An Investigation Into The Relationship Between A Firm’ S Working Capital Management And Its Profitability: A Case Study Of The Namibian State-Owned Commercial Institutions

ABSTRACT 

The importance of effective working capital management in enhancing an organisation’s profitability cannot be overemphasized. In Namibia, the profitability of several State-Owned Enterprises (SOE) has constantly been the cause of taxpayers’ concern for the past few years as these SOEs have incessantly depended on Government bailouts. While a number of scholars have concentrated their research on understanding the relationship between working capital management (WCM) and an organisation’s profitability, the Namibian SOE context has not been empirically studied with regards to these aspects. The discovery of this absence of research therefore generated the following question: what is the impact of working capital management on the profitability in Namibian State-Owned commercial institutions? To address this research question, the literature on working capital management and profitability was thoroughly reviewed, and an empirical investigation was conducted. The literature review emphasised the importance of effective working capital management in enhancing an organisation’s profitability. The population for this study comprised employees from the Finance departments from 23 SOEs, namely Air Namibia, Epangelo Mining; Lüderitz Water front; Meat Corporation of Namibia; Namibia Airports Organisation; Namibia Institute of Pathology; Namibia Ports Authority; Namibia Posts and Telecommunications Holdings; NAMPOWER; Namibia Wild Resort; National Fishing Corporation of Namibia; NAMCOR; Roads Authority; RCC; Trans Namib; Zambezi Water Front; Agricultural Bank of Namibia; Development Bank of Namibia; Namibia National Reinsurance Corporation; Road Fund Administration; Environmental Investment fund;  MVA, and  Games Products vi  Trust Fund. These institutions had a combined total of 125 finance employees countrywide and a questionnaire survey was administered to all of them via e-mail.  The findings indicated that profitability is positively influenced by working capital management (WCM) in Namibian State-Owned commercial institutions.