Pradeep Brijlal

The Use of Capital Budgeting Techniques in Businesses: A Perspective from the Western Cape

Capital budgeting is one of the most important areas of financial management. There are several techniques commonly used to evaluate capital budgeting projects namely the payback period, accounting rate of return, present value and internal rate of return and profitability index. Recent studies highlight that financial managers worldwide favor methods such as the internal rate of return (IRR) or non-discounted payback period (PP) models over the net present value (NPV), which is the model academics consider superior. In particular this research focused on small, medium and large businesses and investigated a number of variables and associations relating to capital budgeting practices in businesses in the Western Cape province of South Africa. The results revealed that payback period, followed by net present value, appears to be the most used method across the different sizes and sectors of business. It was also found that 64% of businesses surveyed used only one technique, while 32% of the respondents used between two to three different types of techniques to evaluate capital budgeting decisions. The findings show that the more complicated methods such as IRR and NPV are most favored by the large businesses as compared to the small businesses. The majority of the respondents believed that project definition was the most important stage in the capital budgeting process. Implementation stage appeared to be the most difficult stage for the manufacturing sector whereas Project definition, Analysis and selection and Implementation were generally rated as being the difficult stages by the retail sector. Project definition and Analysis and selection were found to be the most difficult stages by the service sector. Most businesses used the cost of bank loan as a basis in capital budgeting and more than two thirds of respondents used non-quantitative techniques to consider risk when making a decision on investing in fixed assets.

The Relationship between Levels of Education of Entrepreneurs and Their Business Success A Study of the Province of Kwazulu-Natal, South Africa

The small, medium and micro enterprise (SMME) sector has been widely recognized as an engine of economic growth in South Africa. The implementation of the National Small Business Strategy (NSBS) in 1995 established important objectives for the sector to address such problems as lack of access to markets and procurement, lack of access to finance and credit, low skills and education levels, lack of access to information and a shortage of effective support institutions. In response, the South African government established institutions and programmes designed to improve access to sources of finance, market opportunities, technology, training and development and education. This paper examines whether there is a relationship between the level of education of SMME owners and the growth of their businesses, using labour force and turnover as success indicators. The study adopted a mixed method approach, including questionnaire surveys, observations and face-to-face interviews. The results indicate that in the two years preceding the study there had been a relationship between the owner/managers level of education and the businesss ability to grow by increasing its labour force and annual turnover. This study, conducted in a developing economy, therefore supports the findings of similar studies in developed economies, that the level of education of an entrepreneur and the success of their business are related.

The Use of Financial Management Practices by Small, Medium and Micro Enterprises: A Perspective from South Africa:

This paper reports on an investigation of financial management practices used by small, medium-sized and micro-enterprises (SMMEs) in South Africa. It was found that more than half the SMMEs examined use external accounting staff to prepare accounting reports and more than 60% rely on external accounting staff to interpret and use accounting information. A majority of the SMME owners were found to lack interpretation skills and an awareness of how to use information from financial statements. An implication of this study therefore is that policy makers, business support organizations, banks and academic institutions need to focus on educating SMMEs more effectively in financial management, thereby mitigating the risk of cash flow problems and business failure.

Accessing bank finance in relation to human capital, gender and race among SMMEs in a developing economy

Small, Micro and Medium-sized Enterprises (SMMEs) contribute to the national economy significantly. However, many SMMEs have difficulties in accessing bank finance due to the lower level of their human capital and scarce financial resources in the context of developing economies. This study aims to investigate the key factors of human capital and associated issues with access to bank finance from gender and race perspectives. A survey design combined qualitative and quantitative research approaches were employed in this study. Data were collected through a self-administered questionnaire and a number of interviews. A group of SMME owners (n=532) were randomly selected from the Western Cape, South Africa. The findings demonstrated that the human capital and gender of SMMEs is not strongly associated with success in securing bank finance. From a race perspective, white entrepreneurs are more likely to be approved for bank finance than other race groups.

A framework for combating insider trading on developing stock exchanges: Evidence from the Zimbabwean stock exchange

Stock exchanges play a vital role in any capitalist economy as they provide a secondary market where investors can buy and sell shares under orderly conditions at fair and competitive prices. This role requires stock exchange operations to be regulated in order to enhance the efficiency, transparency and full disclosure in their operations. This is particularly true with respect to the potential harm associated with insider trading. In Zimbabwe the trading of shares is conducted through Zimbabwe Stock Exchange and is regulated by the Zimbabwe Securities Commission. The Zimbabwean Stock Exchange is a typical emerging stock exchange whose performance has been noteworthy in the past two decades in terms of returns on investment in United States dollar terms and in terms of share price increases. In recent years however, the Zimbabwe Stock Exchange has faced some challenges associated with insider trading. On the other hand principles of corporate governance, business ethics and morality have been emphasized as critical managerial attributes that result in fair trading and business practices. Based on literature review on the subject and responses to qualitative interviews with stakeholder groups on insider trading in Zimbabwe, this paper discussed the concept of insider trading and its causes and proposes a framework for combating insider trading in developing stock exchanges.

Entrepreneurial Knowledge and Aspirations of Dentistry Students in South Africa.

An investigation of the intentions and knowledge of entrepreneurship of final-year university dentistry students is reported, with particular regard to the factors of gender and race. A questionnaire survey was used with final-year dentistry students, over two years, at the University of the Western Cape in South Africa. The findings show that dentistry students across race and gender groups believed that entrepreneurship education was important. At least half of the students showed an interest in starting a business practice soon after their graduation and completion of a mandatory one-year internship, with more male students indicating an interest in starting a business than female students. More Black African students indicated interest compared to other race groups (Coloureds, Whites and Indians). There were no significant differences between male and female students with regard to knowledge of entrepreneurship, but there were significant differences with regard to race in the scores for knowledge of entrepreneurship, with White students scoring the highest and African students the lowest. The authors conclude that entrepreneurship education should be included in the curriculum in the final year of dentistry studies to encourage business practice start-up soon after the one-year internship period, with the aim of contributing to growth in employment.