Rising Operational Costs Threaten SME Stability In South Africa

Since the start of 2025, several announcements by government have left South African consumers concerned about future disposable income as well as businesses troubled about available cashflow.

The National Energy Regulator of South Africa (NERSA) deliberated and announced a 12.74% electricity price hike for Eskom, effective 1 April. NERSA confirmed that additional increases will follow over the next two years: a 5.36% hike for 2026/27 and 6.19% for 2027/28. The rising cost of municipal rates also increases financial pressure and strains operational budgets for many Small and Medium-sized Enterprises (SMEs).

SMEs Face Mounting Challenges

With an immediate future filled with sustained cost increases, South African businesses particularly SMEs face some of the biggest impacts. CFOs must put financial and operational plans in place now to counter the higher expenses to protect profitability and longevity. Otherwise, SME companies may begin retrenching, firing, or reducing their workforce. Considering that SMEs generate around 60% of South Africa’s private sector jobs, job losses would have a devastating effect on an already concerning unemployment rate.read more here

Finding Solutions for Strained Cashflows

Shrinking the SME-employed workforce doesn’t offer a sustainable solution. Decreasing other expenses proves difficult with municipal rates and electricity hikes. The other potential pathway lies in ensuring a consistent cashflow, though this remains easier said than done.

In a pressurized economic environment, CFOs must consider the changes in consumer spending. For SMEs, these developments often translate into stagnating or declining profitability. According to the research paper Survival in a Harsh Economic Climate, SMEs’ turnover dropped by 50% to 60% in the last 12 months.

Rising prices for commodities or services seem almost inevitable, which could result in a loss of price-sensitive customers. Simply increasing the cost of goods and services does not serve as a viable long-term financial strategy for CFOs.

Optimizing Payment Collection

CFOs often overlook payment collection, yet it can positively contribute to managing strained cashflow. On average, “SMEs wait 70 days to get paid compared to 52 days for corporates.” Pre-sale measures, such as clear and/or flexible payment terms, and post-sale communication around payments, such as payment reminders, help improve this. Equally crucial is the payment method offering a variety of payment options ensures a smoother, faster, and more secure payment process regardless of customer dynamics.

More customers are moving away from debit orders in favor of flexible, self-directed payment options that allow them to pay when it suits them. SMEs that cater to this preference improve both collection success and customer satisfaction.

Fintech to the Rescue: Enabling SME Payment Collection

One of the key advancements in the fintech industry involves the development of multi-channel payment platforms that help SMEs improve their payment collection processes.

Platforms and offerings such as GetPaid from Shoprite that utilizes the Pay@ YAP platform aim to help CFOs manage cash flow more effectively by streamlining the invoicing and payment process.

By integrating with a range of payment channels, these fintech solutions enable quicker, more efficient payments and improve the timing and predictability of cash flow. CFOs often experience faster payment collection since traditional payment delays are eliminated. Real-time transaction visibility allows CFOs to monitor payments, track receivables, and gain greater control over financial data and cash flow forecasting.

Developed with SMEs in mind, payment platforms such as the above-mentioned services also provide cost-effective solutions that don’t require large capital investments. These platforms integrate seamlessly with existing accounting and Enterprise Resource Planning systems, simplifying adoption.

A Smarter Path Forward

As everyone starts tightening their belts and bracing for escalating fuel, product, and service prices, South African business must find smarter ways to make rands stretch without taking away employment from those who need it most.