The State of South African Small Business 2025, a report developed by accounting software group Xero, was released this week.
The findings are significant in that they show the enduring resilience and optimism, so endemic in the South African small businesses sector, despite economic and geopolitical challenges. The report underscores their adaptability and growth potential.
The report was based on an online research survey of over 400 small businesses with up to 200 employees, conducted between March 7 and March 20 this year.
I spoke with Collin Timmis, Country Manager of Xero South Africa, about the report, and he provided a refreshing outlook on the SME market in the country.
Listen to Our Discussion Here:
Key Findings of The State of South African Small Business 2025:
- 83% of small businesses reported revenue growth over the past year
- 90% are optimistic about future growth.
- Cash Flow issues are affecting 41% of businesses surveyed
- 17% are experiencing significant difficulties with cash flow
- 46% are struggling with late payments,
- 43% of owners to forgo salaries due to cash flow issues
- and 41% to use personal funds to top up the business shortfalls
The report also highlights how political and economic instability, rising taxes, service delivery issues, and increasing costs are anticipated to create challenges for the year ahead.
Key Quote:
“I think we’re so used to negative news to be honest that when we hear positive news, that’s a bit strange. A couple of years ago, about two years ago, we did a global report on the happiness of small business owners. And strangely, South African small business owners were happier than all of their counterparts in every other market we operate in”.
Cilin Timmis
Adoption Of Technology and AI
Technology, particularly cloud-based business tools, was seen as a critical driver of success going forward, with 45% of businesses citing it as a key factor.
Adoption of cloud technology is seen as a key benefit that assists with better financial management (58%), remote working (46%), improved operations (42%), and task automation (40%).
However, barriers like limited resources (38%), skill shortages (38%), and integration issues (35%) hinder broader adoption.
Artificial intelligence (AI) is gaining traction among South African SME’s, with 46% expecting it to assist with automation of tasks like invoicing, 45% anticipating faster information retrieval, and 38% valuing its potential for cash flow management and forecasting.
Accounting Services Valued
Accountants and bookkeepers are seen as vital, with 80% of businesses viewing them as trusted advisors, particularly in financial areas such as tax compliance (49%), business decision guidance (51%), and financial reporting (45%).
Tax filing has become easier due to SARS’s digital investments, with 39% of VAT-registered businesses filing digitally and 27% via accountants.
Managing Accounts Critical to Business Success
Colin Timmis
“I’d probably highlight what a lot of people don’t talk about that often, which is the responsibility on the business owner to make it easy for people to pay them, which again is not something small businesses do”.
SME’s Investing in Staff Training and Market Growth
Looking ahead, businesses plan to invest in staff training (42%), new technology (40%), marketing (39%), and new products or markets (33%).
The report concludes that South African small businesses are resilient and eager to innovate, with technology and advisory support crucial for unlocking their potential. Xero emphasizes its commitment to supporting these businesses in navigating challenges and shaping a successful future.
