Financial performance measures and business objectives attainment in fast food SMMEs in the Cape Metropolis: A preliminary liability and suitability analysis

Abstract

According to the Small Business Act No. 102 of 1996, Small Medium and Micro Enterprises (SMMEs) were introduced by the South African government to assist with the achievement of uplifting the national economy to reduce the rising trend unemployment and poverty in the country. SMMEs are believed to contribute up to 30% of the Gross Domestic Product of South Africa and are further believed to be responsible for absorbing up to 80% of the national labour force. Regrettably, prior research suggests that these initiatives have not succeeded in reducing unemployment and eradicating poverty, since more than 75% of SMMEs have been reported to fail within their first two years of existence. Economic factors have been blamed for the dismal outcomes. However, the achievement of business objectives is very relevant to how a business is managed, particularly from a financial outlook. In essence, the current authors are of the view that SMMEs were not attaining their objectives owing to the ineffective utilisation of financial performance measures, which consequently affects the smooth existence of these entities as a going concern. The main objective of this paper was to determine the extent to which SMMEs make use of financial performance measures to attain their business objectives. The research adopted a quantitative approach, which entails the collection of data from 30 SMMEs leaders (owners and/or managers) in the Cape Metropolis. All participants were required to adhere to a list of strict delineation criteria. The finding reveals that SMMEs leaders do make use of financial performance measures to manage their respective businesses towards the attainment of business objectives, but only to a limited extent.