While not all the wishes of business owners made it into the Budget, there is no doubt that small and medium enterprises (SMEs) are seen as a key stimulus to pull the economy out of the doldrums. Any action taken along the path of economic recovery will be taken up and cheered on by SMEs, says Siphethe.
First among the wishes of SMEs for the action towards recovery is stability of resources. No amount of incentive schemes, tax breaks and development funding for SMEs announced in any Budget can make up for the damage caused by the uncertainty of the supply of basic resources such as electricity.
The emphasis placed in the latest Budget to shore up the country’s electricity supply makes it therefore a pro-SME Budget. For SMEs, the clearest indicator that it can be matched by appropriate action will be whether further load shedding can be stemmed.
The agencies and teams tasked to rescue South Africa’s electricity supply will find eager partners in the South African SME sector. SMEs are good at turning crises into opportunities, says Siphethe, and government will find no shortage of SMEs willing to take up ideas for alternative power supply.
Similarly, there is excitement among SMEs in the education sector about stated plans to solve the education crisis. They will be on the forefront of any effort to turn these plans into action.
Also in the tourism sector the wish of many job-creating SMEs is for real action to rid South Africa of the last vestiges of the disastrous visa regime that held back the industry.
Although the Department of Small Business Development did not receive much in the way of increased funding in this year’s Budget, it can play a key role in advocating for the participation of SMEs in the public-private growth initiative announced by The Presidency earlier this year, says Siphethe. Small and medium businesses, which do not have the resources to send representatives to forums where government and business meet, need a champion to fight for participation in such initiatives. The Department of Small Business Development is ideally placed to play such a role, not for the sake of small and medium businesses, but for the added economic stimulus that SME participation brings.
The renewable-energy sector, the manufacturing industry and mining stand to benefit if SMEs can be drawn into the planned public-private growth initiatives.
Siphethe believes that the Department of Small Business Development will put its limited resources to good effect if it were to emphasize the provision of technical assistance to SME business owners. In the experience of BUSINESS/PARTNERS, which administers such a programme, technical assistance makes a huge difference in the survival rate of small businesses.
The idea is to make funds available to businesses that need technical support in implementing anything from a proper accounting package, a marketing plan or a new production method.
The Department of Small Business Development will also find good return on investment of its limited resources into a revived export-support programme to help South Africa’s SME business owners capitalise on the faster growth taking place in countries to the north.
In general, the effectiveness of government support for SMEs will increase as coordination between the various departments in the economic cluster improves, including the Department of Economic Development, Trade and Industry and Small Business Development, and their network of agencies such as the Industrial Development Corporation and the Small Enterprise Finance Agency, says Siphethe.
High on the wish list for any SME doing business with government, whether in the economic cluster or not, is the timely payment of invoices. Without it, government’s attempts to stimulate SMEs through preferential procurement will come to very little.
While there were no additional tax breaks for SMEs in this year’s Budget, there were no increases either, which remains an important and perpetual item on an SME wish list.
It has been a while since the thresholds for certain SME tax breaks have been adjusted, including the R1m turnover threshold for registering as a VAT vendor, the R20m turnover level for qualifying for the Small Business Corporation tax breaks and the R1m turnover cut-off for paying a simplified turnover tax.
A future increase in all of these thresholds will have a stimulating impact on SMEs, says Siphethe. But for now, by far the most important stimulus for South Africa’s SMEs will the putting the plans for economic growth into real action.