Survey reveals half of South African small businesses are at risk of closure

A new survey has unveiled alarming insights into the sustainability of small businesses in South Africa, indicating that without immediate financial support, half of the nation’s small enterprises may not survive the next year.

Titled the Small Business Growth Index (SBGI) and released on Friday by Absa, the South African Chamber of Commerce and Industry (Sacci), and the Bureau of Market Research (BMR) at Unisa, the survey said that 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.”

With an index score of 51.08, the current state of South Africa’s small business environment is classified as being in the “vulnerable” zone.

The survey, which captures responses from over 1 600 small businesses across all nine provinces, highlights a sector grappling with extreme financial pressures.

Rising operational costs, coupled with a challenging economic landscape, have left many companies in decline and at significant risk of shutdown.

“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.”

Ronnie Mbatsane, managing executive for SME Business at Absa Business Banking, said that 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.

“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,” he said.

The survey said that more than half (55.3%) of respondents said they may not survive longer than a year under current conditions.

Prof Paul Kibuuka, head of the economic research division at the BMR, 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,” he said.

Kibuuka said this was 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.

Alan Mukoki, CEO of Sacci, said the data revealed a small business sector that was under financial pressure yet optimistic and investment-oriented.

“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,” Mukoki said.

The survey said that 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.”

The survey added that 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.”

Professor Raymond Parsons, an economist from the North West University, said that the challenges faced by the small business sector steadily reflect the extent to which broad economic growth forecasts for the South African economy as a whole for 2025 were being steadily trimmed.

“On Thursday the Sarb again reduced its 2025 growth forecast to only 0.9%. High-frequency business data is therefore mixed and trading conditions are tough in the circumstances,” Parsons said.

“The obstacles and trends outlined in the SBGI thus come as no surprise. Nonetheless, because small businesses are more vulnerable to economic setbacks, it remains important to get targeted assistance extended to them before it’s too late.”

In her Budget Vote speech in Parliament last week, Minister of SMall Business Development Stella Ndabeni noted the profound challenges that plague small businesses and committed to bringing them to the centre of our national economic agenda.

“This is not a rhetorical statement, but an acknowledgement that it is in their success that we will unlock shared prosperity, inclusive growth, and a more justeconomic order,” Ndabeni said.

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