Sink or Scale: Why the First 2 Years Define Business Survival in South Africa

South Africa is a country of hustlers, innovators, and survivors. Every year, over 400,000 formal businesses are registered through the Companies and Intellectual Property Commission (CIPC). Yet, that number only scratches the surface. In townships, rural villages, informal settlements, and urban corners, countless more entrepreneurs are starting businesses that never appear on a registry. They are hairdressers, kasi-food vendors, spaza shop owners, and backyard mechanics. They are the beating heart of the informal economy.

But whether formal or informal, all new businesses face one undeniable truth: the first two years are everything.

The First Two Years: Make or Break

Globally, and especially in South Africa, around 70% of startups don’t survive beyond 24 months. It’s a harsh statistic, but one that captures the weight of the challenges new business owners face. In these early days, founders are grappling with:

• Underestimated costs and overestimated revenue
• Cash flow problems
• Load shedding and unreliable infrastructure
• Difficulty accessing markets
• High interest rates and limited funding options

Even the most determined entrepreneurs find themselves squeezed between survival and sustainability.

Service-based businesses may break even within 12–18 months, while product-based or retail ventures may take two to three years. Manufacturing and tech ventures can take even longer, often prioritising growth over profit early on. For many, if profit hasn’t started appearing by the two-year mark, the dream begins to unravel.

And here’s another critical truth: if you don’t know the benchmarks for your industry or how to measure performance, you won’t know if you’re on track. Too many entrepreneurs operate in the dark, lacking visibility on margins, sales cycles, burn rates, or client acquisition costs. Understanding where you stand isn’t optional—it’s survival.

The Double Economy: Formal vs Informal

What makes South Africa unique is its dual economy. On one side lies the formal sector: tax-compliant, registered, often bank-financed. On the other is the sprawling informal economy—estimated to contribute over 6% of GDP and support more than 2.5 million people.

Informal traders don’t fail in the conventional sense. Many operate in survival mode: cash-only, no compliance obligations, no scalability. They don’t face creditors or go into liquidation, but they also rarely grow beyond a subsistence level. The lack of formal structure makes them invisible in data, but not in impact.

The Path to Going Formal

For informal businesses ready to grow, formalisation can unlock opportunity:

• Registering a company with CIPC
• Getting a tax number from SARS
• Opening a business bank account
• Joining local incubators or funding networks (e.g., SEDA, NYDA, YES)

Formalising allows businesses to:

• Access government and private-sector funding
• Apply for tenders and contracts
• Build credit and financial history
• Gain legal protection and credibility

Yet, barriers remain. Many business owners lack the knowledge, trust, or resources to navigate the process. Red tape, compliance costs, and fear of taxation deter them. That’s where mentorship, grassroots support, and policy reform come in.

Survive to Thrive

The first 24 months of business test everything: your courage, your cash flow, your grit. It’s the period where late nights meet empty accounts, where small wins keep the dream alive.

But it’s also where the seeds of greatness are planted. South Africa’s business future depends not only on supporting new ventures but on helping them survive that critical first two-year window—whether they’re born in a Sandton boardroom or a backyard in Mamelodi.

With the right tools, knowledge, and support, our entrepreneurs can move from hustle to high-growth. Because the goal at The Glass Castle isn’t just survival. It’s scale.