The South African economic environment is tough, as we all know. It’s even tougher if you’re an entrepreneur who’s trying to grow a small business. It’s some comfort to know that you have a community: small businesses make up around 90% of all formal businesses in South Africa (SA), provide around 60% of all formal employment, and contribute more than 30% to our gross domestic product (GDP).

Despite some increased small-business support through incubators and funding avenues, we still face a pressing need to expand the small and medium enterprise (SME) sector and help it create jobs to reduce economic inequality.

Here’s what you need to know about the small-business landscape in SA right now – which trends and sectors are changing, and where to expect growth.

Financial services and funding 

Most banks provide a wide range of digital tools for business payments and cash flow. With more data available, banks and other lending institutions can personalise the services they offer to suit your business and customer needs. Traditional financing channels are changing under market pressures to offer more accessible funding models to small businesses.

The market has also seen the rise of alternative funding models such as blended finance arrangements, venture capital, growing seed funds, enterprise and supplier development funds, as well as innovative alternative lending platforms. Government is coming to the funding party too, through development finance institutions and targeted funding programmes. The rise of fintech companies in SA also gives SMEs access to digital financial products, such as purchase order and invoice financing, merchant cash advances, and working capital loans.

E-commerce and the digital economy

The mobile industry is expected to contribute $170 billion to the sub-Saharan African GDP by 2030, so an online, mobile-friendly presence is a must for small businesses. In sectors like retail, online sales give your business the potential to reach an international market. Digital marketing strategies – such as social media and influencer marketing – have become more important for small businesses across all sectors.

Digital payments are increasingly popular too. Cash is still king in SA’s small-business sector, but many business owners are seeing the benefit of using digital financial services to simplify the checkout process. This is important not only for e-commerce, but also for brick-and-mortar shops. Explore the digital payment options available and choose the best for your business.

AI and your small business

Whatever your personal feelings about artificial intelligence (AI), it has become almost impossible to exclude AI completely from your business – so you should make it work for you. 

AI can take over repetitive business tasks, helping you stay competitive and maintain customer relationships more easily. AI analytics can also help you understand your customers’ behaviour better, to make more informed marketing decisions. If you’re in manufacturing, AI tools can help with automation solutions to reduce costs and increase efficiencies.

Sustainable business practices

Adopting sustainable practices not only benefits the environment, but also enhances business performance, builds reputation, and drives long-term growth. Many small businesses in SA are trying to reduce their impact on the environment, often by adopting green technologies, conserving resources, and reducing waste. It’s a strategy you may need to adopt to stay relevant in an increasingly environmentally conscious market.

Sustainable practices could include energy-efficient technologies, sustainable sourcing and packaging, and practices like precision farming and water conservation in agriculture. Green business practices can bring new opportunities for SMEs by attracting sustainability-conscious consumers and accessing financial incentives.

Collaboration and networking

It’s vital for small businesses to take any opportunity to learn from and partner with business incubation and acceleration programmes, and to join networking initiatives that connect them with mentorship, business development support, and access to capital. These platforms support collaboration, knowledge-sharing, and joint ventures, allowing small businesses to grow faster and more effectively.

Sectors poised for growth

• Green building
  Expanding urbanisation brings a need for green construction and smart infrastructure. SMEs can provide eco-friendly building materials, smart energy systems, and sustainable urban planning.
  
  
• Tourism
  The sector remains a vital part of SA’s economy, and small businesses can offer personalised travel experiences, eco-tourism experiences, smart booking and travel management apps, and niche travel services – focused, for example, on adventure, wellness, or unique cultural experiences.
  
  
• Media
  The rise of digital consumption has increased demand for content creation, digital marketing, and entertainment. South African creatives can export unique content globally, and local content creators can now be more involved in the distribution of their own product. Businesses in niche sectors like content creation, influencer marketing, video game development, animation, e-learning platforms, and online courses all have the potential for growth.

The South African small-business landscape is ripe for growth and expansion. With commitment to funding and support from government, funding agencies, and banking institutions, along with a real sense that small business can deliver the growth that we need from the national economy, entrepreneurs with good ideas and a passion for their businesses have many promising opportunities available.

Nedbank offers a comprehensive range of support and funding services for small businesses with a turnover of up to R30 million a year. Join the community on SimplyBiz, powered by Nedbank, to learn new business skills, find discounts on business supplies, source funding for business development, and promote your business on an advertising platform that reaches a broad market.