Red tape, funding shortfalls and lack of data still constrain small business growth

Red tape, limited funding access, and inadequate data systems remain key challenges facing South Africa’s small business sector.

Addressing the National Council of Provinces’ Select Committee on Economic Development and Trade, Small Business Development Minister Stella Ndabeni-Abrahams told the committee that structural issues continue to constrain micro, small and medium enterprises (MSMEs)

These include limited access to finance, regulatory and administrative burdens, lack of access to competitive markets – particularly in rural and township areas – and insufficient ICT and innovation support. Ndabeni-Abrahams also flagged the absence of a centralised and up-to-date MSME database as a constraint on evidence-based policymaking and effective monitoring of support programmes.

Ndabeni-Abrahams underscored the Department’s alignment with the National Development Plan’s target of generating 90% of new jobs through MSMEs over the long term, and said institutional reforms are aimed at improving service delivery and strengthening the Department’s support models.

The DSBD’s strategic plan for 2025–2030 outlines five focus areas to address these issues.

The Department’s five priorities for the next five years include cutting red tape by reforming 28 laws and rolling out e-registration systems in 100 municipalities, supported by a new Business Licensing Bill; improving market access through infrastructure investment and support for 5 000 MSMEs; expanding financial support via new policy frameworks for incentives, township and rural economies, and start-ups; developing business skills by backing 50 000 start-ups and formalising 30 000 informal businesses each year; and strengthening institutional capacity through the appointment of a Small Enterprise Ombud and an advisory body for fair trade and dispute resolution.

Committee Members raised concerns around municipal accountability, programme implementation, technological readiness, inclusion, provincial funding imbalances, and the clarity of funding and legislative frameworks. The importance of performance monitoring and financial support for cooperatives was also noted.

Officials from the DSBD and its implementing agency, the Small Enterprise Development and Finance Agency, provided responses covering budget shortfalls, inclusion policies, institutional reforms, and the red tape reduction framework.

Some Members expressed dissatisfaction with the level of detail provided on funding formulas and measurable outcomes. The Minister committed to submitting written responses to outstanding questions, reaffirmed the Department’s commitment to transparency and quarterly reporting, and noted that legacy institutions were under review as part of broader reforms.

IOL