South Africa’s economic lifeline lies not in giants, but in its grassroots

SINCE the late 1990s, South Africa has been participant in the global economic system. We have built a formal economy that is, in many sectors, efficient and globally competitive. Yet, this very engine of our prosperity is failing. It is constrained, unable to expand at a rate that reverses our chronic unemployment and stubborn poverty.

- DEVAN PILLAY

Frankly, the formal economy is failing the majority of our populace. Millions find themselves marginalised—trapped in the informal economy, underemployed, or entirely without work, devoid of a sustainable income. Deep poverty remains the stark reality for too many.

The heart of the problem is saturation. Our economic environment offers little room for organic growth. It is dominated by large industrial monopolies that control the market, while below them, micro, small and medium enterprises (MSMEs) operate in a state of hyper-competition, a brutal arena where there are often more losers than winners. This is a tragic paradox, for the MSME sector is, in fact, the true lifeblood of our nation.

With over 2.6 million entities, MSMEs contribute an estimated 35% to our Gross Domestic Product (GDP) and are the primary source of livelihood for over 11 million workers. Most critically, they account for around 60% of new jobs created each year. They are our greatest hope for mass employment, yet we are systemically allowing them to wither. The statistics are alarming: 25% of new MSMEs do not survive their first year, and a staggering 70% shutter their doors by year five.

Their failure is not due to a lack of ambition, but rather attributed to well-known barriers: financial instability, cash flow crises, and weak organisational capacity. MSMEs struggle to grow sustainably due to a combination of market and operational weaknesses.