The uncomfortable truth about small business funding in SA
In this environment, funding is often positioned as the solution. It is also where expectations and reality frequently diverge.
According to the South African MSME Access to Finance Report 2025, asset financing remains the most sought-after form of support among small businesses. The logic is straightforward: more capital should unlock more growth. In practice, it is rarely that simple.
Entrepreneur Orion Herman has experienced that disconnect first-hand. When he secured funding for his recycling business, Liquid Gold, which converts organic waste into fertiliser and animal feed, it initially felt like a turning point. The business was already seeing demand, and capital was expected to accelerate expansion.
Instead, it introduced new operational complexity.
“One of the biggest misconceptions is that funding alone will unlock growth,” Herman says. “Capital without the right operational discipline, market access and technical capability can place more pressure on a business rather than accelerate it.”
As funding increased, so did the demands on the business. Pricing models had to be restructured, systems formalised, and investment decisions prioritised far more carefully. Growth shifted from expansion for its own sake to disciplined execution.
What ultimately changed the trajectory of the business was not funding alone, but what came with it.
Through the SAB Foundation’s Social Innovation Fund, capital was paired with mentorship, technical support and access to networks. Each element addressed a different constraint. Technical guidance reduced costly errors, mentorship improved decision-making, and networks opened doors that would otherwise have taken years to access.
“Funding is an enabler,” Herman says. “But growth is driven by execution, knowledge and access.”
His experience reflects a broader pattern in the South African SME landscape.
Many entrepreneurs receive funding before their operational foundations are fully in place. Financial systems are still developing, management structures remain informal, and routes to market are often inconsistent. At that stage, capital can accelerate movement, but it cannot compensate for structural gaps.
Without additional support, funding can expose weaknesses faster than it resolves them. This is where programme design becomes critical.
Models that combine funding with mentorship, training and ongoing business support are more likely to produce sustainable outcomes. They recognise that capital is only one part of the growth equation.
Over time, the difference is measurable.
South Africa continues to face one of the highest SME failure rates globally, with an estimated 70 to 80% of small businesses failing within five years. If funding alone were sufficient, those figures would look markedly different.
Businesses that receive both financial and developmental support are more likely to stabilise, scale and create employment. They are also better equipped to navigate volatile economic conditions.
For Herman, that integrated support provided clarity.
“Mentorship helped us focus on unit economics and understand where value is created,” he says. “It changed how we think about scaling, especially in a capital-intensive space.”
South Africa’s SME funding gap, estimated at more than R350 billion, remains a significant constraint on growth. Closing it is important. But the more difficult question is what happens once the money is disbursed.
At present, that is where many businesses falter.
South Africa’s SME challenge is not only about access to funding. It is about what comes after it. Capital gets businesses started. Support is what keeps them going.