These South African businesses could be forced to close within a year – and it has nothing to do with US tariffs
Nearly half of South Africa’s small businesses are facing the prospect of closing their doors due to the rising costs of operating in the country.
This was highlighted by professor Deon Tustin, CEO of the Bureau of Market Research, which operates as an independent entity within the University of South Africa (UNISA).
Tustin said South Africa’s small businesses are facing extreme financial strain, and many fear they will not survive another year without urgent intervention.
The latest Small Business Growth Index (SBGI), a survey of 1,600 businesses conducted in April and May, revealed the amount of stress many business owners face.
According to the index, more than half of them could be forced to shut down within the next year.
The data reveals that 55.3% can survive just one year or less under the current cost inflation conditions without outside help.
While official statistics show low inflation, the lived reality can be very different for a consumer or business owner.
The survey noted that the combination of rising input costs, constrained pricing flexibility, and weak financial buffers is creating a perfect storm of financial vulnerability.
Tustin described the research as a baseline study that revealed that cash flow issues were the biggest problem for these businesses.
“These businesses are operating in a very high inflationary environment,” he said.
“This is forcing around 75% of them to plan price increases of between 6% and 9% this year just to keep up with costs. Those increases will ultimately be passed on to already cash-strapped consumers.”
According to Tustin, small businesses are battling rising costs across almost every major category.
“Yes, utilities like electricity and water are significant, but raw materials, transport, and fuel costs have risen sharply too,” he said.
“Two-thirds of businesses reported steep increases in transport and fuel, with a net increase of around 60%. Borrowing costs, rental, wages, and taxes also add to the pressure.”
He stressed that the result has been eroded profitability, and many companies are being forced into short-term cost containment measures just to stay operational.
Businesses are already closing
The pressures on South African businesses are also evident in the country’s latest liquidation data.
Data from Statistics South Africa shows that 753 businesses were liquidated in the first half of 2025, of which 98 were compulsory or court-ordered liquidations.
Craig Blumenthal, an insolvency expert at Fluxmans Attorneys, said the difference between voluntary and compulsory liquidations is key when analysing business health.
While voluntary liquidations can sometimes reflect normal business decisions, such as restructuring or tax planning, compulsory liquidations are a clearer sign of insolvency and distress.
“Compulsory liquidations are clearly more related to companies being in financial distress than is the case with the far more opaque voluntary liquidation category,” he said.
Taking this into account, Stats SA’s data shows that compulsory liquidations in the first half of the year are up around 7.4% from 2024.
Interestingly, Tustin noted that the lack of demand for goods and services was not the main concern.
“When we spoke to business owners after the survey, many told us they believed there was demand for what they offer. What they really want is help accessing opportunities, more than just funding.”
However, he noted that many small businesses are not making enough use of advisory support that could improve their resilience.
“From our financial studies, we know that people become more financially well when they use financial advisors,” he said.
“Yet in this case, small businesses haven’t reached out enough to build that kind of financial wellness. There’s a big role to play in helping them identify and market opportunities more effectively.”
Government support also came up strongly in the survey results. The affordability of finance, including grants, was a clear priority, as was cutting bureaucracy so SMMEs could operate more efficiently.
Reducing VAT was also raised. He added that the Department of Small Business Development had already shown interest in the findings, and the Bureau plans to keep the momentum going.
“This is the beauty of the Small Business Growth Index; it won’t stop at research. We already have a webinar planned to engage with the businesses who took part, and we want to invite others to join,” Tustin said.
“We’ve also reached out to the Minister of Small Business Development, and the department has been positive about engaging.”
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