Can internal control activities and managerial conduct influence business sustainability? A South African SMME perspective

Abstract

Purpose – The purpose of this paper is to determine the empirical relationships that exist between two of the elements of a sound internal control system, namely internal control activities and managerial conduct, and the perceived sustainability of South African small, medium and micro enterprises (SMMEs). Design/methodology/approach – Data were obtained from management and employees of 100 South African SMMEs operating in the Fast Moving Consumer Goods industry. All participants were interviewed by means of face-to-face structured interviews due to the complexity of the questions posed. Findings – Only general management competencies have a relationship with the economic sustainability of these business entities. The rejection of three of the four hypotheses supports the current poor sustainability rate with approximately 75 per cent of South African SMMEs having to close their doors after being in operation for only three years. Originality/value – As this study is the first of its kind for SMMEs, and although limited relationships were identified, it is crucial for management of SMMEs as well as government bodies that have an influence sphere over these entities, to ensure that SMME management incorporate crucial internal control activities and appropriate management conduct in their businesses.