The impact of managerial competencies on the performance of SMEs in the Buffalo City municipality

Abstract

This research study was undertaken to examine the impact of managerial competencies on performance OF SMEs in the Buffalo City Municipality in the Eastern Cape Province of South Africa. The objectives of the study were, to investigate the relationship between managerial competencies and performance of SMEs in the Eastern Cape; to explore the extent to which human skill impact on SME performance; to establish whether business skills posed by owner-managers promote high performance in SMEs ;and finally, to establish whether technical skills inherent in owner-mangers have an impact on SME performance. To achieve these objectives, the study hypothesised the set objectives. A total sample of 184 SMEs was used to obtain the relevant information .Stratified sampling was used to gather data using a self-administered questionnaire as the research instrument. Data obtained from this study was elicited from SME owner sand owner-managers only as there were the target elements. The t-test and chi-square were used for statistical analysis in order to derive research findings and conclusions .After the analysis of the empirical findings, the researcher discovered that, eighty percent of the SMEs are five years or shorter in existence of which forty-one per cent exist for less than two years. High performance of SMEs was found to be heavily linked to managers technical and business skill. The ability to outperform industry rivals and increase productivity was found dependant on human skill which supported the Human Capital and Resource Dependence theory. The majority of SMEs are hampered by resource shortfalls with the technical skill (networking and innovativeness) resource shortfall being the most critical. SMEs generally conduct financial statement and inventory analysis, but ratio analysis, however is largely neglected. Only forty-two percent of SMEs practice financial planning and appraisal.