More than two-thirds of SA SMEs plan price hikes amid rising costs

A concerning trend has emerged within South Africa's small business sector as a new report revealed that 67% of small and medium-sized enterprises (SMEs) plan to raise prices by up to 10% over the next six months.

This shift is largely a response to relentless operational cost pressures, posing significant challenges for the sustainability of these businesses in an increasingly volatile economic environment.

The latest Small Business Growth Index (SBGI) report, based on a comprehensive survey of more than 2,000 SMEs, highlights the precarious state of the sector, indicating that fewer than four out of ten of these businesses believe they can withstand the current pressures for more than a year without external support.

The SBGI was launched earlier this year through a collaborative effort between Absa Business Banking, the South African Chamber of Commerce and Industry (SACCI), and the Bureau of Market Research (BMR) at Unisa, establishing it as the country’s inaugural barometer for assessing the conditions affecting small businesses.

The overall SBGI score for the latter half of 2025 stands at 51.50 points, on a scale of 0 to 100. This places the sector within the "Vulnerable Zone", still reflecting fragile stability and only a modest improvement from the previous half, which recorded 50.08 points.

Alarmingly, a mere 24% of SMEs are situated in the “confidence” or “growth” range, while over 40% find themselves in distress, highlighting the urgent need for liquidity relief, energy stability, and more accessible market interventions.

"These findings show a sector at a critical inflection point," said Vignesh Subramani, Interim Managing Executive for SME Business at Absa Business Banking.

"Small businesses are moving from fragile survival toward a conditional and uneven recovery. The balance between short-term relief, medium-term competitiveness, and long-term reform will determine the future of South Africa’s small business economy."

The performance metrics reveal a mixed narrative: about one-third of SMEs (33%) indicate growth, while almost a quarter (24%) are facing significant trading difficulties and 9% are on the brink of closure.

This dim landscape is contrasted by growing optimism, as 59% of surveyed SMEs foresee moderate to strong growth within the next year, despite ongoing cost and policy challenges.

A robust 92% plan to expand locally, while 72% aim for national growth, 45% have their sights set on exports, and 67% are preparing for online expansion.

The primary constraint still afflicting these businesses is the soaring operational costs. particularly transport, utilities, and raw material inputs.

As many enterprises pass these elevated costs onto consumers, they risk dampening demand, which could further exacerbate inflationary cycles in the economy.

The report stresses the critical need for targeted cost-relief measures, such as energy subsidies, improved logistics, and interest rate reductions, if SMEs are to remain resilient through the 2026 fiscal year.

Alan Mukoki, CEO of SACCI, said, "Businesses consistently expressed the need for stronger government intervention, including easier access to affordable finance, reduced red tape, and meaningful VAT relief. These issues align with long-standing advocacy themes calling for fiscal reform and infrastructure stability."

Experts believe that much needs to be done to simplify and stabilise the operational environment. Immediate efforts should focus on enhancing liquidity and controlling rising costs by enforcing timely payment terms, strengthening working-capital support, and incentivising energy resilience.

The pace of digital adoption, financial inclusion, and targeted skills development must accelerate over the next 18 months to ensure competitiveness.

In the long term, structural reforms are crucial for streamlining regulation, enhancing procurement efficiency, and integrating SMEs firmly within the national growth strategy.

Additionally, supporting startups in rural and township economies is paramount for promoting economic inclusion.

This demands improved coordination among institutions, data-driven policymaking, and enhanced access to finance and markets.

Building implementation capacity is also essential, an area hampered by fragmented governance and inconsistent policy alignment.

These measures will be crucial for fostering entrepreneurial growth, inclusion, and resilience, in accordance with the G20 Startup20 recommendations.

“SMEs are entering FY2026 with the strongest performance outlook since the inception of the SBGI," Professor Deon Tustin, CEO of the BMR said. 

"Positive expectations now outnumber negative ones by nearly five to one, illustrating a remarkable shift from earlier this year. The challenge is sustaining this confidence amid rising costs and infrastructure challenges while ensuring that this anticipated growth materialises.”

BUSINESS REPORT