and for the poor in the subject countries. The major impediments have included lack of collateral, inadequate training and business knowledge and risk aversion on the part of traditional financial institutions such as banks. Further, domestic resource mobilization endeavours have concentrated on tax reforms to improve governments' revenue collection and administration, leaving personal savings aggregation unattended. This financing gap is despite knowledge that MSMEs possess the most potential for employment creation, thus poverty alleviation for the masses. Cooperative Financial Institutions have been in existence for a long time and have the potential to provide innovative solutions in addressing the problem at hand. They have however, received little attention and recognition and the historical association with agriculture and the older generation has limited their outreach and impact. This study is thus intended to explore whether CFIs can bridge the financing gap for MSMEs in Sub-Saharan Africa.
Open Access
A cross sectional analysis of SME failure within the industrial sector: focus on IDC funded investments
(2012) Amparbeng, Kofi; Abor, Joshua
Small and Medium Enterprises play an important economic role in many countries. In South Africa, for example, a significant proportion of the formal business entities are SMEs; and they contribute between 52 and 57% to GDP, and provide about 61% to employment. However, despite their significance in the local economy, SMEs regularly encounter the threat of failure. Business failure can be disruptive and costly to a large number of stakeholders, which include the owner, the employees, suppliers, customers, investors, bankers, communities, etc. This study examines failed SMEs and compares them with SMEs that are going concerns in order to discover significant differences between the two groups. The study adopted non-parametric tests and binary logistic regression methods. The final data set included 50 failures covering the calendar years July 2009 and June 2012, and 50 going concerns listed in the IDC database on 30 June 2012. The dataset was limited to industrial sector firms from the Chemicals, Metal, Textiles and Wood & Paper industry. The results of this study indicate that, the going concern sample of SMEs were larger than the failures in terms of firm size; led by more experienced management; older in terms of years in existence; and were supported by a stronger equity structure and interest cover ratio. The binary logistic regression results also show that SMEs located in provinces with high per capita income are associated with high probability of failure. But SMEs with increase in annual turnover or increase in equity structure are less likely to fail. Understanding which variables are statistically significantly different between the two groups can enable business owners to develop plans to increase their likelihood of survival. They can also help other stakeholders such as funders implement policies and controls for funding SMEs that mitigate these risk factors.
Open Access
Exploration of Alternative Financing Strategy for the Small and Medium Enterprises in South Africa
(2014) Xolo, Siyavuya; Abor, Joshua
Small and Medium Enterprises (SMEs) are the most talk about businesses which are vital for economic growth at the same time are faced with challenges to obtain finance from the financial institutions. The research intends making a contribution to assist coming up with a possible way and strategy to obtain funds and devise an implementation plan to make funds accessible to the SMEs. Different studies point to almost similar causes that lead to the challenges experienced by the SMEs. Everyone that has shown an interest in the subject of the SMEs has in a way, formally or informally, proposed some kind of intervention mechanism. Different things are being tried at the same time in order to speed up the process although the progress is not to the level of satisfactory otherwise there would be no need to undertake the research. The focus of the research is on the SMEs in South Africa. In preparation for this research, a literature review on various aspects of the SMEs was covered to ensure that whatever plan of action is going to be proposed there is no repetition of work that has already been done; instead it can be aligned to some ideas that have already been suggested. The research explores possible ways to source funds that will be used towards financing the SMEs in South Africa. A suggested implementation strategy is to ensure that the impact is significant in improving the situation. Details of who will be responsible for what and the possible sources of funds are provided in Chapters four and five. The research is more on devising the solution for the SMEs based on the readily available literature review information and the opinions of the researcher, for that reason there is no need for surveys or preparation of questionnaires for submission to some of the financial institutions. A great deal of work has been done in this area of the SMEs and it is clear as to what is the real challenge. Primary and secondary data are relevant for this research. The research is undertaken with the understanding that people will have different ideas and preferences for different reasons; hence it is expected to have divided views on what is in this research report. In addressing global issues or issues of national interest a collaborative effort is crucial, and where possible innovative ideas are to be shared. The whole world is calling for innovative ideas; the more ideas are put on the table the better, then a judgement call will be made to implement or not implement. There are those who believe that government should intervene by reviewing policies to correct the market failure and some see the establishment of a financial institution solely intended for the SMEs. What does not come out clearly is how the institution will be funded considering that there are so many challenges in South Africa that need government intervention and the resources are limited. Based on this, the researcher identified options to be used to generate funds to be used to finance the SMEs, details are in Chapter four, and then the amount to be obtained from each option was estimated, details are in Chapter five. The strategy to manage financing of the SMEs is provided in Chapter Six and the discussion of the results which are found in different sections of this report is in Chapter Seven, followed by the conclusion.
Open Access
Financial inclusion: A look at the institutional and credit organisational enablers in the South African market
(2014) Gitonga, Loise; Abor, Joshua
To serve the underserved markets successfully companies have to re-evaluate their strategies and approach towards the poor; this is also true for financial institutions and governments seeking to address financial exclusion or looking to fully bank the under banked in their economies. This study examines the regulatory enablers put in place by the South African government; the organisational enablers in form of financial institutions; and the products or services these institutions offer the under banked or unbanked in the society. In examining the products and services offered four factors were taken into consideration i.e. availability, acceptability, affordability and target market awareness of the product. The study was carried out using a deductive qualitative approach; the hypothesis was 'some of the macro and micro enablers required when seeking to serve the underserved are missing in South Africa'. From our analysis; there are very specific positive steps being taken to enhance the macro environment. Hopefully as these undertakings are established the micro-environment will improve. Such improvements are expected to include; increase in strong, reliable national players serving the underserved; increase in providers of good and safe services for the underserved and enhanced awareness among consumers on the products available for them.
Open Access
The impact of credit constraints on agricultural productivity in Tanzania
(2015) Msulwa, Baraka; Abor, Joshua; Biekpe, Nicholas
This paper uses a nationally representative sample of agricultural businesses in Tanzania to empirically investigate the determinants of credit constraint status and its impact on agricultural productivity. In particular, we directly elicit the nature of the credit constraints experienced by crop producers. Subsequently, we evaluate the effect on crop output value per hectare using an endogenous switching regression model, which simultaneously estimates the likelihood of being credit constrained and its impact on productivity. The results provide evidence that the relaxation of all credit constraints would significantly enhance agricultural productivity; hence, contributing favourably to rural development, poverty alleviation, and the improvement of living standards in Tanzania. Moreover, consideration of only quantity constraints was shown to underestimate the full impact of credit constraint status in the presence of transaction costs and risk constraints. We advocate for the Tanzanian agricultural policy framework to adopt a broader definition of credit constraint status in pursuit of agricultural and economic development.
Open Access
The impact of family ownership on firms' performance: A study of firms in the South African Clothing and Textiles manufacturing industry 2009-2011
(2013) Ntsalaze, Lungile; Abor, Joshua
Family businesses have been prevalent throughout history for the way in which they are able to combine family interests with those of the business. However, it is only recently-that the world has begun to recognize its signiﬁcance and uniqueness. Stimulated by this recognition, there is a steadily growing body of academic knowledge that has started to consolidate more insight into the characteristics of the family birthed and operated enterprise as a viable business model. The history suggests that family businesses have played an integral role in nation building and for an emerging market environment like South Africa, could hold one of the keys to accelerate much needed broad-based economic advancement and participation. This study was shaped from a keen interest in investigating the tacit value that family owned business models can yield by conducting a comparative panel study of performance between family and non-family firms in the Clothing and Textiles manufacturing industry in the South African IDC portfolio (2009-2011). Key ﬁnancial metrics, namely to return on assets, return on equity, income security cover, outside funds to cash flow and shareholders' funds to total assets were referenced. Regression analysis was used to estimate the relationship between performance and ﬁrms. Both qualitative and quantitative approaches were employed in the study to arrive at the results. Although studies have been conducted to show that family-controlled firms seem to perform worse than non-family ﬁrms, the results from this study show that family business performed better on return on assets when applying the data set in a regression analysis technique. The results also show that, founder and ﬁrst generation owners have a signiﬁcant impact on family business performance. Given the importance of family businesses, in terms of employment creation, informal training (skills development) and the economy at large, it is therefore critical that all efforts be made to assist the owners of family businesses to deal with the complex challenges they face to ensure their survival and growth.
Open Access
Micro-enterprise finance as an empowerment tool for women-owned businesses: lessons from Kenya and South Africa
(2012) Wamaitha, Mary; Abor, Joshua
The dualism of South Africa's economy is reflected, most notably, in the country's high Gini coefficient which in 2010 was recorded at 63.14. The recent labour and social unrest in the country may be attributed in part to the socio-economic disparity between the first and second economy. Twenty-one per cent of the population lives on R1 000 or less. The majority of the population, 52 per cent, lives on R1 800 a month. Furthermore, only 29 per cent of the adult population in South Africa is employed full time. The unemployment rate in 2011 was 24.9 per cent and the unemployment rate for women remained higher than the national average between 2008 and 2012. Although the unemployment rate for both men and women increased in 2012, women were 1, 2 times more likely to be unemployed than men. The South African government has made some strides in alleviating poverty through various interventions, including formulating a job creation strategy aiming to create 5 million new jobs by 2020, providing social grants to the poor and adopting policies such as the Broad-Based Black Economic Empowerment policy support to promote black-owned businesses. However, the financial services sector has not been sufficiently addressed in these interventions despite the pressing need for reforms. There are currently six leading or mainstream banks which provide the full spectrum of financial services to the South African population. Many of these banks provide little or no access to the marginalised groups in society including women and alternative sources of finance for the poor are also limited. This study proffers that microfinance can be an effective mechanism which can be used to deliver financial services to the unbanked or those who only have access to informal banking services. More specifically, it focuses on how microfinance can be used to empower women and promote the growth and sustainability amongst women. The main objectives of the study are to identify and assess the critical success factors and shortcomings of the Kenyan microfinance model, which is well-developed and regulated and make recommendations for the South African microfinance sector. The study places specific emphasis on microfinance models tailored for women and women-owned businesses. The research approach adopted in this study was intended to be flexible, explorative and comparative. It draws from the lending models applied by Equity Bank in Kenya and Women's Development Business in South Africa. Both primary and secondary data was used in order to achieve the objectives of the study. The key findings of the study reveal that, the critical success factors of microfinance institutions which lend to women include the adoption of a multi-faceted lending methodology, group-based and individual lending, encouragement and facilitation of savings. Other critical success factors are educational and business skills training interventions and product innovation and diversification to meet the needs of these women.
Open Access
Performing loans in a multicurrency environment environment: A case of Zimbabwe
(2015) Masunda, Collen; Abor, Joshua; Biekpe, Nicholas
Zimbabwe has been experiencing an unprecedented increase in Non-performing loans (NPLs), since the adoption of the multi-currency regime in 2009. The NPL ratio which stood at 15.92% as at 31 December 2013, has attracted much attention considering its impact on banking sector stability and its effect on the real sector. The banking sector has since reduced its risk appetite, adopting conservative lending strategies, in response to the scourge, in an environment where industry is in need of funding thus causing second round effects. There has been conflicting views in literature on factors influencing the rise in NPLs. Shareholders and bank management have placed the blame of the increase in NPLs on the macroeconomic environment, while regulatory authorities and policy makers have attributed the levels to corporate governance weaknesses. This study sets out to ascertain the factors that have been instrumental in driving the level of non-performing loans in Zimbabwe and the extent to which each of these factors has contributed to this trend. The population of study was the Zimbabwean banking sector which comprised 21 banking institutions as at 31 December 2013. The factors that were investigated were: lending interest rates, shareholding structure, GDP growth, inflation rate, management efficiency, capital adequacy, loan tenure, size of the institution and the lagged NPLs. The study used statistical techniques, in particular panel data analysis for bank level data collected on a quarterly basis over a 5 year period beginning March 2009 and ending December 2013. The findings indicate that all the macroeconomic factors were not statistically significantly related to the rise of the NPLs. On the other hand bank specific factors with the exception of loan tenure and lending rates, were found to be significantly related to the rise in NPLs. Lagged NPLs were found to be more influential implying that the country is blight with credit indiscipline. Findings of this study, with the exception of size were found to be generally consistent with previous literature on determinants of NPLs. An interesting observation made was that bank size was found to be positively related to NPLs, contrary to literature, indicating that larger banks are not benefiting from diversification benefits. Based on the findings, the research recommends enhanced monitoring of banking institutions by the supervisory authority coupled with a collaborative NPL resolution options. Banking institutions are encouraged to tighten their credit risk management systems and practices.
Open Access
SMME access to finance in South Africa
(2013) Ndjwili-Potele, Khotso; Abor, Joshua
The challenge of development in South Africa is to increase employment, broaden distribution of wages and enhance skills of all workers, but particularly those workers disadvantaged by apartheid. The high unemployment rate and unemployability of a large section of the population, self-employment through small business presents the only realistic solution. But successful start-up and sustainability of such enterprises requires readily available access to robust and effective microfinance and business support programmes. This research studied SMME access to state and commercial financing vehicles and how this impacted on their growth prospects. The results from case studies show pervasive lack of access to finance by the SMMEs and that business start-ups and cash flows are financed mainly from savings and, to a lesser extent, from simple instruments, such as bank overdraft; While these kinds of financing have led to increased stock carrying and modest revenue growths, it has led to neither expansion of business nor significant increases in employment. Although the results show that banks have made big strides in reaching out to previously excluded and unbanked consumers and that they are more visible to the SMME than state institutions, the business owners show high levels of risk and debt aversion by not taking advantage of available SMME focused loans offered by the banks. Albeit the study could not satisfactorily and authoratively establish causes of this aversion beyond information deficiency and incoordination within banks, it is clear that it (aversion) led to a form of self-censure to obtaining loans. More research is needed to get a better understanding of this phenomenon.
Open Access
Testing the appetite of potential players in the housing microfinance field to develop niche loans for backyard shack formalization
(2014) Rousseau, Eloise; Abor, Joshua
Backyard shacks prevalent in new government-sponsored housing developments is a distinctly South African phenomenon (Lemanski, 2009). Conventional housing finance and government housing delivery systems have consistently failed to meet the housing needs of lower income South Africans (Sisulu, 2005); however the informal market has responded to the housing need. The rate at which new households create informal housing now exceeds the rate of government housing - and infrastructure provision (Durand-Lasserve et al, 2002). Backyard shacks in formalized areas create a number of problems relating to urban management and public health; however backyard shacks have enormous potential as a means of achieving high-level government policy objectives such as densifying existing serviced neighbourhoods. South Africa's policy environment has not been successful in unlocking the potential that backyard shack formalization holds. Government interventions such as the provision of grants and subsidies have resulted in sub-optimal allocation of resources and unintended negative consequences. Housing Microfinance (HMF) is increasingly viewed as an important tool that can facilitate access to affordable, appropriate shelter for lower-income households (Daphnis and Ferguson, 2004); however the industry's potential remains untapped (Kihato, 2013). Whilst there are ranges of potential players in the HMF field that may be better positioned to intervene in the formalization of backyard shacks by means of providing financing products, they are not incentivized to achieve the high-level government policy objectives that have driven the unsuccessful government intervention thus far. This study tests the appetite of potential players in the HMF sector to develop a niche loan targeted at beneficiaries of government-sponsored houses, which can be used to finance the formalization of backyard shacks. Concerns around - and prerequisites for involvement in such an initiative were identified by means of conducting in-depth interviews with potential players in the HMF sector. The major concerns around involvement in the development of a niche loan related to using a RDP house as collateral for a loan and to social justice concerns in terms of assisting RDP recipients and not backyard tenants. Prerequisites for involvement related to partnering with other potential players and the community and to educate potential clients on personal finance and encourage investment in their own properties.
Open Access
Venture capital and entrepreneurial development in Gauteng
(2014) Hamnca, Ephraim Monde; Abor, Joshua
Venture capital as a source of finance and non-financial services has gained popularity among start-up and existing businesses worldwide in recent years. Venture capital has been synonymous with high technology start-ups in the United States and of late has emerged as a recognizable source of finance in South Africa. South Africa has a healthy VC industry and growing number of SMEs. The SMEs in the country however have a challenge when it comes to accessing financial resources for starting businesses and for expansion purposes despite the existence of VC companies. It would have been the popular belief that the emergence of VC companies in the country would have increased the alternatives to the financing sources for SMEs but this seems to not have been the case. The VC companies are still not popular among the small business sector and their services are still not accessible as well. The aim of the study was to explore the state of venture capital market in South Africa and find out how it can accelerate entrepreneurial development. The researcher selected VC companies who are associated to the South Africa Venture Capital and Private Equity Association (SAVCA) and SMEs based Johannesburg area to take part in the study. The target sample was 70 venture capital firms and 200 SMEs from the Johannesburg area. The response rate from the VC companies was 53% and it was 67% from SMEs. The results obtained from the study indicated that there was a need for VC companies to impart more information concerning their services to SMEs. The SMEs generally did not have much knowledge of venture capital, how and where ton access it hence the low accessibility of this finance source to South African SMEs. The empirical study revealed that only 17% of SMEs in the study had knowledge of VC financing and only 6% of the SMEs had approached VC companies in the past. It was also discovered that 85% of the VC companies believed that the conveyance of information relating to their services contributed to the challenges SMEs faced in accessing VC sector. Of the SMEs taking part in the study 45% strongly believed that the development of the VC sector will drive SME growth and survival in South Africa.
Open Access
Venture capital in emerging economies: a comparative study between South Africa and Poland
(2014) Ndzululeka, Pumeza; Abor, Joshua
This study evaluates the venture capital sector in emerging economies with reference to the South African and Polish venture capital markets. The study focuses on the entrepreneurial, regulative and governmental factors that characterise emerging market venture capital sectors as well as the role that venture capitalists play in economic development. Emerging market venture capital characteristics, similarities and differences found from the literature review were tested in the South African venture capital market by conducting semi-structured interviews with six members of the South African Venture Capital and Private Equity Association. The findings confirm similarities between the two markets and highlight a few differences. The findings also show that South African VCs have very different experiences compared to the Asian VCs mainly due to institutionalization. In conclusion emerging market VCs sectors in Poland and South Africa are seen as having environments that are not deterrent to the growth of the venture capital sector but which with a few adjustments can spur on greater growth of the sector.

Browsing by Author "Abor, Joshua"

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