A survey of more than 2 000 small businesses in South Africa shows that two-thirds (67%) plan to raise prices up to 10% over the next six months in response to persistently rising operational costs, while only 38% believe they can survive for more than a year under current pressures without external support – according to the latest edition of the Small Business Growth Index (SBGI) report, covering the second half of 2025.
Launched in February through a partnership 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.
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”. The figure reflects fragile stability and a modest improvement on the previous half (50.08 points) but is still short of the threshold for sustained recovery. Only one in four SMEs (24%) 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.
“These findings show a sector at a critical inflection 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.
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.
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. Many businesses are passing these increases on to consumers 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 the twelve-month period.
“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. 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. It is also important to build implementation capacity, which is currently constrained by fragmented governance, inadequate policy alignment and uneven participation in the ecosystem. These efforts are key to promoting entrepreneurial growth, inclusion and resilience, in line with the G20 Startup20 recommendations.
“SMEs are entering FY2026 with the strongest performance outlook since the inception of the SBGI. Positive expectations now outnumber negative ones by nearly five to one, contrasting with the near parity observed earlier in the year. The challenge now is sustaining confidence under persistent cost and infrastructure pressures in addition to ensuring that the anticipated growth becomes realised to achieve inclusive recovery,” said Prof Deon Tustin, CEO of the BMR.
