Why South Africa keeps failing its SMEs
By Larry Claasen
SOUTH AFRICA is falling short when it comes to providing support for SMEs.
That is the findings of the 2026 Global Entrepreneurship Monitor (GEM) National Expert Special Report on South Africa, which said the country’s enabling environment for entrepreneurship scores a low 3,9/10, trailing the global average of 4,7.
South Africa’s National Entrepreneurship Context Index (NECI) score of 3,9, which has changed little over the past five years, falls below those of “peer emerging economies” such as Indonesia (5,8), as well as its BRICS partners, India (6,1), Brazil (4) and China (5,4).
Angus Bowmaker-Falconer, research fellow at Stellenbosch Business School and co-author of the report, says: “The problems of a substantial gap between good policies and on-the-ground reality are well-diagnosed. What is needed now is not new policies or additional funding, but the political will and institutional discipline to translate the policies and financial resources we already have into action.”
Bowmaker-Falconer said the performance of countries like India, Indonesia and that of the top-ranked UAE was a result of deliberate, coordinated policy choices.
The report makes a number of recommendations like making regulatory/bureaucratic and access reforms; putting in place support like formalising entrepreneurship as a school learning area; and changing social and cultural norms that support or discourage entrepreneurship.
The GEM report is insightful and provides a pathway, but at its heart, it does not say anything new. Over the years, several reports have come out with similar findings, yet the response from the state has not really changed.
The truth of the matter is that the government – even the current GNU – has not prioritised SME development.
Understandably, pressing issues like the power crisis, and the problems at the country’s ports and in its rail network have taken most of its focus. But in neglecting the lot of SMEs, it is missing an opportunity to address the high unemployment rate in a way that does not cost too much.
A review of the regulatory and bureaucratic issues would lift the administrative burden of running a business. A centralised online funding portal would match SMEs with funders. The state can also come up with programmes that provide them with access to markets.
Thought also has to be given into how to enable these businesses to scale up their operations.
Such interventions can easily be addressed in Operation Vulindlela, a joint initiative of The Presidency and National Treasury designed to accelerate structural reforms, modernise network industries, and boost economic growth.
If the state makes the necessary SME reforms using Operation Vulindlela as its change agent, and also brings in the financial sector as development partners, it could effectively transform the South African economy in a way that directly affects ordinary people.
If an SME reform package is implemented, side hustles will become full-time businesses, existing businesses will be able to scale up production, and all of them will be able to get access to new markets they never even envisaged getting into.
The upside to this kind of package is immense. It will have an almost immediate impact on employment, salaries and production capacity.
Put another way, it will unlock the latent abilities of South Africans.
This country clearly has entrepreneurial flair and putting some effort into unleashing it could not just boost its collective bottom line but also allow people to fully express who they are.
