The impact of an economic recession on the working capital management of small and medium enterprises in South Africa

M.Com. (Financial Management)Working capital management (WCM) is considered critical for the success of all business and especially for small businesses. A recession (such as the one that took place in 2009) complicates the working capital management of small businesses. Working capital management of a sample of small and medium enterprises in South Africa were investigated to determine how they manage their working capital during challenging economic conditions. The impact of the 2009 economic recession on WCM was specifically investigated by following a quantitative descriptive research approach. The study sample consisted of 44 companies listed on the JSE Ltd AltX Index. A trend analysis was applied on WCM variables to determine significant changes overthe study period. Because variables were not normally distributed, the Mann Whitney U test was conducted to determine the statistical significance of the WCM mean ranks pre-, during and post-recession phases. The trend analysis of working capital management over the six-year study period exhibited a significant improvement in the working capital management level during the economic recession. This was largely attributed to delaying payment to creditors. The analysis of the WCM variables pre-, during and post-recession phases indicated that there were no significant changes in WCM that can be attributed to the 2009 economic recession. It was concluded that although there were changes in working capital management over the study period, the changes could not only be attributed to the 2009 recession