The Status of Internal Controls in Fast Moving Small Medium and Micro Consumer Goods Enterprises within the Cape Peninsula

Abstract

South African Small Medium and Micro Enterprises (SMMEs) play an important role in terms of stimulating the national economy. Despite the aforementioned, prior research shows that the failure rate of these entities is amongst one of the highest in the world, which is believed to be caused by economic factors. Several economic factors which impact on SMME sustainability have subsequently been researched and identified. As a result, SMME sustainability has received attention from the national government in recent times. One of economic factors which have been perceived by the authors as a major contributor to the high SMME failure rate is the lack of internal controls. Ultimately the responsibilities to both implement internal control frameworks and maintain all internal controls, rests with the management of an organisation. In essence, it can be said that a business is uncontrollable when it is essentially unmanageable. With the absence of adequate internal controls, an environment is created where an organisation is susceptible to all kinds of detrimental risks and, if these risks are not taken care of on time, the overall sustainability of the organisation could be negatively affected, which may lead in imminent failure. The main objective of this study was to determine the degree to which the implementation of an adequate system of internal control can help improve SMME sustainability. The research that was conducted was empirical in nature and fell within the ambit of the positivistic research paradigm. Questionnaires were administered and distributed to 110 owners and/or managers of SMMEs (SMME leaders) that operate within the fast moving consumer goods industry, situated in the Cape Peninsula. Based on the findings, it is obvious that most of the SMMEs do have a variety of internal controls, as prescribed by formal internal control frameworks but their support in terms of SMMEs sustainability were quite limited.

DOI: 10.5901/mjss.2014.v5n10p163