Threat Looms for Over Half of Small South African Enterprises As They Stand on Brink of Collapse Without Immediate Aid, According to Recent Research
The Small Business Growth Index (SBGI) report, launched in February 2025, highlights the urgent need for targeted and systemic support for small businesses in South Africa, which are struggling to cope with rising operational costs and financial distress [1][3].
The report, a partnership between Absa Business Banking, the South African Chamber of Commerce and Industry (SACCI), and the Bureau of Market Research (BMR) at Unisa, surveyed over 1,600 small businesses across all nine provinces in South Africa [5]. The findings reveal a challenging environment, with only one in four businesses reporting growth, while more than half (52.8%) said they were contracting, trading with difficulty, or at risk of closure [1].
To address these issues, the report proposes a package of interventions aimed at boosting the resilience of small businesses, which constitute over 90% of formal enterprises in South Africa and contribute significantly to employment and GDP [1][4].
Financial Support
The report emphasises the need for financial support to prevent imminent closures, as more than half of small businesses may not survive beyond 12 months without it [1][3]. This includes expanding grant-based funding mechanisms through streamlined and accountable micro-grant channels and increasing access to fit-for-purpose finance by supporting hybrid financing products [2].
Addressing Cost Pressures
The report also addresses cost pressures related to transport, utilities, and raw materials, which have risen significantly and are squeezing small business margins [2]. To alleviate this, the report calls for measures to address these cost pressures and facilitate broader access to equity and alternative capital sources.
Improving Cash Flow and Managing Debt
Given the high debt levels and cash flow challenges identified in the survey, the report suggests support to improve cash flow and manage debt [1][2]. This includes strengthening financial literacy and awareness through a national SME finance readiness campaign.
Closing Skills Gaps
The report also identifies skills shortages as a limiting factor for growth and sustainability, and calls for efforts to close perceived skills gaps [1].
Data-Driven Policy Interventions and Business Strategy Improvements
The SBGI aims to provide data-driven policy interventions and business strategy improvements by using insights like those provided by the index to inform decision-making at government and industry levels [4].
Absa, as the Bank of the Entrepreneur, is committed to collaboration to ensure small businesses have access to appropriate solutions [6]. Moreover, more than 75% of businesses indicated plans to raise prices by an average of between 6% - 10% in the months ahead due to cost pressures [7].
The SBGI uses a range of indicators to generate a composite score between 0 and 100, with a score of 51.08 placing South Africa's small business environment in the "vulnerable" zone [8]. More than half (55.3%) of respondents said they may not survive longer than a year under current conditions [8].
To access the full report or learn more about the Small Business Ambassador Programme, visit sacci.org.za/small-business-growth-index/. The SBGI's role includes offering timely, practical insights that can guide both business owners and policymakers in creating supportive environments for SME growth [5].
References: 1. [Link to reference 1] 2. [Link to reference 2] 3. [Link to reference 3] 4. [Link to reference 4] 5. [Link to reference 5] 6. [Link to reference 6] 7. [Link to reference 7] 8. [Link to reference 8]
- The Small Business Growth Index (SBGI) report highlights the urgent need for financial support to prevent small businesses in South Africa from closing, as more than half may not survive beyond 12 months without it.
- The report proposes expanding grant-based funding mechanisms and increasing access to fit-for-purpose finance as key strategies for offering financial support.
- In addition to financial support, the report addresses cost pressures related to transport, utilities, and raw materials, which have risen significantly and are squeezing small business margins.
- To alleviate cost pressures, the report calls for measures to address these issues and facilitate broader access to equity and alternative capital sources.
- Given the high debt levels and cash flow challenges identified in the survey, the report suggests support to improve cash flow and manage debt, including strengthening financial literacy and awareness.
- The SBGI aims to provide data-driven policy interventions and business strategy improvements by using insights from the index to inform decision-making at government and industry levels, with the goal of creating supportive environments for SME growth.
