As South Africa marks Transport Month, the country’s infrastructure challenges continue to pose serious barriers to the growth and development of small and medium-sized enterprises (SMEs). For years, frequent load shedding and poor internet access have disrupted operations and reduced productivity, while inadequate transport and logistics infrastructure delay supply chains and increase costs.

Veroshen Naidoo, chief investment officer at Business Partners Limited, notes that although Eskom has made significant progress in addressing load shedding this year, the other constraints continue to not only hinder day-to-day business activities; they also contribute to high failure rates and stifle much-needed broader economic development. “Poor or inadequate infrastructure steadily increases the cost of doing business and erodes competitiveness to the point of closure for some businesses,” he says. “The knock-on effects of this are significant, especially in a low-growth economy where margins are already under severe strain.”

A recent Small Business Growth Index revealed that more than half of South Africa’s SMEs (55.3%) may not survive the next year without urgent support. Rising expenses are a major factor: transport costs are up by 60.9%, utilities by 56.9%, and raw materials by 52.9%. Much of this price volatility stems from infrastructure inefficiencies – from congested and hazardous roads with potholes and sinkholes, to unreliable water supply, particularly in Gauteng, inflating utility bills and logistics bottlenecks affecting material costs.

Fortunately, the government has acknowledged the magnitude of this issue. In his 2025 budget speech, Finance Minister Enoch Godongwana allocated R1 trillion to public infrastructure spending over the medium term. While indeed a step in the right direction, this allocation is not enough, with a World Bank study estimating that South Africa would need to spend between R4.8 trillion and R6.2 trillion by 2030 to close the infrastructure funding gap. 

According to Naidoo, this shortfall will continue to hit small businesses the hardest. “Inadequate infrastructure limits the ability of SMEs to reach customers, access suppliers and expand into new markets,” he says, adding that businesses operating in rural areas are even more constrained than those within metropolitan hubs.

Digital connectivity, once considered a luxury, has become an absolute necessity. “Limited access to affordable, high-speed internet holds our SMEs back from adopting e-commerce, digital marketing, and cloud-based solutions that could dramatically improve efficiency and competitiveness,” says Naidoo. “This is particularly concerning given how rapidly digital adoption accelerated during and after the pandemic.”

He emphasises that finance alone cannot overcome these barriers. While access to funding is essential for SMEs to grow, it is not sufficient if the enabling environment is lacking. “An entrepreneur can secure a loan to expand operations, but if they are unable to operate on a day-to-day basis due to a lack of basic infrastructure, the return on that investment will be compromised.”

For SMEs to thrive, Naidoo believes they need targeted infrastructure support from financiers. “Beyond providing funding, we must help them build resilience to infrastructure shocks, with financing options tailored to renewable energy, water conservation and harvesting and digital adoption.”

However, he argues that broader systemic change is still required. “Government cannot carry this responsibility alone. Closing the infrastructure gap will require coordinated efforts between the public sector, private investors, and financiers. By working together, we can create an ecosystem that not only funds SMEs but also enables them to grow sustainably.”

There are promising signs. Recently, Transnet has opened up its freight rail network to 11 private operators in a move to boost freight volumes and drive efficiency within South Africa’s logistics sector. The rollout of fibre and mobile broadband is extending digital connectivity to more communities. But progress remains uneven, and SMEs operating in rural or underserved areas often see little of these gains.

Naidoo concludes that prioritising infrastructure development is not just about national competitiveness but about unleashing the power of South Africa’s entrepreneurs. “SMEs represent the backbone of our economy, employing millions of people and contributing significantly to GDP. If we want to see these businesses thrive, create jobs and drive inclusive growth, then ensuring reliable infrastructure is non-negotiable. It is a crucial but missing link in our economic recovery story.”