'Small businesses are moving from fragile survival toward a conditional and uneven recovery.'
Many small businesses are planning to increase prices of goods and services by up to 10% over the next six months due to rising operational cost, while few believe they can survive for more than a year under current pressures without external support.
These are the findings of the latest edition of the Small Business Growth Index (SBGI) report, covering the second half of 2025. SBGI is compiled by Absa Business Banking, the South African Chamber of Commerce and Industry (SACCI), and the Bureau of Market Research (BMR) at Unisa.
More than 2 000 small and medium enterprises (SMEs) were surveyed with the aim of providing real-time, evidence-based insights into the performance and conditions shaping the small business ecosystem.
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Businesses are vulnerable
The survey found that the overall SBGI score for the period stands at 51.50 points on a scale ranging from 0-100, placing the sector in the “Vulnerable Zone”. This is an increase from 50.08 points.
The survey revealed that one in four SMEs operates in the “confidence” or “growth” range, while more than 40% remain in distress or experience strain, which underscores the continued need for liquidity relief, energy stability, and market access interventions.
Vignesh Subramani, interim managing executive for SME Business at Absa Business Banking, said the findings show a sector at a critical inflection point.
“Small businesses are moving from fragile survival toward a conditional and uneven recovery.”
Businesses performance
The survey showed that 33% of businesses reported growth, while 24% said they are trading with difficulty and 9% are at risk of closure.
However, most businesses showed firm optimism. Fifty-nine percent anticipate moderate to strong growth over the next 12 months despite persistent cost and policy headwinds.
Expansion strategic objectives are broad, with 92% planning to grow locally, 72% aiming to scale nationally, 45% expressing export ambitions, and 67% preparing to expand online.
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Increases ahead
The survey found that across all segments, operating costs continue to be the most acute constraint. These pressures have intensified over the past six months, with transport, utilities, and input costs emerging as the most critical drivers.
The increase in operational costs has seen businesses increasing prices of goods and services to stay afloat, but this risks dampening demand and prolonging inflationary cycles.
“Without targeted cost-relief measures, such as energy subsidies, logistics improvements, and interest-rate relief, many SMEs will remain vulnerable through FY2026, with the cost environment expected to stay elevated across the12-month period,” reads the report.
Government intervention needed
Alan Mukoki, CEO of SACCI, said businesses have consistently expressed the need for stronger government intervention, from easier access to affordable finance and grants, to meaningful reductions in red tape, VAT relief, and urgent support to offset the costs of energy and load-shedding.
“These priorities echo long-standing SME advocacy themes like fiscal reform, infrastructure stability, policy certainty, and a regulatory environment that enables rather than constrains growth,” he said.
The survey highlighted that simplifying and stabilising the operating environment through finance, energy, logistics and integrity reforms, will be pivotal to reversing stagnation and unlocking inclusive SME-led growth in 2026.
The future of SMEs
It was revealed that in the short term, stakeholders need to focus on liquidity and cost stabilisation by strengthening working-capital support, enforcing 30-day payment terms, and incentivising energy resilience.
Over the next 18 months, competitiveness must be driven through digital adoption, financial inclusion, and targeted skills development, supported by expanded blended-finance mechanisms and SME–fintech partnerships.
Over the longer term, sustained progress will depend on structural reform that streamlines regulatory processes, enhances procurement efficiency, diversifies export participation, and embeds SMEs more firmly within the national growth strategy.
“In addition, supporting startups in rural and township economies is essential to drive economic inclusion. This requires enhanced coordination among institutions, stronger systems for data-driven policymaking and improved access to finance and markets.”
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