Are Labour Policies Lubricant or Stumbling Block to Financial Performance of Small and Medium Companies? An Empirical Study of Employment Equity Amendments in South Africa

Abstract

Labour policies have been singling out as the key impediment to financial success of small and medium enterprises (SMEs). The upward spiral, exponential rate of SMEs failure in South Africa is an inescapable pointer to faltering labour policies. This paper brings to the fore the need to establish the impact of labour policies on financial performance of SMEs with specific attention given to employment equity amendments in South Africa. While some labour policies can lessen labour imbalances in companies, the finance performance of companies remains overlooked, in particular that of still growing SMEs. There is paucity of literature with evidence about inextricable link between employment equity amendments in South Africa and financial performance of SMEs. The purpose of this paper is to examine the impact of labour policies on financial performance of SMEs focusing on employment equity amendments in South Africa. This study employed the descriptive research design and quantitative approach. The sample of the study was 226 SMEs. Both descriptive and inferential statistics were utilised in analysing the data. The study indicated that the majority of the amendments to Employment Equity legislation had a detrimental effect to the financial performance of SMEs. The paper offers a critical and salient insights into the relationship between amendments to Employment Equity legislation and financial performance of SMEs. The paper provides a rich resource for organisations, policymakers and other stakeholders looking to improve equity and sound financial performance of SMEs in the face of broad social division, unemployment and under-resourcing.