New small and medium enterprises (SMEs) are an important vehicle to address the challenges of job creation, sustainable
economic growth, equitable distribution of income and the overall stimulation of economic development. New SMEs suffer from
a high failure rate in South Africa. The high failure rate of new SME paints a bleak picture of the SME sector’s potential to
contribute meaningfully to job creation, economic growth and poverty reduction. The primary objective of this study was to
determine the causes of the failure of new SMEs. The review of the literature revealed that the causes of the failure of new
SMEs are both internal and external. Internal factors include lack of management experience, lack of functional skills and poor
staff training and development and poor attitudes towards customers. External factors include non-availability of a logistics
chain and a high cost of distribution, competition, rising costs of doing business, lack of finance and crime.