In 2024 and 2025, South Africa’s economy shifted from continued weakness toward gradual stabilisation, with several developments improving the outlook even as growth remained low. Real GDP growth slowed to 0.5% in 2024, weighed down by summer drought conditions, port congestion, and elevated uncertainty. However, as confidence improves with the easing of power cuts and the formation of the Government of National Unity (GNU), the National Treasury projects a gradual recovery, with growth of about 1.2% in 2025 and an average of 1.8% over 2025–2027.
Macroeconomic conditions also improved materially on the price and interest rate front during this period. By March 2025, headline CPI had fallen to 2.7% and core inflation to around 3%, reflecting lower international fuel prices and weak domestic demand after inflation had been persistently high earlier in the cycle. As inflation pressures receded, the South African Reserve Bank moved from tightening to easing: after having reached a repo rate of 8.25% in May 2023, it began cutting rates from late 2024 and reduced the repo rate stepwise to 7.0% by September 2025.
South Africa’s micro, small and medium enterprises (MSMEs) continue to be dominated by micro, informal and early-stage to growth-phase businesses that started with personal or social capital.1 Many of these businesses are unregistered (56%) and therefore rely on the bankability of the entrepreneur to access financial products and services. Business start-up funding comes mainly from savings (37%) or salary (14%), and from social capital (41%, for example friends and family)). Only 7% of MSMEs used a business loan from a formal FSP to start a business, while 5% used a personal loan, and 3% refinanced a home loan. The last two depend on the owner’s bankability. The MSME sector plays a major role in employment, with about 80% of the workforce employed in MSMEs, yet they face a significant financing gap of ZAR 350 billion. This gap does not arise from a lack of capital. The number of MSME funders increased from 148 to more than 300 between 2018 and 20252.
Credit dynamics in 2024 and 2025 closely reflected macroeconomic shifts. From 2023 through mid-2024, tight monetary policy and intensified structural constraints and stalled lending: corporate loan growth fell to 2.6% year-on-year by January 2024.
Corporate loan increases remained modest through 2024. In early 2025, however, conditions began to turn. Lower inflation, successive repo rate cuts, supported a cautious improvement in business sentiment and helped trigger a rebound in corporate lending. Loans to companies rose by about ZAR 75 billion in the first quarter of 2025, and by July 2025, year-on-year growth in corporate loans had accelerated to around 9.9%.
The SME outstanding stock of loans grew in 2024, showing a year-on-year increase of 9.6%. The broader stock of loans outpaced this growth, as total outstanding loans surged by 12.8% compared to 2023.
Most business owners are digitally literate and digital payment use is growing, yet digital tools for business operations remain underused. Only 50% of MSMEs have access to the internet, 49% have a social media presence and 32% have a website. However, digital payments are widely used, with close to 80% using digital financial services. Cash may still dominate in value, as only 28% own a point-of-sale (POS) device.
Government funding for MSMEs occurs mainly through development finance institutions (DFIs). Due to data gaps, National Treasury has only been able to collect consistent data from two DFIs over the last three years (2023–2025), the Small Enterprise Development and Finance Agency (Sedfa3), and the Industrial Development Corporation (IDC). These DFIs provide direct funding, grants and credit guarantees to expand MSME finance. Sedfa has provided close to ZAR 2 billion in direct loans between 2022 and 20244, with women-owned MSMEs receiving 22% of this amount. Over the same period, Sedfa provided ZAR 195 million in grants, 41% of which went to women-owned MSMEs. Sedfa’s Khula Credit Guarantee (KCG) has helped unlock private sector funding from FSPs. Between the 2022/23 and 2024/25 financial years, KCG grew from around ZAR 449 million in 2022/23 to about ZAR 1.39 billion in 2024/25.5 The guarantee supported finance from FSPs to more than 2 900 MSMEs. In addition. the Development Bank of Southern Africa (DBSA), provided MSME’s and sub-contractors with ZAR 2.3 billion between 2022 and 2024.6 Over 470 start-ups received part of the ZAR 102m innovation grant disbursed.