South Africa’s small and medium‑sized businesses are struggling to stay afloat as economic pressures mount. Statistics South Africa (Stats SA) reports that 1 534 businesses entered liquidation in 2025, with about 100 closures recorded in December alone, up 11% from the same month in 2024.
This trend shows that many small business owners are reaching a breaking point amid rising costs, weak demand and ongoing operational challenges.
Most of last year’s closures, roughly 87%, were voluntary, meaning the business owners chose to shut down. Voluntary liquidations can sometimes be part of restructuring or strategic shifts, but when they rise alongside other stress signals, they often reflect difficult trading conditions.
Meanwhile, 193 businesses were placed into compulsory liquidation in 2025, up 5.5% from the prior year. Compulsory liquidations are court‑ordered and usually signify that a company can’t meet its financial obligations, pointing to real solvency issues behind the numbers.
In Khayelitsha, Cape Town, The Milk Restaurant and Champagne Bar will shut down permanently on 28 February 2026 after years of financial pressure. The restaurant opened in 2018 and became known as a fine‑dining destination in the township, creating jobs and attracting visitors.
“The business could no longer survive its financial problems. I invested all my money into the restaurant and equipment. When that wasn’t enough, I borrowed more to keep it running,” said Spelo Jalivane, the founder.
He said the ongoing struggle shows how tough the environment has become for small, independent operators. The closure also means staff must now look for work in an already tight economy, adding a human dimension to the liquidation statistics.
Some industries are feeling the strain more than others. In 2025, the sectors most affected by liquidations were finance, insurance, real estate and business services, followed by trade, catering and accommodation.
Together, these two groups accounted for 801 of all closures last year. These sectors typically depend on stable infrastructure, reliable consumer spending and smooth supply chain conditions that have been under pressure due to high input costs, logistics challenges and weak demand.
Further insight comes from the Small Business Growth Index (SBGI), which surveyed over 1 600 SMEs across the country.
https://sacci.org.za/small-business-growth-index/
“The SBGI score of 51.08 shows that small businesses are in a vulnerable zone. Only one in four reported growth. More than half are shrinking, struggling, or at risk of closure. Rising costs for transport, utilities and raw materials are forcing them to raise prices, but many cannot keep going,” Prof Paul Kibuuka, Head of Economic Research at the Bureau of Market Research (BMR) explained.
More than half of the surveyed SMEs said they might not survive a year without extra support. Experts point to the need for working capital, better access to markets and targeted government programmes that can help businesses through rough patches.
“Small businesses are under financial pressure but still want to invest,” said Alan Mukoki, CEO of the South African Chamber of Commerce and Industry (SACCI).
“Policymakers should respond with urgent, tailored and accessible financing solutions that bridge the gap between demand and supply. The focus must be on relieving immediate cash flow stress, enhancing finance literacy and empowering businesses to invest in growth and resilience.”
Despite these pressures, about 80% of SMEs still plan to invest in marketing, equipment and working capital, showing cautious optimism among business owners. Analysts warn that without timely support, more closures are likely in 2026 and could reduce jobs and weaken local economies, especially in townships and rural areas where small businesses are a key source of employment.
SMEs contribute more than 60% of private sector jobs in South Africa. Every closure therefore affects not just a business but also families, workers and entire communities. SMEs need support to survive and thrive.
