SA’s small and medium-sized business sector is approaching a tipping point, with more than half of surveyed firms warning they may not survive the next 12 months without intervention.
This is the stark warning by the Small Business Growth Index (SBGI) — a new collaborative survey developed by Absa, the SA Chamber of Commerce and Industry (Sacci) and the Bureau of Market Research at Unisa.
The index, designed as a real-time “thermometer” for the sector, shows that small and medium-sized enterprises (SMEs) are facing severe and widespread operating pressures. Conducted in April and May this year, the online survey captured the experiences of 1,601 small business owners and managers across all nine provinces.
The data paints a picture of deep fragility: 33.9% of respondents said they could only survive another 0-6 months under continued cost pressures, while a further 21.4% estimated they could last 7-12 months. Together, this means 55.3% of small and medium-sized businesses are at risk of closure within a year if no relief mechanisms are introduced. Only 11.5% are resilient enough to last beyond two years under the current conditions.
SMEs are a cornerstone of SA’s economy, driving job creation, innovation and broader economic participation. Yet they remain under pressure from a range of persistent challenges, made worse by recent economic shocks, infrastructure shortfalls and complex regulatory requirements.
Only one in four businesses reported any growth over the past six months — and even then, the growth was described as modest. Almost half of all SMEs are either contracting or trading under significant distress, and nearly 10% are on the brink of closure.
The survey’s findings underscore a critical shift in the profile of the small business landscape: the majority are no longer operating from a position of strength or even stability — they are defensive, cash-strapped and increasingly at risk of collapse.
One of the biggest concerns is that profits are shrinking faster than sales, showing that rising costs are squeezing small businesses from all sides.
Transport and fuel expenses were the biggest culprits, with more than 66% of firms reporting sharp cost increases, followed closely by utilities (electricity and water) and raw materials. Borrowing costs, rentals, wages and tax burdens have also climbed, leaving little room for recovery.
“Their ability to absorb these shocks has diminished significantly,” the survey report stated.
While SMEs have shown resilience in retaining staff, the overall employment picture remains flat and worrying.
According to the survey, two-thirds of firms kept their workforce stable over the past six months, but this should not be confused with confidence: the lack of hiring and a significant share of firms cutting jobs suggest caution rather than expansion. Nearly one in four businesses reduced headcount, while just one in 11 were able to expand staff.
SMEs’ top concerns included inadequate capital, ineffective marketing, increased competition, inflation, rising costs and reduced consumer spending. What is particularly interesting is that climate change ranked among SMEs’ top concerns — even surpassing issues such as load-shedding and water supply problems.
SMEs need funding but often struggle to access it. According to the report, access to institutional or formal funding is rare and often delayed or unavailable.
“Several respondents expressed frustration at being excluded from funding opportunities, particularly due to not qualifying for BEE,” the report read.
Despite relentless cost pressures and fragile operating conditions, SMEs are not giving up. In fact, the data shows many remain determined to adapt and grow.
The index found that even under financial strain, a significant number of SMEs are still planning to expand their reach, adopt new tools and explore untapped markets — including digital and export opportunities.
This outlook reflects a measured optimism, rooted in three hopes: that conditions will stabilise within the next year, supportive policies may materialise and their own innovation and persistence can carry them through the downturn.
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