Evaluation of Small Business Support in Post-Apartheid South Africa

The post-apartheid economic transformation framework in South Africa requires a critical analysis of business financing structures. Relying solely on financing as the primary driver of economic development neglects the intricate dynamics of historical racial disparities and systemic inequities in economic benefit distribution. This chapter examines the intricate welfare implications and fundamental reasons for policy deficiencies in business resource allocation. Furthermore, this chapter argues for a longitudinal data analysis incorporating cultural and societal contexts.

This chapter argues that the internal systems governing grant approval may predict the future success of small firms, especially regarding revenue generation. Additionally, a correlation exists between the allocation of grant funds to small enterprises and their long-term operational sustainability within South Africa’s post-apartheid economy. While existing scholarship often underemphasises the various determinants of business success beyond direct financial grants, empirical evidence indicates that government support initiatives for entrepreneurial ventures can enhance overall economic growth. The strategic framework of small company grant schemes, especially their capacity to tackle essential socio-economic issues in South Africa, represents a critical intersection of political mandates and policy formulation. This chapter uses stakeholder theory to examine the various elements of government financial support programmes. This approach analyses whether the primary objectives of such funds are to inform or fulfil political aims or if they are fundamentally focused on advancing developmental outcomes. A review of the literature and empirical studies on the impact of government support since 1994 reveals data that present seemingly contradictory insights, highlighting the necessity of enhancing the business ecosystem through evidence-based policy interventions.

The definition of a small business varies by country, significantly influencing national policies. South Africa’s support for small enterprises primarily seeks to address historical injustices, particularly following 1994. This entails actively promoting economic inclusion for Black-owned enterprises by providing grants and various forms of support. This chapter discusses funding allocation to primarily Black-owned businesses and its influence on inequality reduction in the most disadvantaged communities. This study uses data from the Department of Trade and Industry (DTI) on all granted awards, their purposes, and assessments of their efficiency. The chapter analyses recipients’ socio-demographic characteristics to evaluate the implementation of equity and affirmative action principles in the grant distribution process for small business owners. Social justice theory frames the study to examine the practical application of equity and equality concepts in the South African small business sector. The findings indicate a possible disconnect and confusion in applying equity versus equality in funding initiatives, particularly during the COVID-19 pandemic.

The chapter evaluates the performance of funded small businesses before and after 1994 to determine the efficiency of grant policies in post-colonial South Africa. The literature is rife with arguments regarding the politicisation and corruption surrounding the funding of small businesses. Certain sections advocate for a new funding formula and enhanced evaluation tools to improve the processes for state-supported grant programmes. This chapter diverges from that argument to investigate whether South Africa’s historical context influences grant policies and the trends in the implementation of government funding, including loans. While pre-colonial literature aids in understanding the historical narrative regarding business funding, data on business performance post-receipt of government support offers intriguing insights into businesses’ perceptions of such assistance. This analysis concentrates on the capability of SMEs to manage their businesses successfully. The key finding highlights the necessity to redesign policies from a privileged perspective to establish a merit-based framework for assessing the effectiveness of South African grant support programmes.

The idea of a subsidy for predominantly Black businesses and suppliers was to address challenges related to capital accumulation. Assessing the programme’s sustainability requires understanding the accountability involved in providing grants and support to businesses. This accountability begins with the government, particularly regarding allocating and distributing funding or providing subsidies. On the business side, recipients are expected to comprehend the conditions of the grant and its intended use. This chapter develops a framework for grant provisioning based on allocation and distribution concepts to identify challenges surrounding funding and accountability in South Africa.

Literature focusing on studies of government grant programmes highlights the need for partnerships to ensure trust in funding for businesses in South Africa. There is an ongoing debate regarding the mismanagement of taxpayer funds and the lack of transparency in allocating resources to beneficiaries. This chapter analyses existing literature and case studies, arguing for the necessity of multilayered collaborations for the effective management of grants. Based on this framework, persistence in challenging policies and advocating for change is essential to reform the funding system in developing countries, including South Africa. The chapter, therefore, makes a case for partnerships among various stakeholders to transform the grant system in South Africa.