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

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.

Read more: SARS: How to deal with the VAT-on, VAT-off as a business

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.

Read more: The fuel levy increase vs VAT hike explained

“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.

Read more: Running on empty – OECD, banks and business warn SA of stagnation

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.

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.

Read more: Agoa is effectively dead in the water — quo vadis SA-US Trade?

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.

Read more: New African BRICS members decry preferential treatment for SA

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