Impact of finance on entrepreneurship: a South African case study

Abstract

This study investigates the relationship between entrepreneurship and access to finance in South Africa. Entrepreneurship is currently a buzz topic around the world as policy makers and private sector business influencers realise that this disused area is a catalyst for economic growth. Because of the assortment of theoretical and empirical evidence on entrepreneurial finance at the microeconomic level, we decide to tackle the gap from a macroeconomics point of view. We employ time series data and proxy entrepreneurship activity using self-employment. Furthermore, we employ unit root and cointegration tests to investigate the long run relationship between access to finance and entrepreneurship activity. The results of the empirical analysis indicate access to finance has a significant and positive impact on entrepreneurship activity in the long run. Furthermore, the causality test reveals that the relationship between access to finance and entrepreneurship is bi-directional.