Received:
2026-05-25 | Accepted:
2026-08-05 | Published:
2026-09-30
Title
The role of internal controls in promoting growth and sustainability of small and medium enterprises in South Africa
Abstract
Small and Medium Enterprises (SMEs) play a crucial role in South Africa (SA) in creating employment, driving economic development, and alleviating poverty. Even though their importance is acknowledged, high failure rates among SMEs persist; weak governance structures, improper financial management, exposure to fraud, and inadequate risk assessment practices sometimes cause them. This study assesses the role of internal controls in promoting the growth and sustainability of SMEs within the Free State province. The study employed structured interviews as a data-collection instrument and a thematic approach to analyse the data. The results of this study demonstrate a clear maturity gradient of internal controls. Micro-SMEs rely on owner-driven, informal controls, whereas medium-sized enterprises use structured governance and risk management systems. Control activities such as the approval process and cash reconciliations are mostly implemented, while proper risk management, monitoring mechanisms, and internal audit functions are absent due to limited resources. This study suggests that internal controls not only serve as compliance mechanisms but also play a vital role in enhancing the sustainability and growth of SMEs. The study recommends establishing a policy to support SME growth and providing training in internal controls and digitalisation to strengthen the sustainability of SMEs in South Africa.
Keywords
SMEs, internal controls, sustainability, growth, risk management, South Africa
JEL classifications
M10
, M13
, M40
URI
http://jssidoi.org/ird/article/265
DOI
Pages
42-54
Funding
These research study was funded by New Generation of Academics Programme (nGAP), under research Studies Costs, South Africa.
This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License
References
Ajala, T. O., Ololade, B. M., Olaleye, J. O., & Abass, K. B. (2023). Internal control systems and organisational performance in Small and Medium Enterprises (SMEs) in Nigeria. African Journal of Business Management, 17(4), 65-73 https://doi.org/10.5897/ajbm2023.9445
Search via ReFindit
Appah, E. (2025). Enterprise Risk Management Practices and Financial Performance of SMEs: Moderating Role of Management Competence in Nigeria. British Journal of Multidisciplinary and Advanced Studies, 6(5), 21-45 https://doi.org/10.37745/bjmas.2022.04956
Search via ReFindit
Aray, E., & Alcívar, I. (2025). Control interno y gestión financiera de las PyMEs de servicios del Cantón Manta. Horizon Nexus Journal, 3(2), 214-227 https://doi.org/10.70881/hnj/v3/n2/67
Search via ReFindit
Aziz, Z. D. A., Rahman, N. A. A., Omar, M. K., & Hussein, N. (2024). Empowering Entrepreneurial Ecosystem: A Conceptual Paper on Exploring the Impact of Government Support on SMEs in Malaysia. Information Management and Business Review, 16(3S(I)a), 573-583 https://doi.org/10.22610/imbr.v16i3s(i)a.4151
Search via ReFindit
Baloyi, F., & Khanyile, M. B. (2022). Innovative mechanisms to improve access to funding for the black-owned small and medium enterprises in South Africa. The Southern African Journal of Entrepreneurship and Small Business Management, 14(1), 1-14 https://doi.org/10.4102/sajesbm.v14i1.578
Search via ReFindit
Efile, J., & Neethling, A. (2025). Factors Contributing to the Existence of Undetected Fraud Within Retail SMEs in the Cape Metropole. International Journal of Applied Research in Business and Management, 6(1) https://doi.org/10.51137/wrp.ijarbm.2025.jefs.45695
Search via ReFindit
Hatab, A. A., Lagerkvist, C. J., & Esmat, A. (2020). Risk perception and determinants in small‐ and medium‐sized agri‐food enterprises amidst the COVID‐19 pandemic: Evidence from Egypt. Agribusiness, 37(1), 187-212 https://doi.org/10.1002/agr.21676
Search via ReFindit
Igbojioyibo, R. P. (2024). The Impact of Internal Control Systems on Asset Protection and Financial Reporting Accuracy in SMEs. Asian Journal of Economics Business and Accounting, 24(12), 65-80 https://doi.org/10.9734/ajeba/2024/v24i121592
Search via ReFindit
Iwara, I. O. (2024). SMME efficacy: an in-depth analysis of key constructs in rural context. International Journal of Entrepreneurial Knowledge, 12(1), 1-23 https://doi.org/10.37335/ijek.v12i1.218
Search via ReFindit
Klein, Y., Lubinga, S., & Masiya, T. (2024). Implementation of internal controls in supply chain management: A case study. Journal of Transport and Supply Chain Management, 18(0), 1-10 https://doi.org/10.4102/jtscm.v18i0.1083
Search via ReFindit
Maela, K. D., Matloga, S. T., & Zitha, H. E. (2024). Nurturing Development Administration in South African Local Government. International Journal of Social Science Research and Review, 7(3), 170-188 https://doi.org/10.47814/ijssrr.v7i3.1987
Search via ReFindit
Magodi, A. Y., Daniyan, I., & Mpofu, K. (2023). Development of a Conceptual Framework for Quality Management System Implementation in Small and Medium Enterprises in South Africa. Industrial Engineering and Applications, 33, 708-716 https://doi.org/10.3233/atde230098
Search via ReFindit
Makaš, A. (2023). Governance, risk and compliance frameworks applicability in the organisations. International Journal of Science and Research Archive, 10(2), 716-724 https://doi.org/10.30574/ijsra.2023.10.2.1024
Search via ReFindit
Molope, G. E., Ladzani, W., & Seeletse, S. M. (2024). Why do some government support structures fail to aid the growth of SMEs in the Gauteng Province of South Africa? International Journal of Research in Business and Social Science, 13(3), 448-452 https://doi.org/10.20525/ijrbs.v13i3.3210
Search via ReFindit
Mukarromah, D., Jubaedah, J., & Astuti, M. (2020). Financial Performance Analysis on Micro, Small, and Medium Enterprises of Cassava Product in Cibadak, Lebak Regency, Jurnal Economia, 16(2), 257-268 https://doi.org/10.21831/economia.v16i2.31232
Search via ReFindit
Musikavanhu, T., & Nqala, L. (2024). Exploring challenges in designing and implementing internal control systems: A case study of small and medium enterprises in the Cape Metropole, South Africa. Business and Finance Journal, 9(1), 75-84 https://doi.org/10.33086/bfj.v9i1.5721
Search via ReFindit
Ngan, N. T. (2024). Factors affecting the effectiveness of internal control systems in small and medium enterprises operating in the trade and service sector in Binh Duong Province. International Journal of Management & Entrepreneurship Research, 6(10), 3577-3588 https://doi.org/10.51594/ijmer.v6i10.1680
Search via ReFindit
Okoye, C. C., Nwankwo, E. E., Usman, F. O., Mhlongo, N. Z., Odeyemi, O., & Ike, C. U. (2024). Accelerating SME growth in the African context: Harnessing FinTech, AI, and cybersecurity for economic prosperity. International Journal of Science and Research Archive, 11(1), 2477-2486 https://doi.org/10.30574/ijsra.2024.11.1.0231
Search via ReFindit
Olarewaju, O. M., & Msomi, T. S. (2021). Factors Affecting Small and Medium Enterprises’ Financial Sustainability in South Africa. African Journal of Inter/Multidisciplinary Studies, 3(1), 103-117 https://doi.org/10.51415/ajims.v3i1.893
Search via ReFindit
Ololade, B. (2024). Internal control systems of SMEs in Nigeria: a proactive or reactive strategy against employees’ fraud? Journal of Financial Crime, 32(1), 49-63 https://doi.org/10.1108/jfc-10-2023-0259
Search via ReFindit
Oyelakin, O., & Abdullahi, A. (2022). Assessing the efficacy of employee training and internal control system on financial management of small and medium scale enterprises in Nigeria. African Journal of Economic and Management Studies, 13(3), 366-384 https://doi.org/10.1108/ajems-06-2021-0299
Search via ReFindit
Pelei, A., & Benedek, P. (2024). The role of compliance in the operation of credit institutions. Pénzügyi Szemle = Public Finance Quarterly, 70(1), 50-66 https://doi.org/10.35551/pfq_2024_1_3
Search via ReFindit
Purba, S., Muda, I., Lumbanraja, P., & Kholis, A. (2022). Factors that Influence the Organisational Performance in Private Universities: A Review of Literature. International Journal of Finance Economics and Business, 1(4), 284-291 https://doi.org/10.56225/ijfeb.v1i4.107
Search via ReFindit
Rahayu, D., Hartanto, R., Rohayati, I., & Harni, R. (2024). Fraud prevention strategies in indonesian msmes: the significance of honesty and internal control factors. Jurnal Akuntansi Keuangan Perpajakan Dan Tata Kelola Perusahaan, 1(4), 427-440 https://doi.org/10.59407/jakpt.v1i4.879
Search via ReFindit
Şenvar, Ö., & Hamal, S. (2022). Examining Fraudulent Financial Statements of Turkish Small and Medium Enterprises (SMEs) from Different Sectors. European Journal of Science and Technology, 41, 211-220 https://doi.org/10.31590/ejosat.1063728
Search via ReFindit
Shava, E. (2024). Re-engineering local economic development through SMMEs post-COVID-19 in rural municipalities. International Journal of Research in Business and Social Science, 13(3), 401-409 https://doi.org/10.20525/ijrbs.v13i3.3028
Search via ReFindit
Shipanga, U., Roux, S., & Dubihlela, J. (2022). Operational risk factors and the sustainability of small and medium manufacturing enterprises in South Africa. Insights Into Regional Development, 4(4), 126-139 https://doi.org/10.9770/ird.2022.4.4(7
Search via ReFindit
Su, W., Guo, X., Ling, Y., & Fan, Y.-H. (2022). China’s SMEs Developed Characteristics and Countermeasures in the Post-epidemic Era. Frontiers in Psychology, 13, 1-13 https://doi.org/10.3389/fpsyg.2022.842646
Search via ReFindit
Tam, N., & Le‐Anh, T. (2021). The Impact of Internal Control on Performance of Small and Medium-Sized Enterprises in an Emerging Economy. Asia-Pacific Management Accounting Journal, 16(2), 367-389 https://doi.org/10.24191/apmaj.v16i2-13
Search via ReFindit
Zeng, H., Li, Y., & Shi, J. (2020). Does the supervisory ability of internal audit executives affect the occurrence of corporate fraud? Evidence from small and medium-sized listed enterprises in China. International Journal of Accounting and Information Management, 29(1), 1-26 https://doi.org/10.1108/ijaim-02-2020-0020
Search via ReFindit
RSS 1.0