South Africa’s Small Businesses Facing Collapse as Over 50% Warn of Closure Within a Year Amid Rising Costs and Lack of Funding

A new survey has revealed a looming crisis for South Africa’s small business sector, with more than half of small and medium enterprises (SMEs) warning they may not survive beyond the next 12 months. According to the inaugural Small Business Growth Index, 53% of the 1,600 businesses surveyed said they were either contracting, struggling to trade, or at risk of shutting down completely due to soaring operational costs and limited access to finance.

The study, backed by Absa Group and conducted by the University of South Africa’s Bureau of Market Research in partnership with the South African Chamber of Commerce and Industry (SACCI), paints a bleak picture. Rising input costs – with some, like transport and raw materials, surging by as much as 61% – have left small businesses battling to stay afloat.

Alarmingly, 55% of businesses said they are unlikely to survive longer than a year without intervention, and less than 12% believe they can stay open for more than two years under current conditions. Only one in four SMEs reported experiencing any growth, while just one in eleven managed to expand their workforce, highlighting the severe strain on job creation in a country already grappling with high unemployment.

The Small Business Growth Index scored the current SME environment at 51.08, categorizing it as “vulnerable” and signaling the urgent need for targeted policy intervention. The report recommends grant-based funding for early-stage, township, and rural businesses, as well as greater access to affordable financing, business training, and market linkages.

Alan Mukoki, CEO of SACCI, stressed the need for immediate action to avert widespread closures. “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 financial literacy, and empowering businesses to invest in growth and resilience,” Mukoki said.

Small businesses are the backbone of South Africa’s economy, contributing nearly 40% to GDP and employing millions. Their potential collapse would have devastating consequences for economic stability, job creation, and poverty reduction. With SMEs struggling under the weight of rising costs, limited access to credit, and sluggish demand, the call for structural reforms and sustainable support mechanisms has never been more critical.