National context
- The Department of Small Business Development (DSBD) was allocated R2.9 billion for 2025/26, constituting 0.1 % of consolidated government expenditure of R2.59 trillion for the financial year. Transfers and subsidies accounted for 84% of this, with most (R1.9 billion) going to the Small Enterprise Development Finance Agency (SEDFA), which was established by the National Small Enterprise Amendment Act in October 2024 and merges several previous agencies.
- The National Development Plan states that 11 million jobs need to be created between 2012 and 2030, with small enterprises or start-ups expected to create 90% of these new jobs.
- The FinScope MSME Survey South Africa 2024 estimates that there are approximately three million small, micro and medium enterprises (SMMEs) in South Africa, employing around 13.4 million people. DSBD data indicates that 38% of SMMEs operate in the trade and accommodation sector, followed by 15% in the construction services sector, 15% in community services and 14% in finance and business.
- The 2024 edition of The State of the SMME in South Africa, produced by the Shoprite Group, reports that women own just over half (51%) of all microenterprises, which employ between one and five people. However, the level of women’s ownership declines as SMMEs grow. Women own only 13% of medium-sized businesses, which employ 51–200 people. (For more information, read The State of the SMME in South Africa report on page 231.)
- The DSBD’s Medium Term Development Plan, which runs from 2024 to 2029, aims to support one million SMMEs, while creating 273 500 jobs and sustaining 1.6 million jobs over the period.
- In April 2025, the DSBD, in partnership with the Department of Trade, Industry and Competition, launched a R500 million fund to support spaza shops. The fund aims to enhance market competitiveness and help spaza shops and food outlets compete with larger retailers.
- During his 2025 State of the Nation Address, President Cyril Ramaphosa announced the establishment of a Transformation Fund worth R20 billion a year, over five years, to fund black-owned and small business enterprises. It aims to improve the effectiveness of broad-based black economic empowerment (see page 157 for more on the proposed transformation fund).
- South Africa was ranked 49th out of 56 economies in the Global Entrepreneurship Monitor’s (GEM) National Entrepreneurial Context Index for 2024/2025. The index measures the average state and quality of the country’s entrepreneurial ecosystem. Only one of the GEM’s 13 Entrepreneurial Framework Conditions was rated as sufficient for South Africa. The country also scored equal to or below the group average on all 13 conditions in the 2024/2025 report.
Overview of CSI spend
Half of companies contributed towards entrepreneur and small business support, investing 5% of average CSI expenditure.
- The majority of CSI expenditure in this sector (70%) went towards skills development for entrepreneurs and business owners, a significant increase from 57% in 2024.
- The second-largest expenditure area in this sector was providing infrastructure, facilities and equipment, which received 17% of funds on average, a slight decrease from 20% in 2024.
- Only 7% of average sector CSI spend went to providing finance, down from 15% in 2024.
- Only a fifth of companies (21%) reported that the entrepreneurs and small businesses supported through their CSI initiatives also form part of company value chains, notably down from 52% in 2022.
- Other support mentioned in this sector included mentoring, guidance and advice.
[CASE STUDY] SME development needs M&E commitment
Entrepreneurship and small business development are widely recognised as essential drivers of job creation, economic dynamism and transformation in South Africa. Yet, despite this consensus and annual public investment of nearly R3 billion in the sector, efforts to boost it have made little progress.
The untapped potential of SMMEs
South Africa’s small, micro and medium enterprise (SMME) sector holds significant potential. According to Trade & Industrial Policy Strategies (TIPS) 2024 special edition bulletin, The State of Small Business in South Africa, formal small businesses contributed 19% of gross domestic product (GDP) and 33% of employment in 2023, while the informal sector generated just under 5% of GDP but provided 17% of employment.
These are substantial contributions, yet they pale in comparison to what could be achieved. TIPS notes that only around 6% of working-aged adults in South Africa are employers or own-account workers, compared to 20% in most upper-middle-income countries.
The Centre for Development and Enterprise (CDE) reported in 2024 that the contribution of small businesses to total business turnover had improved only marginally since 2014, from 20% to 23% in 2024. The government’s own 2022 Small Enterprise Development Masterplan acknowledged “low survival rates and stagnant growth” in the sector. Research and Markets’ SME Trends in South Africa 2025 report similarly highlights that the sector has largely failed to create many jobs due to low entrepreneurship rates, poor survival rates, red tape, difficulties accessing finance and a concentrated economy.
The SMME measurement gap
A critical obstacle to improving outcomes appears to be the lack of reliable data on SMMEs and the support required for SMME growth. The CDE report suggests that national government intervention has not only failed to stimulate small business growth but has actually hindered it through bureaucratic inefficiencies and misallocation of resources.
South Africa is not alone in struggling with SMME evaluation. The Organisation for Economic Co-operation and Development’s (OECD) 2023 Framework for the Evaluation of SME and Entrepreneurship Policies and Programmes notes that “there remains a dearth of reliable impact evaluation evidence in the domain of SMME and entrepreneurship policies” internationally, despite improvements in data availability and evaluation methodologies.
Locally, the 2024 white paper by the Gordon Institute of Business Science (GIBS) on enterprise and supplier development (ESD) found that, despite substantial public-sector investment programmes, “the impact of such programmes in terms of developing the country’s entrepreneurial capacity and capabilities remains uncertain.”
The research noted that a poorly defined and untested theory of change guides much of ESD practice. Without longitudinal impact measures, the theory of change cannot be tested and development strategies and tools are neither benchmarked, shared, nor published. As a result, stakeholders in the ESD ecosystem have no way of knowing how well it is performing.
GIBS recommends improving ESD effectiveness through programmes designed around an evidence-based understanding of what SMEs need, with monitoring and evaluation (M&E) aligned with corporate strategy and focused on meeting the needs of SMEs.
The private sector contribution
The CDE argues that private-sector involvement is essential not only for funding but also for accountability. Its February 2025 report, Let the private sector drive small business development, suggests that private lenders, venture capitalists and investment funds have a track record of identifying promising start-ups, bringing with them the risk assessment skills and transparency that government agencies may lack.
Besides funding, companies have much to gain from supporting SME development, whether through business operations or corporate social investment initiatives. SMEs require resources, expertise, networks and exposure, while companies benefit from access to new ideas and innovations, as well as the broader benefits of a more robust economy. However, SME development efforts need to be accompanied by a commitment to evidence-based data.
South African companies are already playing a role in supporting SMMEs. According to Trialogue research, 50% of companies invest in entrepreneurship and small business support, representing 5% of CSI spend.
The lack of impact evidence has not gone unnoticed, with the private sector stepping in to contribute to the SME information gap.
In 2025, the Shoprite Group published its second The State of the SMME in South Africa report, providing insights to guide companies on how to better support SMEs. (See page 231 for an article on the report)
Meanwhile, accounting software provider Xero has published its 8th annual State of South African Small Business report in 2025, tracking revenue, optimism and the role technology is playing in boosting local SMEs.
The reports demonstrate how companies can help build the knowledge infrastructure for more effective SME programme design and implementation, enabling public and private interventions to achieve measurable impact. In a sector where billions are spent annually with uncertain results, this contribution may prove as valuable as the funding itself.
