South Africa faces enduring economic challenges: low growth, persistently high unemployment, and rising pressure on both households and the public sector. According to the World Bank’s latest available data, GDP growth remains subdued, while unemployment continues to exceed 30%, constraining economic resilience.
Yet within this environment, a powerful and often overlooked economic engine is operating on a scale.
Small, micro and medium enterprises (SMMEs) account for 90% of businesses and contribute up to 60% of employment, according to the Banking Association South Africa (BASA). They are widely recognised as the backbone of the economy. Despite this, many remain excluded from the systems needed to grow, particularly in accessing finance.
The reason is deceptively simple: too many South African SMMEs remain economically invisible.
The Visibility Gap
According to Trade & Industrial Policy Strategies (TIPS), formal small businesses contributed around 19% of South Africa’s GDP and roughly a third of employment in 2023, while the informal sector accounted for a further 17% of employment, largely driven by micro enterprises and own‑account workers. These figures highlight the sector’s significant role in the economy. However, research cited by the International Finance Corporation (IFC) indicates that only about 5% of formal SMMEs in South Africa have access to bank credit, while generating roughly a third of economic output.
This stark disconnect between contribution and access exposes a structural flaw in how risk, visibility, and opportunity are defined. In this context, invisibility has little to do with ambition or effort. Many SMMEs generate steady revenue, employ staff, and serve loyal customer bases. Their key limitation is the absence of a digital and financial footprint that aligns with traditional lending and insurance frameworks.
Thin credit histories, informal operating models, and irregular cash flows often cause otherwise viable businesses to appear high‑risk or difficult to assess, a dynamic highlighted in TIPS’ 2025 policy brief on the small business finance gap.
Why Invisibility Matters
The consequences of this invisibility extend far beyond individual businesses. In an economy characterised by structurally high unemployment, constrained public finances, and deep inequality, excluding a sector that employs millions is economically unsustainable, as reflected in national indicators tracked by the World Bank.
Globally, the IFC estimates the SMME finance gap at trillions of dollars, driven largely by information asymmetries between lenders and small businesses. In South Africa, this gap is amplified by historic exclusion and uneven access to formal financial systems.
This dynamic creates a persistent paradox: while SMMEs are often perceived as high-risk, they are also among the most resilient parts of the economy. Research by TIPS shows that although formal small businesses were significantly affected during the COVID‑19 downturn, informal and own‑account enterprises rebounded faster, driven by their proximity to real‑world demand.
These realities are increasingly shaping cross-sector discussions, including TransUnion’s ‘Conversations That Matter‘, where business leaders, policymakers, and financial institutions are aligning on the urgent need to rethink how risk and opportunity are assessed in emerging markets.
Visibility, then, is not a technical “nice‑to‑have”. It is a structural requirement for scale, sustainability, and inclusion.
Closing the Gap: Lessons from What’s Working
The challenge is no longer theoretical, and neither are the solutions.
Institutions making meaningful progress are already shifting how SMMEs are assessed and supported. Three clear patterns are consistently emerging:
- building visibility early by enabling businesses to develop credible financial footprints over time
- moving beyond point-in-time assessments towards more dynamic, journey‑based approaches to risk
- prioritising speed, ensuring viable businesses receive decisions while opportunities still exist
At the centre of this shift is the more deliberate use of alternative and behavioural data, from transactional signals to digital activity. This enables lenders to distinguish between businesses that are genuinely high-risk and those that are simply unseen.
Leading institutions are already applying these approaches in practice, fundamentally reshaping how SMMEs are assessed. In doing so, they are unlocking stronger portfolio performance and supporting sustained small‑business growth.
The message is clear: when visibility improves and decision-making evolves, SMMEs transition from marginal applicants to scalable partners in economic growth.
Data as an Enabler, Not a Barrier
Improving visibility does not mean lowering credit standards or encouraging reckless lending. Rather, it means strengthening the accuracy with which risk is understood.
South Africa has made meaningful progress in this area. Over the past decade, the use of broader, responsibly managed data sources has enabled millions of individuals and entrepreneurs who were previously excluded from the formal system to build recognised financial identities. This includes insights such as how consistently consumers pay their accounts, how they transact digitally, and patterns that indicate financial stability even outside of traditional credit products.
At TransUnion Africa, we see firsthand how richer data leads to better outcomes, including more accurate risk assessments, fairer access decisions, and greater participation in the formal economy. When lenders can distinguish between the “unknown” and the high‑risk applicant, capital can flow more efficiently and responsibly.
SMMEs as Economic Multipliers
The value of SMMEs extends beyond their balance sheets. These businesses anchor local economies, create entry points into the workforce, and reinvest close to home, a role strongly reinforced by national SMME contribution data from BASA.
As SMMEs grow, they generate a multiplier effect. Employment increases, household incomes stabilise, and local value chains are strengthened. Over time, this broadens the tax base and reduces reliance on the state.
While policy intent to support small business has long existed, alignment across datainstitutions, lenders, and policymakers has often lagged. Encouragingly, IFC‑backed financing initiatives and digital‑first SMME lending models signal that momentum is now building.
A Growth Story Hiding in Plain Sight
South Africa is not short of entrepreneurial talent. What it lacks is the systems needed to consistently recognise, assess, and support that potential on a scale. By responsibly and collaboratively closing the visibility gap, and doing so with urgency, SMMEs can shift from overlooked operators to recognised drivers of growth.
Because when SMMEs become visible, they do more than unlock access to finance. They unlock jobs, resilience, and economic participation on a scale. And in doing so, they help unlock South Africa’s next chapter of growth.
By Lee Naik, CEO, TransUnion Africa