Most South African small businesses will not survive the next year

More than half of South Africa’s small businesses don’t expect to survive for more than a year, a survey backed by lender Absa found.

Some 53% of the 1,600 entities canvassed for the inaugural Small Business Growth Index said they were contracting, trading with difficulty or at risk of closure, with costs of some of the inputs such as transport and raw materials climbing as much as 61%.

Just one in four of the firms reported that they were growing, while 55% said they may not survive longer than a year. Less than 12% anticipated remaining in business for more than two years without support to improve their access to working capital and markets. Just one in 11 was able to expand headcount. 

Absa Business Banking partnered with the South African Chamber of Commerce and Industry in February to introduce the Small Business Growth Index, with the survey conducted by the University of South Africa’s Bureau of Market Research. The latest index score of 51.08 places South Africa’s small-business environment in the “vulnerable” zone.

The report calls for grant-based funding to be provided to early-stage, township and rural businesses, and for small firms to be given increased access to cheaper funding and training.  

“Policymakers should respond with urgent, tailored and accessible financing solutions that bridge the gap between demand and supply,” said Alan Mukoki, SACCI’s chief executive officer.

“The focus must be on relieving immediate cash-flow stress, enhancing finance literacy and empowering businesses to invest in growth and resilience.”

According to the Banking Association of South Africa, small and medium-sized enterprises accounted for roughly 34% of the country’s gross domestic product.