South Africa's SMMEs are flying blind in a changing global order

Daily Maverick

2 days ago

Small businesses are yet again expected to absorb the shocks of stalling growth, economic policy and diplomacy.
Small businesses are expected to keep the lights on, even as South Africa stumbles through an increasingly volatile global and domestic economic environment.
While a 25 basis point rate cut at month end offered some respite, it's hardly the lifeline small, medium and micro enterprises (SMMEs) need, said Miguel da Silva, executive of business banking at TymeBank in the bank's SMME forecast for June.
'Some diminishing pressure on the cost of credit' followed the South African Reserve Bank's cut, Da Silva said. Yet, he said 'the economy needs every bit of help it can get'.
VAT relief with a fuel levy sting
The National Treasury's decision to hold VAT steady at 15% provided some short-term relief to cash-strapped SMMEs.
But the olive branch came with a thorn. As of 4 June, petrol and diesel prices jumped by 16c and 15c per litre respectively.
'With many small businesses already operating on razor-thin margins, this 16c increase will likely be passed on to consumers, potentially dampening demand in an already constrained market,' Da Silva said.
This adaptation to the Budget showcases the government's strained fiscal position. In a podcast discussion on Budget 3.0, Stanlib chief economist Kevin Lings pointed out that until South Africa lifts GDP growth above 3%, pressure on public finances will persist.
'The negative revenue impact from backtracking on the VAT increases proposed in the previous version of the Budget, as well as the weaker economic growth trajectory, is counteracted… by a combination of revenue and spending adjustments,' explained Dr Elna Moolman, Standard Bank Group head of South African macroeconomic research.
'The expenditure changes are dominated by scaling back some of the new spending proposed in the previous versions of the Budget, while the revenue adjustments include both the reversal of some of the tax relief previously proposed… and unspecified future tax hikes.'
The Budget foreshadows a pivot to removing the regulatory burden on businesses. Though, as Da Silva noted, no specific SME-support programmes, funding initiatives or targeted relief measures have emerged.
Q1 data highlights on the scale of struggle
The economic scoreboard from Q1 depicts an economy in stagnation:
GDP grew by just 0.1% in Q1 2025, with agriculture (+15.8%) the only area showing growth.
The National Treasury revised 2025 growth expectations downward from 1.6%, from 1.8%.
Official unemployment rose to 32.9%, from 31.9%, which translates to a decrease of 54,000 in the labour force.
Youth unemployment increased to 46.1% from 44.6% in the first quarter of 2024.
While the SME SA Funding Summit 2025 on Thursday, 12 June is expected to explore access to finance, Da Silva stressed that a functioning, reliable environment matters more.
How does this affect you?
No real relief for entrepreneurs: if you're running a small business, don't hold your breath for targeted funding or tax breaks. Government promises of support remain vague.
Price volatility on imports and exports: If Agoa collapses or BRICS moves away from the dollar, expect price changes in imported goods and export delays.
Policy fog = business risk: If you're a customer, supplier or entrepreneur, inconsistent policy and mixed messages from government and diplomats create risk, which translates into cautious spending, higher borrowing costs and business hesitancy.
Agoa and the diplomatic see-saw
South Africa's trade diplomacy with the US remains complicated, but functional for now.
Trade Minister Parks Tau and Agriculture Minister John Steenhuisen delivered a new framework to US Trade Representative Jamieson Greer on 19 May, laying out a new bilateral trade proposal.
'We met and had a very cordial and constructive meeting with Ambassador Greer… We had a very open and frank exchange about how we can ensure mutually beneficial trade between South Africa and the United States of America,' said Steenhuisen.
He further noted that 'the importance of both markets for each other, and obviously a lot of emphasis from the American side [on] wanting to rebalance some of the trade… and from our side, wanting to retain market access'.
With Agoa set to expire in September 2025, a renewal is looking uncertain.
Da Silva said that 'the complex challenge of either finding alternative markets or restructuring their operations' looms large for SMME suppliers in US markets.
'While the US is not our largest trading partner, it is an important one, with 8% of our exports destined for its shores,' said Maarten Ackerman, chief economist at Citadel. 'Of that 8%, a third is excluded from tariffs, but citrus exporters are likely to be hardest hit.'
BRICS Summit brings new questions
Then there's the BRICS Summit in Brazil in early July, where stakeholders are expected to discuss mechanisms to alleviate dependency on the dollar.
'For SMEs, particularly those in export-oriented sectors, this diplomatic tightrope walk translates into very real business planning challenges,' Da Silva explained.
Navigating dual allegiances between BRICS and the West 'requires SMEs to develop strategies that can withstand diplomatic volatility while capitalising on emerging opportunities', Da Silva said. DM