SMME stands for small, medium and micro enterprise. In South Africa the National Small Enterprise Act (Act 102 of 1996) is the law that sorts a business into one of those three classes, using the sector it operates in, the number of full-time equivalent paid employees and its annual turnover. Last updated: October 2026.
The rules for those size limits changed in 2026, so this guide explains what an SME is, what counts as small, medium and micro today, and what to check before you tell a funder or a government programme which class you fall into.
What does SMME mean?
An SME is a small or medium enterprise. An SMME adds the word “micro” and so names all three classes. In everyday South African business talk the two terms are used for the same group of businesses, and the Act itself deals with micro, small and medium enterprises together.
The Act describes these businesses as separate and distinct business entities, including their branches or subsidiaries, co-operatives and similar bodies, managed by one owner or more and carried on in a sector of the economy. A business is not an SME because it feels small. It is an SME when it fits the size limits that apply to its sector.
The three classes: micro, small and medium
- Micro enterprise: the smallest class. Many micro enterprises are owner-run, have very few employees and a small turnover, and a large share of them are informal.
- Small enterprise: a step up, with more staff and a larger turnover, usually with some management structure and often a registered company.
- Medium enterprise: the largest class, with the most employees and the highest turnover, still below the size where a business counts as a large enterprise.
Which class a business belongs to is not decided by one number. It depends on the sector (retail, construction, manufacturing, agriculture and so on), on full-time equivalent paid employees, and on annual turnover. A turnover that makes a retailer medium can make a mining or manufacturing business small, which is why one national figure for “an SME” is misleading.
What changed in 2026
The National Small Enterprise Amendment Act (Act 21 of 2024) removed the size table that used to sit inside the Act and gave the Minister of Small Business Development the power to set the criteria by regulation instead, so they can be reviewed for inflation and changes in the economy. You can read the amending law on gov.za. The section that repeals the old schedule came into effect in May 2026 through Proclamation 314 in Government Gazette 54750, as recorded by Acts Online.
The Department of Small Business Development published draft regulations in Government Gazette 53348 on 15 September 2025. The draft sets sector-by-sector limits for full-time equivalent employees and annual turnover, lined up with the standard industrial classification codes, and public comment closed in October 2025.
We have not found the final regulations in the Government Gazette, so we are not repeating any threshold here. Treat any figure for “a typical small or medium business” that you see online as a rule of thumb from the earlier schedule, not as the current test. The Department of Small Business Development publishes the current notices on dsbd.gov.za, and that is the place to confirm the limits for your sector before you rely on them.
Why your classification matters
- Support programmes: agencies such as Seda and Sefa, and many corporate supplier-development programmes, ask whether you are a micro, small or medium business, and apply their own rules on top.
- Funding applications: lenders and funders usually ask for your turnover and number of employees. Have both ready, backed by financial statements, before you apply. Our guide to funding options for small businesses shows what each type of funder asks for.
- Reporting: government and Statistics South Africa use the classes to count and track small businesses, which is part of why the criteria are being updated.
Keep this separate from B-BBEE. A B-BBEE “exempted micro-enterprise” or “qualifying small enterprise” is a different test, set under the B-BBEE codes of good practice, with its own turnover limits. Being an SME under the National Small Enterprise Act does not automatically give you a B-BBEE status.
What an SME needs to run legally in South Africa
1. Register the business
A formal business is registered with the Companies and Intellectual Property Commission (CIPC). Registration gives the business a legal identity and a registration number. You reserve a name, give the details of the directors and register the company. Our guide to registering a small business in South Africa walks through the steps. Check the current fees on the CIPC site, because they are revised from time to time.
2. Register for tax
A registered company must also be registered with the South African Revenue Service (SARS) for income tax, and for VAT, PAYE and UIF where they apply. Once the CIPC registers your company, SARS can generate its income tax reference number, but you still have to keep your returns up to date. A tax practitioner can help you stay compliant.
3. Follow the employment rules
Once you hire people, you need written employment contracts, at least the national minimum wage, and the rules on working hours, overtime and leave. You must also keep a safe workplace under the Occupational Health and Safety Act.
4. Other laws that apply
Depending on what you do, you will also meet the Protection of Personal Information Act (POPIA), consumer protection rules, intellectual property rules and environmental regulations. These apply to small businesses as much as to large ones.
Frequently asked questions
Is there a difference between an SME and an SMME?
Only the word “micro”. An SMME names micro, small and medium enterprises. In South African business use, people treat the two terms as meaning the same thing.
What is a micro enterprise?
It is the smallest class under the Act: a business with very few employees and a low turnover for its sector. Many street traders, spaza shops and one-person service businesses are micro enterprises.
How do I prove which class my business falls into?
Funders and programmes usually ask for your annual turnover and your number of employees, backed by financial statements, payroll records or the tax returns you submitted to SARS. Keep these up to date, and check the limits for your sector on the Department of Small Business Development’s website.
Does being an SME mean I qualify for government support?
Not automatically. Each programme sets its own requirements, such as your sector, location, ownership and how long you have been trading. The class is usually only the first question.
If you want to compare funding that suits a business of your size, start with our guide to funding options for small businesses.
