Only four out of every ten small businesses in South Africa believe they possess the financial resilience to operate for more than twelve months under current economic pressures without securing external assistance, according to a recent biannual study backed by the Absa Group. The latest Small Business Growth Index, released on Tuesday, indicated that approximately 38 per cent of respondents felt their enterprises would survive past the twelve-month mark, a figure largely unchanged from the 40 per cent recorded in the inaugural survey published in August. This persistent fragility underscores the severe and continuous strain faced by the sector, which serves as the largest employer in the continent’s most industrialised economy.
The overall Business Confidence Index (BCI) for the sector registered at 51.5, showing only a minimal increase from 51.08 in the previous period. This score firmly places the operating environment for small businesses within the “vulnerable” zone, highlighting the substantial systemic risks they face. The survey, which was commissioned by Absa’s business-banking unit and the nation’s chamber of commerce and industry, and executed by the University of South Africa’s Bureau of Market Research, covered a sample of 2,134 firms, providing a robust snapshot of the national micro-economic climate.
The study found that, despite some strengthening in operational continuity post-pandemic, the cumulative effects of past lockdowns, persistent liquidity challenges, intense cost pressures, and deep-seated structural constraints continue to plague the majority of enterprises. More than 40 per cent of firms surveyed remain in a state of outright distress or are experiencing significant strain, reinforcing the urgent need for targeted interventions spanning financial relief, energy stability, and enhanced access to markets.
The most acute obstacle cited by the small business community remains financial and liquidity-related, with more than a quarter of respondents identifying it as their primary constraint. These entities frequently grapple with late or inconsistent client payments, a dependency on overdraft facilities simply to meet payroll and supplier obligations, and chronically inadequate access to appropriate capital. Further exacerbating the working capital crisis, high domestic inflation and persistently weak consumer demand have eroded meagre cash buffers, trapping many of these businesses in a precarious “hand-to-mouth” operational cycle.
Beyond immediate financial woes, macroeconomic uncertainty remains a top perceived external risk. Business leaders cited endemic crime, corruption, and the systematic decay in public infrastructure—specifically concerning energy supply, water provision, and transport networks—as major hurdles to stable operation and growth. Load-shedding alone, for instance, has been estimated to cost the South African economy up to R160 billion annually, with small firms bearing a disproportionately high compliance and mitigation cost, as noted in a 2024 analysis by PwC South Africa.
Crucially, the survey revealed a stark lack of momentum in the sector’s growth potential. Only 24 per cent of all small businesses currently operate within the “confidence” or “growth” range, indicating that the vast majority are focused purely on survival rather than expansion. The small business segment, defined as firms with fewer than fifty employees, is disproportionately important to the country’s socioeconomic health, with roughly three million such enterprises employing approximately 13.4 million people, according to data cited by the Banking Association of South Africa.
To mitigate the structural fragility, the report proposes several key interventions designed to improve the operating environment. These recommendations include simplifying complex funding processes through the establishment of one-stop digital application portals, introducing performance-linked grant schemes, and crucially, creating a national “ease-of-doing-business” task force to rigorously monitor and report on bureaucratic bottlenecks. Such systemic reforms are viewed as necessary to unlock the sector’s potential to drive employment and generate the kind of economic transformation outlined in the nation’s strategic development plans, according to the Finscope Small Business Survey.