Small and medium-sized enterprises are often seen as drivers of economic growth and development
by generating employment opportunities. However, for SMEs to be successful they need finance.
Access to finance has been found to be a major obstacle to SMEs’ ability to do business in South
Africa. This paper takes a closer look at firms, their access to finance and output per worker in South
Africa, by using data from the World Bank Enterprise Survey 2007. The results show that firms that are
financially constrained are more vulnerable to shocks and competition, and are weaker contributors
to employment creation and growth. These firms are typically small and less established. They hold
less inventory, have lower capacity utilisation and are unlikely to be exporters or to introduce new
products in response to competition. The results from the regression model confirm that access to
finance and different sources of finance are drivers of productivity at firm level.