The latest State of South African Small Business report by small business platform Xero reveals the three main concerns for small businesses are political and economic instability (70%); revenue loss due to loadshedding (46%) and crime, poverty, and civil unrest (19%). The report also cites late payments and a lack of financial skills amongst the main challenges, both which can lead to overspending, poor decision-making and difficulty managing cash flow.
Yet, while there are many challenges, South Africa’s small businesses have thrived in the face of adversity. Almost three-quarters (74%) have grown over the past year – up from 62% last year. Growth is driving optimism, with more than 95% expecting to survive the coming year and nearly 90% the next five years.
“These findings signal the grit and tenacity of small businesses in the face of incredible challenges, and how they’re equipping themselves with the tools they need to succeed and grow,” comments Colin Timmis, Xero South Africa Country Manager.
“As well as most (74%) small firms using generators to survive loadshedding, they also count on new technologies to automate manual processes, operate and sell online, as well as reach new customers – and on their accountants to navigate regulations and complex tax requirements.”
Technology enabling business survival and success
The two most significant contributors helping small businesses survive and grow in the past year were technology (41%) and their accountant (28%).
Nearly three-quarters (74%) say the importance of technology has increased in their business, with 43% reporting that technology has enabled them to reach new customers – up 13% compared to last year. And 39% say it has helped to boost profits.
As a result, over half (56%) of business owners have increased their investment in technology over the last 12 months, and 40% intend to build on this in the coming year.
The secret weapon of small businesses: the accountant
The research shows almost half (49%) of small businesses go to their accountants for business advice, well above any other source of advice – only 6% would turn to the government for guidance.
Small businesses also recognise the wider value that accountants add, as 60% believe accountants are key to economic growth, and nearly two-thirds (64%) say more skills development initiatives are needed from the government to support advisors.
“Government, banks, funders, accountants and technology companies need to work collectively to support small businesses. Only concerted, collective efforts can help businesses navigate the challenges and complexities of operating in South Africa, and help them come out the other side stronger, smarter, and more successful,” says Timmis.
Investing in people
The report revealed small businesses are willing to invest in technology skills, as well as supporting wellbeing.
86% are investing in online or in-person training courses to increase knowledge and improve tech skills. Nearly half (48%) also allocate budget to train their team in technology use and implementation.
There is also a strong focus on diversity and inclusion, with 77% of small businesses placing great importance on promoting diversity, equity, and inclusion in the workplace.
The research was based on interviews with 300 small businesses across various sectors in all nine provinces in South Africa, and was conducted in February – March 2023. Read the State of South African Small Business 2023 report here.
