A new survey of South Africa’s small business ecosystem has revealed a sector under extreme pressure, with rising operational costs leaving more than half in decline, distress or at risk of closure. Most report they may not survive beyond 12 months under current conditions, underscoring the urgent need for targeted and systemic support from both the public and private sectors.
The Small Business Growth Index (SBGI) – launched in February 2025 through a partnership between Absa Business Banking and the South African Chamber of Commerce and Industry (SACCI) and independently conducted by the Bureau of Market Research (BMR) at Unisa – is South Africa’s first real-time barometer tracking the conditions shaping small business performance.
Findings from the inaugural Index are based on a survey of more than 1,600 small businesses across all nine provinces. It draws on a range of indicators – including current performance, operating conditions, cost pressures, cash flow, debt levels, investment intentions, growth expectations and perceived skills gaps – to generate a composite score between 0 and 100, where 0 reflects extremely poor growth prospects and 100 reflects exceptionally strong economic growth and development outlooks.
“The SBGI was conceived to address a critical need for information about the internal and external factors that shape small business growth in South Africa,” says Ronnie Mbatsane, Managing Executive for SME Business at Absa Business Banking. “Small and medium enterprises (50 employees or less) account for more than 90% of all businesses in the country, yet many lack a consistent, real-time barometer to assess prevailing conditions, challenges and growth prospects.”
Prof Paul Kibuuka, Head of the Economic Research Division at the BMR, explains that the latest index score of 51.08 places South Africa’s small business environment in the “vulnerable” zone, caught between recovery efforts and rising operational costs. The survey found that only one in four businesses reported growth, while more than half (52.8%) said they were contracting, trading with difficulty or at risk of closure. Cost pressures continue to mount, with transport, utilities and raw materials emerging as the most volatile inputs – up by a net 60.9%, 56.9%, and 52.9% respectively. This is forcing many businesses to pass the pressure onto consumers, with more than 75% indicating plans to raise prices by an average of between 6% – 10% in the months ahead.
At the same time, resilience is being tested. More than half (55.3%) of respondents said they may not survive longer than a year under current conditions – highlighting the urgent need for working capital support, improved access to markets and targeted policy interventions. Despite the strain, roughly 80% of businesses signalled their intent to invest – particularly in marketing, fixed assets and working capital – reflecting a cautious but determined outlook.
“The data reveals a small business sector that is under financial pressure yet optimistic and investment oriented,” says Alan Mukoki, CEO of SACCI. “Policymakers should respond with urgent, tailored and accessible financing solutions that bridge the gap between demand and supply. The focus must be on relieving immediate cash flow stress, enhancing finance literacy and empowering businesses to invest in growth and resilience.”
To address the sector’s vulnerability, the report calls for urgent, targeted interventions across four priority areas.
Grant-based funding mechanisms must be expanded through streamlined and accountable micro-grant channels, particularly for early-stage, township and rural based businesses. Access to fit-for-purpose finance should be increased by supporting hybrid financing products that combine low-interest, revenue-contingent, medium to long-term loans with embedded training and mentorship components. There is also a need to strengthen financial literacy and awareness by launching a national SME finance readiness campaign, offering workshops, toolkits and digital tools to demystify financing options and improve loan-readiness. Broader access to equity and alternative capital sources – including venture capital, crowdfunding and invoice financing – should also be facilitated through accredited SME intermediaries.
These interventions are further supported by the SBGI initiative’s ecosystem-building efforts, including a dedicated Small Business Ambassador Programme that provides participants with market intelligence, practical guidance and opportunities to shape policy dialogue.
Adds Mbatsane: “As the Bank of the Entrepreneur, Absa is committed to collaboration to ensure that we collectively create a supportive ecosystem where entrepreneurs have access to appropriate solutions, including funding, access to markets, mentorship, training and advisory services. We will continue to refine and expand our solutions to ensure that small businesses don’t just survive but thrive.”
To access the full report or to find out more about the Small Business Ambassador Programme, visit https://sacci.org.za/small-business-growth-index/
