More than 150 South African businesses face closure
South African SMEs are under intense pressure, with nearly 180 close to shutting down. Here’s what the latest data reveals.
New findings indicate that roughly 180 small and medium-sized enterprises are at risk of closing their doors in South Africa. The insight comes from the latest Small Business Growth Index, published by Absa Business Banking, the South African Chamber of Commerce and Industry and Unisa’s Bureau of Market Research.
More than 2,000 SMEs were surveyed nationwide, painting a picture of a sector under mounting strain. According to BusinessTech, even businesses that are pressing forward with expansion efforts are feeling the pressure of the country’s rising operating costs.
Why are operating costs becoming such a major burden?
Transport, electricity and general input costs have increased significantly, forming the biggest barrier to stability. In response, 67% of SMEs reported that they will need to raise their prices by as much as 10% over the next six months to stay afloat. However, many fear that higher prices will deter customers, dampen demand further and keep inflation elevated.
Another worrying insight is that only 38% of businesses believe they can survive for another year under current conditions without additional support. This highlights the intensity of the financial pressure they face.
Is there any improvement in the overall SME environment?
While the index did show a slight improvement, rising from 50.08 to 51.5 points, it still sits firmly within what researchers call the vulnerable zone. This means that despite the marginal upward movement, small businesses remain far from reaching a point of solid recovery or stability.
Across the SME landscape, conditions vary widely. A third of businesses reported positive growth, while nearly a quarter revealed they are experiencing significant difficulties. Most concerning is the finding that 9% of SMEs, roughly 180 businesses, are at immediate risk of closure due to cashflow challenges and persistent instability.
Are SMEs still hopeful about future growth?
Despite the tough climate, more than half of the surveyed SMEs still anticipate some growth within the next year. Many plan to expand locally or nationally, strengthen their online presence or even move into export markets. This cautious optimism suggests that entrepreneurs believe growth is possible, but only if the environment becomes more supportive.
The report indicates that for this optimism to translate into real progress, SMEs will require targeted relief and greater stability.
What support are businesses calling for?
The report emphasises that without cost relief, especially in energy, logistics and financing, the SME sector will continue to face severe pressures into 2026. SACCI CEO Alan Mukoki noted that businesses consistently call for stronger government intervention. Their requests include improved access to affordable finance, grants, reduced red tape, potential VAT relief and help with energy expenses.
These concerns reflect long-standing frustrations around policy uncertainty, unreliable infrastructure and regulatory challenges that often create additional obstacles for business owners.
What actions does the index recommend for stabilising the sector?
The index outlines a phased approach to supporting SMEs:
What should be prioritised immediately?
Short-term recommendations focus on measures that address urgent financial strain. These include working-capital relief, stricter enforcement of 30-day payment terms and incentives to help businesses reduce energy-related expenses.
What should happen over the next 18 months?
The medium-term goal is to improve competitiveness. This would involve promoting digital tools, increasing access to financial services and boosting skills development so that businesses can respond more effectively to market changes.
What long-term reforms are necessary?
Over the long term, the report argues that real recovery will depend on structural reforms. These include simplifying regulation, improving public procurement systems, diversifying exports and ensuring that SMEs are better integrated into national economic plans.
What challenges do township and rural businesses face?
Township and rural enterprises form a major but often overlooked part of the country’s economy. The index shows that these businesses face even greater hurdles than the broader SME sector, particularly when it comes to compliance and access to finance. Many operate manually, handle mostly cash and face ongoing infrastructure difficulties.
Hiten Keshave, CEO of Unconventional CA, noted that two key issues remain deeply rooted in South Africa’s SME environment: the high cost of doing business and the governance systems small firms must navigate. He warned that outdated compliance standards, lagging roughly five years behind global norms, prevent many businesses from qualifying for vital funding, investment opportunities and relief programmes.
Keshave argued that simplifying compliance and making funding more accessible and affordable are essential if township and rural businesses are to participate more effectively in the formal economy.
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