The Small Business Growth Index (SBGI) report has been released in collaboration between Absa Business Banking, the South African Chamber of Commerce and Industry (SACCI), and the Bureau of Market Research (BMR) at Unisa. The SBGI is South Africa’s first barometer providing real-time, evidence-based insights into the performance and conditions shaping the small business ecosystem.
Key insights from the recent report indicate that SMEs are experiencing a consistent decline in both revenue and profit margins, with only a quarter reporting any growth, and very few indicating “strong” increases. Profit erosion outpaces revenue declines, signalling margin pressure. Other takeaways include:
- Two-thirds of businesses held headcount steady, but nearly one in four experienced a reduction. Only about one in eleven expanded staff.
- Provincial sales are the domestic market with the highest net growth, buoyed by strong increases in sales and lower strong decreases.
- Local demand is near equilibrium but edging downward.
- National sales show significant softness, namely, half of businesses saw no change, but the net decline remains sizable.
- Online trading is the lone metric with robust net growth and the highest share of “strongly increased” among all categories. Almost 35% of businesses saw digital revenues rise.
Finding The Data
The study consisted of reaching over two thousand small businesses in South Africa and asking them to complete a survey. The findings focus primarily on the later part of 2025 and aims to provide insight about the financial standings of small and medium businesses.
Current performance trends are mixed. A third of SMEs (33%) report growth, while nearly a quarter (24%) are trading with difficulty and 9% are at risk of closure. Yet future expectations point to firming optimism: 59% 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.
“These findings show a sector at a critical inflexion point. Small businesses are moving from fragile survival toward a conditional and uneven recovery. The balance between short-term relief, medium-term competitiveness, and long-term reform will determine whether South Africa’s small business economy evolves into a resilient, inclusive, and digitally enabled growth engine by FY2026 and beyond,” said Vignesh Subramani, Interim Managing Executive for SME Business at Absa Business Banking.
A Look At the Red Tape
“Businesses 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,” said Alan Mukoki, CEO of SACCI.
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, or so the authors believe.
“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, and diversifies export participation, and embeds SMEs more firmly within the national growth strategy,” a statement reads.
Additionally, Hiten Keshave, CEO and co-founder of Unconventional CA (UCA), responded to the report and emphasised this point.
“Two things remain fundamentally broken in the South African SME economy: the cost of doing business and the governance environment small firms are expected to operate in. SMEs are still drowning in red tape, manual tax processes, and limited access to affordable working capital. South Africa’s compliance and reporting systems are almost five years behind global practice — and that governance gap is directly blocking access to finance, investment, and relief,” he shares.
The Pain Points
For township and rural SMEs — who form a massive and often underestimated part of South Africa’s economy — these barriers are even higher. “Most operate without formal accounting tools, rely on cash-based systems, and face data, infrastructure, and transport challenges that make compliance not just difficult, but almost inaccessible. If we expect township entrepreneurs to participate in the mainstream economy, we must make both funding and compliance radically easier, cheaper, and more digitised.
“Digitised, affordable governance is the most powerful lever we have. Fix that, and we unlock access to finance, improve resilience, and shift SMEs, including those in township economies, from survival mode to scale.”
Hiten’s recommendations include:
1. We need tiered regulation — not one-size-fits-all compliance
The government must implement a tiered governance model. A micro-enterprise in a township should not be held to the same administrative standards as a listed company. Reduce paperwork, automate the basics, and free up entrepreneurs to trade, hire, and reinvest.
2. Digitise the foundations of compliance
Fast-track partial pre-filled VAT/CIT returns, automated payroll compliance, and integrated SME accounting tools. For township and rural SMEs, this means mobile-first, low-data solutions that make compliance a “click-and-submit” action instead of days of manual work. When compliance becomes simple and digitised, SMEs can redirect time and capital back into operations.
3. Create a dedicated access-to-finance channel for SMEs that meet baseline governance standards
We need a ring-fenced ‘Governance-to-Capital’ pathway, where SMEs, including informal and township businesses transitioning to formalisation, automatically qualify for fast-tracked grants, loans, and relief once they meet basic, digitised compliance requirements. Investors and lenders want visibility. SMEs want capital. Governance is the bridge — but only if we make meeting those standards achievable for all, not just well-resourced businesses.
The Small Business Growth Index (SBGI) report has been released in collaboration between Absa Business Banking, the South African Chamber of Commerce and Industry (SACCI), and the Bureau of Market Read More
