South African small and medium enterprises (SMEs) have entered the local government election period with clear expectations around the conditions needed to operate, invest and grow.
Municipal service delivery, good governance and the effective management of illegal immigration have emerged as leading concerns influencing how SME owners intend to vote in the upcoming local government elections.
This is according to the latest SME Confidence Index by Business Partners Limited, which reveals that 70,4% of business owners surveyed have already decided which political party or candidate they intend to vote for. A further 17,6% remain undecided, while 6,6% said they do not intend to vote and 5,3% preferred not to answer.
“These latest survey findings are significant as they confirm that the vast majority of SMEs are highly engaged and intend to vote in the upcoming elections, with more than two-thirds having already made up their minds on their preferred candidate,” says Jeremy Lang, MD of Business Partners Limited. “This means political parties have relatively little room to shift SME sentiment, with only 17,6% of business owners still undecided and potentially open to changing their vote.”
Enforcement and fair competition under scrutiny
When asked to rank eight factors according to their influence on voting decisions, respondents placed safer towns and cities, support for SMEs, investment and job creation, and reliable water supply among the more influential considerations. The effective management of illegal immigration also featured prominently as a consideration, alongside road infrastructure, electricity supply, honest leadership and municipal service delivery.
“These findings suggest that SMEs do not view immigration management in isolation, but as part of their broader expectations around effective governance, regulatory enforcement and a level playing field for business,” says Lang.
Almost eight in 10 respondents (78,7%) agreed that insufficient enforcement of immigration and labour laws is creating unfair competition for South African SMEs, with 55,4% strongly agreeing and 23,4% somewhat agreeing.
“For SMEs operating in a challenging economic environment, compliance comes at a cost. Business owners are therefore understandably concerned when they perceive that businesses operating outside regulatory requirements may have an advantage over those that comply,” says Lang. “The findings point to a need for greater consistency in enforcement to support a fair and sustainable operating environment.”
This concern is also reflected in SMEs’ perceptions of undocumented employment. Almost two-thirds (65%) believe that the employment of undocumented foreign nationals is common within their industries, with 43.1% describing it as very common and 21,9% as somewhat common.
The issue has also had a direct operational impact for some businesses. While 51,2% of SMEs said recent marches and protests relating to illegal immigration had not affected their businesses, 42,2% reported that they had been impacted either significantly or to some extent.
Business confidence remains resilient
Against this backdrop, the Q2 2026 Index presents a mixed but broadly resilient picture of SME confidence. Confidence that businesses will grow over the next 12 months increased by 6 percentage points quarter-on-quarter to 83%, which is 2 percentage points higher than in Q2 2025.
Although SME owners remain optimistic about future growth, the recent fuel price increase is likely to increase operational costs across the value chain, creating additional headwinds that could dampen confidence in the months ahead.
Confidence in finding employees with the right skills and experience also improved, rising by 2 percentage points quarter-on-quarter and 3 percentage points year-on-year to 74%.
However, SMEs remain more cautious about the broader operating environment. Confidence that the South African economy will be conducive to business growth remained unchanged quarter-on-quarter at 63% but was 3 percentage points lower than a year ago.
Access to finance remains a particular concern. Confidence that access to business finance will improve over the next 12 months fell by 1 percentage point quarter-on-quarter to 62%, and was 5 percentage points lower year-on-year – the largest decline among the confidence indicators.
“SMEs continue to demonstrate confidence in their own ability to grow, even while expressing more cautious views about the broader economic environment and access to finance,” says Lang. “This resilience is important, but the findings also highlight the conditions businesses believe are necessary to translate growth ambitions into sustainable growth.”
The foundations of growth remain important
Cash flow, economic conditions and funding remain the three leading challenges experienced by SMEs. Given these ongoing economic and operational pressures including the persistently high fuel prices, businesses continue to place strong importance on the practical resources and support mechanisms that underpin their sustainability.
Access to finance remained highly valued at 85%, unchanged year-on-year and up 1 percentage point from the previous quarter. The importance of SME-specific information, resources and support increased by 2 percentage points both quarter-on-quarter and year-on-year to 86%, while mentorship remained highly valued at 84%, despite a 1 percentage point decline both quarter-on-quarter and year-on-year.
“The consistency of these priorities shows that the fundamentals of SME growth hold true,” Lang says. “With local government elections officially underway and campaigning intensifying ahead of the 4 November vote, SMEs are signalling that they want more than promises. They want an operating environment that is stable, fair and conducive for business growth and success,” he concludes.