Improved consumer confidence signals positive season for SMEs – but fundamentals must follow

The latest Business Confidence Index results are a crucial positive signal for the retail and small-to-medium enterprise (SME) sectors, which have operated under challenging economic conditions throughout the year.

South Africa’s consumer confidence improved in the fourth quarter to hit its highest reading for 2025, helped by consumers’ appetite to spend into the holiday season.

SME services provider Lula welcomed the results and stated that the increase in confidence, particularly related to the holiday season, suggests consumers are more likely to draw on disposable income or credit for discretionary spending, offering a vital boost to SME cash flows.

“This rise in consumer confidence is exactly the positive signal South African businesses, and especially our resilient SME sector, needed heading into the festive season,” says Garth Rossiter, chief risk officer at Lula. “When consumers feel more secure about their immediate future and are ready to open their wallets, that directly translates into improved sales and revenue for retailers specifically, and the businesses we support across all sectors more generally.

“For many SMEs, this uplift is critical for ensuring viability and growth into the new year. A confident consumer is massively supportive of economic growth – we are talking about how people feel, and perceptions can be self-fulfilling.

“However, we must ensure this confidence translates into measurable economic growth on the ground,” he adds.

“Confidence is a pre-requisite for growth: If consumers feel the economy is improving, they spend more. That spending drives sales and profits for businesses. In response, these businesses will hire more people and invest more, which both validate the initial consumer belief. This creates a powerful, positive feedback loop.

“While the mood is improving, many of our clients are still battling the cumulative effect of high costs and ongoing cash flow constraints. Our advice to SMEs remains consistent: Treat this season as an opportunity to accelerate cash conversion cycles and proactively manage your credit health.

Rossiter concludes: “Resilience alone is not enough; we need positive macro indicators, like this consumer confidence reading, to be supported by the fundamental reforms that lower operating costs and ensure reliable infrastructure, allowing our most valuable job creators to truly thrive.”

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