Small businesses in South Africa face numerous challenges that hinder their growth and sustainability.

Securing funding is a major barrier, with only 12% of small businesses accessing formal funding channels. Many lack the credit history or collateral required by traditional lenders, and banks often view startups as risky investments. Cash flow issues also plague 61% of small businesses globally, with South African SMEs frequently unable to pay vendors, loans, or employees.

High Operating Costs: Inflation rates above 5%, rising input costs, and high taxes (including double/triple taxation) strain small businesses. Energy costs, exacerbated by load shedding, and municipal expenses further erode profitability.

Small businesses must navigate over 100 regulations, which is daunting for those without legal or accounting expertise. Stringent compliance requirements, including Broad-Based Black Economic Empowerment (B-BBEE) policies, and bureaucratic processes add costs and complexity.

Large companies dominate 70% of South Africa’s GDP, leaving SMEs to compete for a smaller market share. Micro-enterprises cite competition as their top challenge, intensified by limited market reach (only 20% have a national presence).

A lack of skilled labor affects 70% of small businesses, with larger corporations outcompeting them for talent. High youth unemployment (74%) coexists with 77,000 unfilled jobs due to skill mismatches, and SMEs struggle to afford training or attract experienced staff. 

Crime affects 24% of SMEs annually, with direct costs from theft and indirect costs like security expenses. Events like the 2021 riots caused widespread losses, endangering 150,000 jobs. Cybersecurity is also a growing concern, with 70% of SMEs targeted by cyberattacks 

Many entrepreneurs lack business planning, pitching, or managerial expertise, contributing to high failure rates (60–80% within the first two years). This is compounded by inadequate institutional support and a conservative lending culture.

Ongoing power cuts disrupt operations, with 81% of SMEs reporting productivity losses or business interruptions. Many lack funds to invest in alternative energy solutions like generators or solar.

Poor transport infrastructure, port inefficiencies, and strikes (e.g., Transnet disruptions) increase costs and delay supply chains. Limited access to reliable utilities like electricity and water hinders operations, especially for home-based businesses.

Low consumer spending, driven by high unemployment (32.7%) and rising living costs, reduces demand. Many SMEs lack the resources for market research or effective marketing, and poor pricing strategies or location choices further limit sales.