As South Africa's small business landscape faces unprecedented challenges, the latest insights reveal that funding is just the beginning. What comes next is crucial for ensuring the growth and sustainability of entrepreneurs. Discover the uncomfortable truth about small business funding and what really drives success in a volatile market.
Image: Supplied
South Africa’s small businesses are grappling with immense challenges as rising costs, weak demand, and tightening margins threaten their existence.
Recent data revealed that over half of small businesses are either struggling, contracting, or are at risk of shuttering their doors.
Despite this dire situation, funding remains one of the most discussed solutions, yet it is often accompanied by misunderstandings.
According to the South African MSME Access to Finance Report 2025, the most sought-after form of funding for small businesses is asset financing.
The assumption driving this quest for capital is straightforward: access to funding should stimulate growth. However, this assumption is not universally valid.
Take the story of Orion Herman, for example.
Upon securing funding for his recycling initiative, Liquid Gold, which transforms organic waste into sustainable fertiliser and animal feed, Herman felt he had reached a pivotal moment in his entrepreneurial journey.
With a mission to empower communities through circular economic principles, Herman anticipated that capital would turbocharge his business growth.
Yet, the reality proved more complex, introducing layers of pressure he had not foreseen.
“One of the biggest misconceptions is that funding alone will unlock growth,” Herman stated.
“Capital without the right operational discipline, market access, and technical capability can place more pressure on a business rather than accelerate it.”
As funding became available, Liquid Gold had to make critical decisions.
Pricing strategies required reevaluation, operational systems needed cultivation, and various investments had to be prioritised with newfound discipline.
Growth ceased to be merely about quantity and shifted focus towards the quality of decisions made.
The turning point for Liquid Gold emerged not from funding alone but from the comprehensive support that accompanied it.
Through the SAB Foundation’s Social Innovation Fund, funding was paired with invaluable mentorship, technical guidance, and access to extensive networks.
Each of these components addressed specific challenges Herman faced.
Technical support minimised costly errors, while mentorship sharpened his decision-making prowess, and new networks opened doors to previously inaccessible opportunities.
“Funding is an enabler.But growth is driven by execution, knowledge, and access,” Herman said.
This reality is not isolated to Herman; countless entrepreneurs across South Africa encounter a crucial juncture where funding becomes available, often while their business fundamentals are still being established.
Financial management may still be maturing, operational systems might lack stability, and market routes may remain erratic.
In such cases, while capital can propel a business forward, it does not strengthen the foundational elements that are essential for success. Without adequate support, funding can expose vulnerabilities more quickly than it alleviates them. Therefore, the design of funding programmes becomes paramount.
Approaches that integrate capital with mentorship, training, and ongoing support stand a greater chance of fostering businesses that not only survive but thrive.
They recognise that funding is merely one aspect of what is necessary to cultivate a sustainable enterprise.
The implications of these insights are stark.
South Africa boasts one of the highest small business failure rates globally, with estimates citing that 70 to 80% of small, medium, and micro enterprises (SMMEs) fail within five years.
If funding alone were sufficient for fostering growth, those statistics would reflect a different narrative.
In a climate where failure is commonplace, structured support can profoundly shift outcomes.
Businesses that benefit from both funding and guidance are notably more capable of stabilising, growing, and creating jobs.
They are better prepared to navigate the multifaceted realities of entrepreneurship in a fluctuating environment.
For Herman, this dual support illuminated the path ahead.
“Mentorship helped us focus on unit economics and understand where value is created. It changed how we think about scaling, especially in a capital-intensive space,” he said.
The small business funding gap in South Africa, somehow exceeding R350 billion, is a significant constraint that cannot be overlooked.
Bridging this gap is essential; however, the current discourse is predominantly fixated on the amount of funding required, often neglecting what transpires after it is released.
This oversight constitutes a critical area where numerous businesses falter.
Ultimately, South Africa does not merely face a funding issue; it grapples with a follow-through problem.
While financial support can set businesses in motion, it is the sustained mentorship and guidance that ensure they remain standing and ultimately succeed.
Follow Business Report on Facebook, X and on LinkedIn for the latest Business and tech news.