SMEs remain optimistic despite concerns of political and economic instability – report

A report has revealed that small and medium enterprises (SMEs) remain optimistic despite concerns of political and economic instability in South Africa.

The report released by Xero on Wednesday shows that small businesses in the country continue to be resilient in challenging times, as 83% of the respondents have grown their revenue over the past year.

Xero partnered with KLA to survey 414 small businesses with up to 200 employees and 105 accounting and bookkeeping professionals in the country.

Responses were collected from a diverse range of job roles across various sectors. Fieldwork was conducted via an online research panel from 7 March to 20 March 2025.

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Some SMEs concerned about instability

The report, titled “The State of South African Small Business 2025”, shows that 39% of respondents are concerned about political or economic instability.

Despite 27% of respondents stating they expect challenges with service delivery, such as load shedding, they remain optimistic about the year ahead.

“South African small businesses are beating the odds and showing optimism for the year ahead. The research shows that small businesses are planning to invest in upskilling staff (42%), hiring more staff (40%), and developing skills in new technologies like AI (39%) in the next 12 months,” said Colin Timmis, Country Manager, Xero South Africa.

Entrepreneurial spirit strong

He said that “entrepreneurial spirit appears to be stronger than ever among South African small businesses, but they are crying out for more accessible support, tailored training and better access to funding.

“But their hunger to invest in their people and in new technologies like AI is a testament to their forward-thinking approach. Not all small businesses want to grow but this research shows clear ambition among South African entrepreneurs.”

The report shows that technology continues to play a crucial role in small business success, as 45% of respondents stated that technology was one of the most valuable factors for their business in the previous year.

“Small businesses are leveraging technology to streamline their processes, innovate, and operate more efficiently. For those using cloud-based technology, 58% say it has helped them better manage their finances or simplify financial processes, while 40% report that it enables them to reduce administrative tasks or automate processes, saving them time.”

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Strong appetite for technology

The report also shows a strong appetite for embracing new technology, particularly AI.

Many small businesses are already experimenting with AI, using it to communicate with customers (34%), manage information (32%), and analyse data (31%). 

“However, the report identifies critical barriers hindering the full potential of technology adoption. A substantial 38% of small businesses cite a lack of resources to adopt new technology and a shortage of skills required for these emerging tools.

“Furthermore, 35% reported challenges in integrating new technology with existing systems.”

Accountants and bookkeepers crucial

“As small businesses embrace the future with confidence, accountants and bookkeepers are vital allies in a small business’s support system: for those that use them, 80% agree they are their most trusted business advisor.

“Small businesses say the most valuable areas of support their accountant provides are guiding business decisions (51%), navigating VAT and tax requirements (49%), and providing financial reporting and insights (45%). 

“This year’s research highlights a clear appetite for innovation and growth. To fully unlock this potential, business owners need the right tools and support to be able to realise their ambitions,” said Timmis.

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