South Africa’s economy appears to be showing tentative signs of improvement.
GDP expanded by 0.5% in the first quarter of 2026, retail sales continued to benefit from the growing popularity of Black Friday, and reduced load shedding improved operating conditions for many small businesses.
Business Partners’ latest SME Confidence Index points to growing optimism among business owners, with confidence improving across several key measures, including business growth prospects, access to finance, and payment expectations.
Taken together, the figures paint a picture of an economy that is beginning to stabilise after several difficult years.
The challenge now is whether those early gains can be converted into broader and more durable growth.
Green shoots in the economy
Statistics South Africa’s latest GDP figures suggest the economy gained some traction in the first quarter of the year.
GDP grew by 0.5%, following growth of 0.4% in the final quarter of 2025.
Several sectors recorded positive growth. Finance, real estate, and business services expanded by 0.9%, agriculture grew by 3.9%, while trade, catering, and accommodation, as well as transport and communication, each recorded growth of 0.7%.
Not every sector shared in the improvement. Manufacturing contracted by 0.8%, with five of the sector’s 10 divisions reporting negative growth.
The picture that emerges is one of an economy that is improving, but unevenly. While some sectors are benefiting from stronger activity, others remain under pressure.
That unevenness may also explain why confidence is improving in some parts of the economy while many businesses continue to face significant operating challenges.
Consumers are still spending
Retail data tells a similar story.
In March, StatisticsSA reported that retail sales reached R117.9 billion in November 2025, representing a 3.6% increase compared with the same month a year earlier.
The data also shows that Black Friday continues to reshape consumer spending patterns.
In 2011, before Black Friday gained traction locally, November accounted for 42.5% of combined November-December retail sales. By 2025, that figure had increased to 45.9%, suggesting that consumers are increasingly shifting festive-season spending into November to take advantage of promotions and discounts.
The trend was particularly evident among general dealers, household goods retailers and smaller speciality retailers.
On the face of it, the numbers suggest consumers are still spending despite ongoing financial pressure.
Yet the Business Partners survey suggests that stronger retail spending does not necessarily translate into stronger performance for every SME.
The survey indicates that while festive spending may boost some businesses, the benefits are not evenly distributed across the SME sector.
Why Black Friday wasn’t a game-changer
Business Partners’ fourth-quarter SME Confidence Index found that 46.5% of SMEs experienced no significant benefit from seasonal trading during the Black Friday and festive period.
A further 8.1% reported a negative impact.
Jeremy Lang (pictured), managing director of Business Partners, said seasonal trading remained valuable for some businesses, but the benefits were far from universal.
“While seasonal trading periods such as Black Friday and the festive season provide a boost for some South African small businesses, their impact is more modest and uneven than one might think,” he said.
Lang added that seasonal demand on its own was not a reliable driver of stronger business performance, particularly in an environment characterised by constrained consumer spending and rising operating costs.
The findings suggest that stronger retail activity does not automatically translate into stronger SME performance. Consumer spending may be concentrated in particular sectors, among larger retailers, or around short promotional periods, limiting the benefits for many smaller businesses.
The biggest boost wasn’t Black Friday
If seasonal spending delivered mixed results, one factor stood out clearly in the survey.
Nearly three-quarters (73.4%) of SMEs reported that reduced load shedding improved their operations during 2025.
For many businesses, reliable electricity meant more predictable trading hours, fewer disruptions, and lower expenditure on generators, fuel and backup power solutions.
Lang said the reduction in load shedding had allowed businesses to focus less on crisis management and more on growth.
“The significant reduction in load-shedding during 2025 enabled more predictable operating hours, reduced reliance on costly backup power, and supported improved productivity,” he said.
The finding suggests that structural improvements in the operating environment may have a greater impact on SME performance than short-term spending spikes.
The survey also points to a gradual improvement in business sentiment.
Confidence that businesses would grow over the next year rose to 81%, up from 79% in the previous quarter. Confidence in the broader economy’s ability to support business growth increased even more sharply, climbing five percentage points to 69%.
SMEs also appeared more optimistic about access to finance and finding suitably skilled employees. Confidence in access to finance rose to 65%, while confidence in finding skilled staff increased to 73%.
One of the more encouraging findings was an improvement in payment expectations. Confidence that clients would settle accounts within agreed timeframes rose to 73%, up five percentage points from the previous quarter, potentially easing some of the cash-flow pressure that often weighs on smaller businesses.
At the same time, the survey suggests that SMEs are not seeing the same level of support from all quarters. Confidence in government support for small businesses slipped to 47%, making it one of the weaker confidence indicators measured in the index. Confidence in private-sector support improved marginally to 55%.
Business owners continue to place a high value on support mechanisms that can help them navigate a difficult operating environment. Access to finance and access to SME-specific information were each regarded as important by 87% of respondents, while 86% highlighted the importance of mentorship.
Even with confidence improving, SMEs continue to cite cash-flow constraints, economic conditions, and crime among their biggest challenges.
Can the momentum last?
Although the latest data points to improving conditions, the outlook has become more complicated in recent weeks.
In its May Monetary Policy Committee (MPC) statement, the South African Reserve Bank noted that, before the recent escalation of tensions in the Middle East pushed up oil prices and clouded the global outlook, incoming economic data had been largely positive, and the economy appeared to be gaining momentum.
Since then, however, the global environment has become significantly more uncertain.
The Reserve Bank pointed to elevated oil prices, pressure on household disposable income and heightened global uncertainty as risks to both growth and inflation. It subsequently lowered its growth forecasts for the next two years, warning that weaker household spending and reduced investment could weigh on economic activity.
Governor Lesetja Kganyago described the outlook as a “painful combination of higher global uncertainty and reduced disposable income”, adding that the Reserve Bank sees downside risks to growth.
Higher fuel costs have already begun filtering through the economy, contributing to a sharp increase in fuel inflation. The SARB also warned of renewed pressure on food prices and the risk that rising costs could spread more broadly through wages, services, and consumer prices.
Reflecting those concerns, the MPC increased the repo rate by 25 basis points to 7% at its May meeting. The Reserve Bank said the decision was aimed at containing inflation risks and preventing higher prices from becoming entrenched in the economy.
For SMEs, these risks are particularly important. Small businesses are often among the first to feel the effects of higher operating costs, more expensive borrowing, and cautious consumer spending.
There are, however, some reasons for optimism. After several months of steep increases, recent Central Energy Fund data has pointed to the possibility of lower petrol and diesel prices in July if current trends in international oil markets and the rand are sustained. Any relief at the pumps would be welcomed by businesses and consumers alike, particularly after higher fuel costs filtered through to transport, food, and other household expenses.
The experience with load shedding also offers a useful lesson: when structural bottlenecks are removed, businesses respond.
Another potential tailwind lies in logistics reform. Just as improved electricity supply has reduced costs and operational uncertainty for many SMEs, the government is betting that upgrades to rail, ports, and freight transport will support economic growth. The World Bank, International Monetary Fund, and National Treasury have identified logistics improvements as critical to unlocking investment and easing long-standing bottlenecks. If these reforms gain traction, they could improve the operating environment for businesses in much the same way that reduced load shedding already has.
The SARB also struck a more optimistic note.
Despite lowering its growth forecasts, it said the fundamentals of South Africa’s recovery remain intact, citing resilient economic performance, supportive domestic reforms, and favourable export prices.
Taken together, the latest GDP figures, retail sales data, and SME confidence survey suggest that South Africa’s economy may be finding its footing. Confidence is improving, infrastructure constraints are easing and consumers are still spending.
Whether those gains can withstand global uncertainty, higher borrowing costs, and persistent domestic challenges – and ultimately translate into broader-based growth for SMEs – remains the bigger question.
