As the nation braces for the minister of finance’s budget speech on March 12, South Africa stands at a pivotal juncture. The newly established government of national unity (GNU) has made sweeping commitments to inclusive economic growth, job creation, poverty alleviation and establishing a capable, ethical and developmental state. However, rhetoric without implementation is futile.
The test of the GNU’s sincerity lies in whether it will take decisive action to prioritise micro, small and medium enterprises (MSMEs) — the true engines of economic transformation and grassroots prosperity. If policymakers fail to recognise this reality, South Africa’s economic recovery will remain a distant aspiration, and the promises of the GNU will echo hollow.
MSMEs are not a secondary concern in economic planning; they are the backbone of an economy that must be reimagined. The Small Enterprise Development Agency estimates that over 2.7-million MSMEs contribute about 40% to South Africa’s GDP and support 60% of private sector employment. In light of an unemployment rate exceeding 31%, these enterprises hold the most significant potential to absorb job seekers, particularly young individuals and women who bear the brunt of economic exclusion. Yet, despite their critical role, MSMEs continue to grapple with a policy environment favouring large corporate entities, a financial sector that denies them access to capital and a regulatory framework that hinders their agility and innovation.
The GNU’s budget must provide more than mere token gestures; it must indicate a radical shift from previous neglect. Economists, policymakers and business leaders must recognise that the fundamental weakness of South Africa’s economic structure lies in its failure to decentralise opportunities. For too long, economic power has been concentrated in the hands of monopolies and established firms. Meanwhile, MSMEs — particularly those in historically disadvantaged communities — are perceived as peripheral participants in economic discussions. This status quo must be dismantled if South Africa is to realise its aspirations for an inclusive and growing economy.
South Africa must urgently establish an MSME-focused sovereign guarantee fund backed by the state and private sector to enable small business lending risk-sharing.
A significant and persistent barrier facing MSMEs is the lack of access to finance. Banks and financial institutions, under the guise of ‘prudence’, continue to exclude MSMEs from meaningful credit access by imposing stringent collateral requirements and exorbitant interest rates. This outdated, risk-averse approach ignores the global reality: economic dynamism flourishes when governments strategically intervene in financing small businesses.
South Africa must urgently establish an MSME-focused sovereign guarantee fund backed by the state and private sector to enable small business lending risk-sharing. Additionally, the budget must include tax relief measures and innovative financing instruments, such as revenue-based financing, which permits companies to repay loans as a percentage of their turnover, easing the financial burden on growing enterprises.
Beyond finance, the country’s outdated and bureaucratic regulatory environment is a silent killer of MSMEs. South Africa’s business registration and compliance frameworks are designed not for agility but for administrative control — stifling the sector that ought to drive job creation. The GNU must undertake a comprehensive regulatory overhaul to reduce compliance costs, expedite business registration and eliminate unnecessary licensing requirements that deter entrepreneurship.
In its current form, the Broad-Based Black Economic Empowerment (BBBEE) policy has undermined MSMEs by reinforcing barriers rather than dismantling them. The budget must propose a revised framework that prioritises integrating small businesses into corporate supply chains and facilitates direct government procurement contracts for emerging enterprises.
Equally pressing is the matter of market access. It is futile to financially support MSMEs while denying them access to lucrative supply chains. The government’s procurement policies continue to favour large firms, and MSMEs are frequently sidelined by bureaucratic red tape, delayed payments and outright exclusion from significant projects.
The budget must enforce a legally binding minimum procurement quota for MSMEs across all state departments and state-owned entities. This should be complemented by a robust monitoring mechanism to prevent elite capture, where only politically connected MSMEs benefit. The private sector must also be encouraged to integrate small businesses into their supply chains through tax incentives and mandatory local sourcing provisions. Without access to sustainable markets, MSMEs will remain ensnared in a cycle of subsistence rather than scalable growth.
Furthermore, infrastructure constraints continue to hinder MSME growth. South Africa’s developmental model remains disproportionately centred on urban areas, leaving township and rural enterprises perpetually struggling for resources. The budget must prioritise the establishment of industrial parks, technology hubs, and business incubators in underdeveloped regions. Digital access is also a vital enabler of business expansion in the modern economy; however, many small businesses remain digitally isolated due to high data costs and unreliable broadband infrastructure. The government must commit to subsidised broadband access for MSMEs and promote digital literacy programmes to empower small enterprises to use e-commerce and fintech solutions.
Strategic investment in high-growth sectors represents another critical intervention that must be central to the GNU’s economic strategy. South Africa cannot compete globally if its MSMEs are excluded from the green economy, advanced manufacturing and 4IR-driven industries. The budget must allocate substantial funding to MSMEs working in these sectors alongside industry-specific training programmes to ensure they remain competitive. The informal economy — often overlooked in policy discussions — must also be formally recognised and supported through structured interventions that assist informal traders in transitioning into formal, tax-compliant enterprises.
The urgency of these interventions is intensified by South Africa’s hosting of the G20 Summit later this year. The country’s credibility as a proponent of inclusive economic development will be closely examined. Many G20 nations have embraced MSME-driven growth models that have effectively reduced unemployment and fostered innovation. If South Africa fails to present a coherent, action-orientated MSME strategy, it risks being seen as a laggard in global economic discourse. More critically, it will squander an opportunity to position itself as a leader in shaping global small business development policies.
The high cost of living remains a pressing concern for ordinary citizens, and MSMEs are uniquely positioned to provide cost-effective goods and services at the grassroots level. Unlike large corporations that prioritise profit maximisation at the expense of consumer affordability, MSMEs foster price competition, thereby lowering consumer costs. Suppose the government genuinely seeks to alleviate the burden of the rising cost of living. In that case, it must create an environment where MSMEs can flourish and drive down market prices through increased competition.
Finally, the GNU’s commitment to establishing a capable, ethical and developmental state must be evident in its approach to MSMEs. A state that fails to facilitate the growth of small businesses is one that has compromised its fundamental economic mandate. The neglect of MSMEs is not merely an economic oversight but an ethical failure that perpetuates inequality, stagnation and exclusion. The finance minister must convey an unequivocal message: the era of economic elitism is over. South Africa’s future prosperity hinges on dismantling the barriers that constrain MSMEs and fostering an economy in which small businesses can survive and thrive.
This is a moment for bold action. The budget must reflect a policy shift and a fundamental ideological reorientation in how we perceive economic growth. If South Africa continues to prioritise large firms at the expense of MSMEs, it will deepen economic inequality and render the GNU’s commitments meaningless. The finance minister must rise to the occasion, not with vague promises but with concrete, actionable reforms that redefine South Africa’s economic landscape. Anything less would betray the millions who depend on MSMEs for their survival and economic opportunity.
• Phosane Mngqibisa is a doctoral student pursuing a DBA at the University of Northampton, UK. He serves as the deputy chair of the Gauteng Enterprise Propeller and is an activist for SMMEs
For opinion and analysis consideration, e-mail Opinions@timeslive.co.za
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