Maximise profits with 2025's Top 5 Business Trends

As South Africa’s economy shows signs of recovery and growth, small and medium-sized enterprises (SMEs) are poised to experience a boost from the economic uptick – especially those that can harness the top business trends in South Africa set to emerge in 2025.

SMEs THAT FAIL TO ADAPT TO A GROWING AND CHANGING ECONOMIC LANDSCAPE RISK FACING:

• Reduced market competitiveness and loss in market share as customers move to forwardthinking businesses

• Inefficient operations and higher costs due to manual processes and outdated systems

• Limited access to capital and growth opportunities as lenders shy away from SMEs that don’t show future potential. We share the five key business trends in South Africa to look out for in 2025 that will impact SMEs – from eCommerce going mainstream and digital transformation to new financial service models for growing businesses.

The economic climate in recent years has been tough on South African business owners. With only 33% of SMEs reporting to have access to credit, many small businesses are hampered in their resilience against unforeseen challenges and in long-term growth potential.

“2024 has been a year of continued headwinds for SME owners in South Africa – high interest rates, inflation, and heightened uncertainty around election time and the formation of a new government have all left their mark,” says SME services provider Lula chief growth officer Thomas McKinnon.

The good news is that, with the Bureau of Economic Research’s projections predicting potential economic growth of 2.2% in 2025 and S&P’s recent positive outlook change for South Africa, SME owners might see economic growth double, compared to 2024. While this is good news for small businesses struggling to make ends meet, SME owners must stay ahead of emerging trends to capitalise on opportunities in the new economic landscape.

Here are The Five Business Trends in South Africa that small and medium-sized business owners should be acting on in 2025

1. FLEXIBILITY IS KING: NEW FINANCIAL SERVICE MODELS FOR SMES

While many banks won’t take time to actively manage small business accounts, technological innovations in banking now offer alternative solutions to SMEs. Financial services are increasingly extending their services from traditional banking to digital tools that allow for smart cash flow management.

“Banks and fintech are naturally diving into things like cash flow management tools and leaning into AI-driven insights to make cash flow management smarter than ever,” McKinnon explained.

He adds that, more than just cash flow insights tools, there is a rise in flexible services that can adapt to the ebbs and flows of SME growth in reality – from office spaces that scale with business size to more flexible logistics providers and marketplace aggregators that simplify operations.

2. FUNDING GETS PERSONAL: MORE FINANCING OPTIONS, BETTER FITS

Data brings transparency to business and finances. Thanks to increased access to transaction data, payments data, and data overall, lenders now have a better view of a business’ financial health – and can tailor financing options to match.

It’s not just banks who are using data to tailor financing options.

“Banks are no longer the only game in town, and alternative funders and embedded finance options with payments businesses are proliferating,” McKinnon says. He sees that government and NGO initiatives are also stepping up to support micro and womenowned businesses with guaranteed schemes, creating a broader safety net.

3. MOBILE FIRST: DIGITAL COMMERCE BOOMS AND GOES MOBILE

The digital shift is not just something tech CEOs like to mention; it’s happening at breakneck speed. The digital economy is projected to account for 15%-20% of South Africa’s GDP by 2025, doubling in size from 8%-10% in 2020.

Driving this shift is the increased internet penetration, growing from 68% in 2023 to over 75% by 2025. But internet usage alone doesn’t fully account for the boom in the digital economy. Ecommerce is expected to rapidly grow at a 21.4% compound annual growth rate (CAGR) through 2030.

Within the online retail space, 77% of South Africans do their shopping on mobile phones, while 54% make their purchases on laptops.

4. JUST A SWIPE AWAY: PAYMENTS ARE GETTING SMOOTHER

As consumers move toward digital commerce, so do payments. In June 2024, the South African Reserve Bank (SARB) published a road map towards a cashless economy and is transforming the nation’s digital payments landscape to get there by 2035.

The South African payments landscape is evolving to meet not just digital consumers’ demands but those of both digital and bricksand-mortar businesses. While cash is still widely used by SMEs, 58% of SMEs already use digital transactions.

5. IN THE CLOUD: INVESTMENTS IN DIGITAL INFRASTRUCTURE AND TECH

The digital transformation of South Africa’s economy doesn’t end with eCommerce and the payments landscape. Digital transformation will play a pivotal role in the country’s future, with projections showing it could contribute almost 20% to the GDP by 2028 and create 300 000 jobs.

Today, massive investments hold up tomorrow’s promise. South African telecom companies have invested R200bn in the past five years to establish fibre optic networks and data centres, improving connectivity and supporting the shift toward a digital economy.

The public cloud services market is expected to grow at a CAGR of 25% until 2025, according to predictions by the International Trade Association (ITA). Similarly, the number of Internet of Things (IoT) connections is expected to increase to 43 million by 2025 from 17 million in 2020.

Perhaps you’d like to start with cloud computing. Among the 400 SMEs surveyed by Ecofin, 81.3% identify cloud computing as the most important tool for enhancing competitiveness—surpassing even e-commerce tools.

Cloud services offer a low-cost entry point to advanced technologies that were formerly only available to large enterprises.

PREPARING FOR 2025: GET YOUR CAPITAL IN ORDER

It’s clear that digitalisation is the big driver behind the business trends in South Africa set to transform SMEs in 2025. The trends we’ve explored can bring big opportunities to small business owners. To capitalise on these top five business trends in South Africa, it’s crucial to have your finances in order. Digital transformation requires investment in new technologies, whether it’s eCommerce solutions or AI-driven tools. Besides, cash flow management is more important than ever in a rapidly growing digital economy.