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.
