South Africa’s informal business sector remains vastly underestimated, despite its significant economic contribution. As of May 2024, the sector was valued at approximately R750 billion, yet it continues to operate largely untaxed and underregulated.
At the heart of this sector are small, medium, and micro-enterprises (SMMEs), which provide essential goods and services to millions. Businesses such as spaza shops, the taxi industry, taverns, and repair services—including cellphone and auto workshops—generate substantial revenue, playing a critical role in both local economies and the national GDP.
The Role of SMMEs in Emerging Economies
Across BRICS nations and other developing economies, SMMEs thrive as a response to high unemployment rates. These enterprises offer individuals—regardless of their education level—opportunities to generate income and contribute to economic stability.
In South Africa, the informal sector is instrumental in reducing poverty and unemployment while revitalizing township economies. Areas often perceived as disadvantaged are experiencing a transformation, with small businesses driving real estate value increases. For example, a four-room house in Soweto that was worth R150,000 in 2014 has now appreciated to R400,000, reflecting the sector’s economic influence.
Rapid Growth Despite Regulatory Barriers
The informal business sector is expanding at a remarkable rate of 24% per year, outpacing the formal sector’s 15% annual growth. This surge is attributed to factors such as complex regulations, bureaucratic delays, and strict employment criteria in the formal sector, which exclude many job seekers.
Revenue streams within this sector are substantial: backroom rentals generate between R20 billion and R40 billion annually, the taxi industry brings in R50 billion per year, and taverns and shebeens contribute a staggering R110 billion annually. The potential impact of even partial taxation of these earnings could be transformative for public funding and infrastructure development.
Government and International Support for SMMEs
Recognizing the vital role of SMMEs, the South African government has introduced initiatives to support small businesses. These efforts include funding programs, mentorship, training, and policies aimed at easing market access and regulatory burdens.
On February 24, 2025, the African Development Bank Group (AfDB) and Standard Bank Group signed a landmark agreement to boost trade expansion for SMMEs across Africa. The deal includes a R3.6 billion social bond investment and a $200 million Risk Participation Agreement, strengthening Standard Bank’s lending capacity to drive job creation and economic growth. The AfDB estimates that this funding will assist up to 4,000 businesses, benefiting approximately 3.2 million SMMEs and sustaining 60% of the country’s jobs.
Aligning with BRICS for Economic Growth
The AfDB-Standard Bank partnership aligns with BRICS’ broader financial accessibility goals, supporting sustainable economic development. By closing financing gaps and easing regulatory constraints, such initiatives enable small businesses to thrive in a competitive global landscape.
South Africa continues to explore policy reforms to formalize and enhance the informal sector. Simplifying business regulations and improving access to verified information will empower SMMEs to scale and contribute more effectively to the national economy.
Within the BRICS framework, discussions around digital trade, e-commerce, and cybersecurity can further support SMMEs. The BRICS Business Council has a unique opportunity to promote seamless trade and investment policies, ensuring that small enterprises remain central to economic development across member nations.
ALSO READ : After Losing Her Way, Gaga Says Mayhem Brought Her Back to Herself
