South Africa’s slowing growth, stabilising government debt and continued cost pressures will shape the conditions small businesses face in the months ahead.
Bertie Nel | image supplied
The Medium-Term Budget Policy Statement (MTBPS), tabled by Finance Minister Enoch Godongwana on 21 October, offers an indication of the government’s fiscal priorities ahead of the February 2027 Budget, with implications for business costs, borrowing and growth prospects.
South Africa’s economic growth outlook has weakened, with growth now expected to reach just 1.2% in 2026, down from the 1.6% forecast in February.
However, government debt has stabilised for the first time in nearly two decades, reaching 78.4% of GDP in 2025/26. This could give government more room to address the country’s needs.
For many small-business owners, these figures can seem far removed from the everyday pressures of paying staff, settling suppliers and keeping the lights on.
Yet government’s finances influence taxes, inflation, interest rates and spending on the infrastructure and services businesses rely on. Together, these factors shape operating costs, customers’ spending power and businesses’ ability to borrow and grow.
What the outlook means for your business
Major tax changes are usually announced in the February Budget, but the MTBPS signalled a continued focus on fiscal discipline. The government has released draft fiscal anchor legislation for public comment, designed to limit borrowing and better protect the state’s financial future. These early signals can help business owners plan ahead rather than react to changes once they take effect.
Inflation stood at 4.4% in August, while record-high fuel prices have put pressure on businesses and consumers. To ease the strain, the fuel levy will be cut from 4 November to 1 December 2026, reducing the cost by R3 a litre for diesel and R1.50 for petrol.
Smaller cuts will remain in place until 5 January 2027. This offers some short-term relief, particularly for businesses that rely on transport, although broader cost pressures remain.
Borrowing costs are another concern. The repo rate has risen twice this year to 7.25%, making credit more expensive for businesses that depend on overdrafts or loans.
The minister noted that a lower inflation target and financial discipline are helping to contain borrowing costs, but small businesses still need to consider the impact of financing expenses on their cash flow.
Slower economic growth is also likely to keep customers cautious about spending. However, the Minister identified failing infrastructure as a priority, particularly addressing the institutions responsible for delivering water services.
Efforts to improve infrastructure could benefit businesses over time, while infrastructure spending may create opportunities for suppliers.
Although business owners cannot control these economic conditions, they can take steps to make their operations more resilient.
Five ways to prepare your business
Cash flow should be a priority. Business owners should look three to six months ahead, follow up promptly on unpaid invoices and, where possible, negotiate payment terms that align with when money comes in. This can help prevent a timing mismatch between income and expenses from becoming a bigger problem.
Budgets should also allow for rising costs and realistic changes in sales. Reviewing financial performance every month makes it easier to identify shortfalls early and adjust spending before they become difficult to manage.
Building a cash reserve can provide another layer of protection. Ideally, businesses should aim to set aside enough to cover several months of fixed costs, such as rent and salaries, in a separate account. This can help them weather a slow trading period without immediately turning to borrowing.
Debt should be used strategically, preferably to fund investments that can generate income, such as equipment or stock with a clear market.
Using loans to cover ongoing losses can create further pressure, so business owners should regularly review the cost of their existing borrowing and whether it remains sustainable.
Finally, planning for different economic scenarios can help owners make better decisions under pressure. Consider how the business would perform if trading improved, remained stable or deteriorated.
Identifying potential cost reductions in advance, alongside the conditions that would justify further investment, can make it easier to respond as circumstances change.
Don’t put your ambitions on hold
When the economic outlook is uncertain, it can be tempting to put every growth plan on hold until conditions improve. But waiting for the perfect moment can mean missing genuine opportunities.
For many owners, their business is their largest asset and main source of income. Understanding how business decisions affect personal finances, cash flow and long-term goals can help owners balance growth ambitions with financial resilience.
The budget sets the backdrop for what lies ahead. But the decisions that shape a business remain in the hands of its owner, and the best time to start making them is now.
