Micro-entrepreneurs in South Africa generally regard formal registration of their businesses as a cost rather than a benefit and believe that government funding mechanisms are misaligned with their goals.
This is according to a recent policy paper on South African township economies, “Supporting Small-Scale Micro-Entrepreneurship in South Africa’s Townships”, released by the World Bank. It said local small-scale entrepreneurs were more optimistic about formalisation than their counterparts elsewhere in the region, but many did not believe they obtained the hoped-for benefits.
“While several small-scale micro-entrepreneurs recognise the intended benefits of registration, such as access to government support and legal protections, many do not benefit from these factors… Instead, registration was seen as costly, complex, and misaligned with the flexible and adaptive way that their businesses function.”
The paper includes interviews, focus group discussions and data from 75 micro-enterprise owners in Ivory Park, Marikana and Langa.
The paper said entrepreneurs struggle to access government support due to a lack of information about what is on offer, the perceived irrelevance of programmes and stringent eligibility criteria that frequently exclude them.
“Small-scale micro-entrepreneurs not only face challenges accessing formal support from the government, but some perceive that existing policies and procedures present additional hurdles for their businesses.
“While South Africa’s legislative framework includes laws intended to support small businesses, such as the National Small Business Act and the Business Act, the provisions of these acts frequently do not align with the realities of the informal sector.”
Of the surveyed businesses, 29.3% dealt in takeaways, 12% were spaza shops and 10.7% were in beauty services. Among survivalist entrepreneurs, 38.9% operated takeaways, and 16.7% operated in beauty services.
The majority of survivalist entrepreneurs generally earned an average monthly income of between R1,000 and R5,000, while sustainable entrepreneurs earned relatively higher, between R5,000 and R10,000, the paper said.
Many felt that the available support does not address their specific needs, further exacerbating their difficulties
— World Bank
“Many felt that the available support does not address their specific needs, further exacerbating their difficulties. Some participants also perceived that inconsistencies in the enforcement of regulations hinder their ability to thrive and contribute to the economy.
“Economic necessity due to unemployment or lack of wage job opportunities in formal firms can drive South Africans into entrepreneurship… However, some identified pull factors as the motivation for starting a business. Some survey participants were from families of micro-entrepreneurs that demonstrated the potential to earn a livelihood from this kind of work.”
The paper said most of those in the study found that they preferred running their own businesses to being dependent on others for employment. “Micro-entrepreneurship often begins as employment of last resort but evolves into a deliberate choice as owners value its autonomy and independence.”
The report said 66.7% survivalist entrepreneurs were female, while 61.5% of sustainable entrepreneurs were male. A higher proportion (71.8%) of sustainable entrepreneurs had completed secondary school than their survivalist counterparts (66.7%).
The report added that success in micro-entrepreneurship relied less on access to finance and more on personal initiative, entrepreneurial mindset and strategy.
“Entrepreneurs who reinvest profits, adapt to market conditions, and leverage available resources are more likely to sustain and expand their businesses. This entrepreneurial mindset, characterised by perseverance and continuous learning, is essential for sustaining and expanding micro-enterprises, potentially proving more impactful than financial assistance alone.”
The report says its findings underscore the need for holistic programmes offering business training, socio-emotional skills, mentorship and collective business strategies tailored to the township economy.
“Social and communal networks expand access to shared resources, information, and markets,” it said.
Tabling her budget vote this past week, the minister of small business development, Stella Ndabeni-Abrahams, said the department planned to formalise 11,000 informal enterprises, provide business development interventions for 26,000 township and rural enterprises and offer business skills training for 25,000 small businesses.
She said her department had developed a revitalisation policy to support township SMMEs and rural enterprises. “We will also be scaling our offerings for township and rural enterprises, building on the successes of 2025/2026 where we disbursed more than R829m to over 111,000 SMMEs through the township and rural entrepreneurship programme.”
She said township and rural economies would also benefit from an asset assist programme, a grant-based intervention to support SMMEs gain access to equipment, machinery and operational capability.
“Last year we supported 938 SMMEs to the value of R190m. This year, we have allocated R215m to provide a minimum of 860 with productive assets that enhance their capacity, productivity and competitiveness.”
She said the business infrastructure support programme builds SMME hubs, supports the revitalisation of industrial parks, and provides equipment, energy solutions and shared production infrastructure for SMMEs and co-operatives.
Simone Cooper, head of business and commercial banking South Africa for Standard Bank Group, said that nearly 80% of businesses surveyed in the bank’s own report were unregistered, thereby excluding them from access to finance and formal opportunities.
“This report shows the structural challenges facing township entrepreneurs and what it will take to overcome them. It highlights the importance of market access, access to funding, and digital enablement. With the right partnerships, township SMEs can move from survival to scale.”
Her Standard Bank colleague Naledzani Mosomane, head of enterprise and supplier development at business & commercial banking, said fewer than 9% of these businesses have access to bank loans, with most relying on personal savings or family support.
“The insights reflect the lived realities of township entrepreneurs, their resilience, their contribution, and the barriers that hold them back.”
According to Standard Bank, 49% of businesses operate from homes or garages, with only 11% in commercial premises.
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