A study by SA’s largest bank by assets, Standard Bank, has found that there is a clear distinction between small businesses owned by locals and those run by foreign nationals, with the latter thriving due to its consumer-centric approach.
The study took a deep dive into SA’s informal economy, which some estimates put at R900bn a year, and surveyed about 7,500 businesses in Gauteng, Western Cape, KwaZulu-Natal and the North West.
One of its key takeaways was that there are contrasting entrepreneurial mindsets between SA’s entrepreneurs, who “tend to be traditional and reactive, prioritising immediate needs”, and their foreign peers, who “often display an agile, aspirational and customer-centric approach, embracing innovation”.
Zooming in on the mindsets revealed in the survey, the study of small businesses owned by locals shows a more inward-focused ethos, often exhibiting a cautious approach to change and a reliance on familiar methods.
The effects, according to the report, are that these businesses tend to treat all customers uniformly, “overlooking varying mindsets and behaviours that could influence purchasing decisions” and unlock new opportunities.
Locals strong on needs, weak on vision
“Despite their strong understanding of current community needs, they often lack a broader, strategic perspective to anticipate future customer demands or market trends,” the study noted. “Their approach is typically transactional, centred on fulfilling present needs rather than inspiring customer aspirations or driving future trends.”
In contrast, businesses owned by foreign nationals were agile and more embracing of innovation. They were continuously introducing new products and services to meet their clients’ evolving needs.
“Unlike local SMEs, they are more willing to take calculated risks and embrace novel business ideas, contributing to their dynamic presence in the market,” the study found.
Foreign-owned SMEs drive demand
“Foreign-owned SMEs actively shape consumer behaviour by driving demand for new products and payment methods. They leverage creativity, for example, by using point-of-sale machines for both transactions and withdrawals, monetising convenience in ways that local businesses might overlook.”
The Standard Bank report acknowledged that “these contrasting dynamics have, at times, led to friction between local and foreign-owned SMEs. This highlights the need for more inclusive support structures that aim to level the playing field and foster a more equitable and collaborative informal economy.”
The draft Business Licensing Bill of 2025 says foreign nationals looking to register a business in SA must have a valid visa or permit authorising the applicant to operate a business in terms of the Immigration Act, or an asylum-seeker visa or refugee visa in terms of the Refugees Act.
The bill follows the publication earlier this year of the country’s first national policy-level guidance on general business licensing, geared to cut costs and red tape.
The policy document implores municipalities to recognise licensing as a “regulatory tool and not view it as a fiscal tool” to bolster the coffers of cash-strapped councils.
Small businesses have a high failure rate in SA, with 60%-80% failing within the first five years and sometimes within three years. Red tape, lack of financing and burdensome regulatory requirements have been cited as the biggest constraints.
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