Despite ongoing challenges such as inconsistent power supply and economic instability, an impressive 83% of small businesses have grown their revenue in the past year, and 90% are optimistic about their future growth.
These findings from Xero’s 2025 State of Small Business Report may be surprising to most but they prompt the question: What is driving this optimism? The answer lies in SMEs’ bold embrace of technology.
Resilient SMEs Thrive with a Winning, Digital-First Mindset
Xero’s 2025 State of Small Business Report has revealed a tech-hungry sector that no longer views digital tools as a luxury but rather as a necessity. According to the report, nearly half of small businesses (45%) attribute technology as one of the most valuable contributors to their business over the past year.
Across the country, entrepreneurs are embracing digital platforms to manage their finances, automate admin, and gain real-time insights into their operations. Tools like Xero are helping business owners and their accountants or bookkeepers stay on top of their numbers, freeing up time to focus on things like strategy and customer service.
“As accountants, our role has started changing. No longer are we just doing accounting services, we’re moving into the advisory space and helping SMEs optimise processes by guiding them on using the right digital systems and tools to support the growth of their businesses,” says Damian Baker, Head of Cloud Accounting at OCFO.
This shift in mindset is profound. South African SMEs are no longer adopting technology purely for efficiency but as a tool for empowerment. This approach gives small business owners the confidence to scale, the agility to adapt, and the tools to compete on a global stage. In a country where SMEs account for over 60% of employment, this transformation has the potential to uplift and revitalise entire communities.
Investing in People and Potential
While youth unemployment remains a pressing challenge in South Africa, small businesses are stepping up as engines of opportunity and hope. With a hunger to leverage technology and digitise operations, business owners are eager to equip their teams with future-ready skills to boost productivity and create meaningful, sustainable employment.
This year’s State of Small Business Report found that over 40% of small businesses plan to upskill their teams in the next 12 months, with a strong focus on emerging technologies such as artificial intelligence.
“This enthusiasm for experimenting with new technologies like AI highlights a forward-thinking approach among South African small businesses, who recognise the potential of AI-powered tools to drive efficiency and supercharge the running of their businesses,” says Colin Timmis, Country Manager, Xero South Africa.
Overcoming Barriers with Bold Ambition
While the appetite for innovation among South African SMEs is stronger than ever, the path to digital transformation isn’t without its hurdles. Many small businesses still face significant barriers, such as limited access to funding, unreliable infrastructure, and a shortage of digital skills. But what sets South African entrepreneurs apart is their unwavering determination to rise above these challenges.
“While VAT remains at 15% for now, the Budget 3.0 revealed the general fuel levy will increase by 16 cents per litre for petrol and 15 cents per litre for diesel from 4 June 2025. This is the first increase in three years and, while slight, it may contribute to rising input and distribution costs – particularly for businesses reliant on transport and logistics. SMEs will likely need to consider reviewing their cost structures and pricing models to accommodate this change. Despite this and the many other challenges that SMEs face, many entrepreneurs are not just hopeful, they are proactively looking for ways to future-proof their businesses – with the guidance of expert advice, and technology, especially AI playing an increasing role,” adds Timmis.
By embracing technology, small businesses are ensuring that they remain competitive in an increasingly digital world, further showing their eagerness to evolve, expand beyond their communities, and unlock their full potential through digitisation.
A Future Built on Innovation
Small businesses are building a future where innovation is inclusive, accessible, and empowering. They’re not just adapting to change – they’re embracing it with a hunger to grow their businesses and succeed. What’s especially exciting is the momentum building across sectors. From fintech startups in Cape Town to Agri-tech innovators in Limpopo, SMEs are using digital tools to break into new markets, diversify their offerings, and scale faster.
This wave of innovation is also reinforcing the role of small businesses in the broader economy. As SMEs grow more confident in their digital capabilities, they’re not just improving their own operations -they’re creating jobs, stimulating local economies, and contributing to a more inclusive, tech-enabled future for South Africa.
The message from South Africa’s small business community is clear and inspiring. Technology is not just a tool; it’s a catalyst for transformation. SMEs, supported by their accountants, are standing at the forefront of a digital revolution. One defined not by circumstance, but by choice, eagerness, and creativity. With continued support, smart investments, and a shared commitment to progress, there is no limit to what can be achieved.