It is significant that the man who will be making the speech, Finance Minister Pravin Gordhan, is the one who was brought in to fix a crisis that shook business owners to their very core. So traumatic was the sudden sacking of the former finance minister Nhlanhla Nene late last year that the Business Partners Limited SME Index showed business owners’ confidence levels plummeted beyond the usual fluctuations.
“Usually business owners’ confidence about their environment fluctuates while their core belief in their own abilities to survive remains more or less optimistic. The fourth quarter 2015 Business Partners Limited SME Index shows for the first time that their confidence in themselves has also been effected,” says Ben Bierman, chief financial officer at Business Partners Limited (BUSINESS/PARTNERS).
Bierman ascribes their bruised morale to the sacking of Minister Nene, coming after a year of load shedding, the worst drought in living memory, a plummeting rand and the global slump.
Can Minister Gordhan be the rainmaker that South African business owners will be hoping for when he makes his annual Budget speech?
Bierman believes that he can, albeit within confines of a very tight budget and severely depleted state resources. Fortunately, one of the most important measures that government can take to boost small business and entrepreneurship – the cutting of bureaucratic red tape – does not entail significant government spending.
Bierman says if the recent State of the Nation address by President Zuma is anything to go by, government is aware that a “huge layer of bureaucracy is stifling entrepreneurship. It is a perennial problem that must be addressed to make small business grow faster.
“Our plea to government is to look at slashing red tape, and to make sure that the remaining compliance rules that are truly necessary are implemented efficiently, effectively and with quick turnaround times.”
A coordinated effort, perhaps led by the small business development ministry, is needed between the different spheres of government and between government departments to prevent further proliferation of red tape. Bierman suggests a routine small business impact assessment process to test any new legislation and regulation for its unintended consequences and compliance burden on owner-managed businesses, much like an environmental impact assessment is mandatory for any big development.
The announcement of a further tax break for small business owners in the upcoming Budget speech is probably too much to hope for when the Government is trying to plug a growing deficit, says Bierman.
The main tax concessions for business owners, namely Small Companies Tax, Turnover Tax and the exemption on registering for Value-Added Tax, are likely to remain. Any increase in the levels of these concessions will boost entrepreneurial growth, but even if the Government feels it is unable to concede more, it can help by softening its stance on issuing tax clearance certificates.
Small businesses are often behind on their VAT payments because they are required to pay VAT when they invoice, not when they get paid, and they don’t have the cash to bridge the gap. The South African Revenue Services (SARS) strictly refuses to issue tax clearance certificates unless payments are fully up to date. A new regime, in which SARS could issue letters of good standing based on a business’s longer-term tax compliance rather than its up-to-the-minute status would go a long way to ease the burden, says Bierman.
The weak rand presents a major opportunity to boost the tourism sector. Sentiments expressed in the State of the Nation Address bode well for further measures to be outlined in the Budget speech to entice foreign visitors to bring much needed foreign exchange into the country. The many small businesses directly and indirectly linked to this sector are sure to benefit.
Although the Budget speech is all about the finances of the country and government spending, it is an important platform from which to send signals that could soften the industrial relations battles in the coming year. Wage demands will have to be tempered by a realistic assessment of the straining economy. Big business will have to stop using the bargaining council system to erect barriers to entry into their industries against small businesses who can’t afford the high minimum wages. Hopefully Minister Gordhan will be able to send a powerful message that could set the tone for a collaborative year between labour, big business and small business, says Bierman.
Despite the constraints on the budget, he believes that there is a strong argument to be made for setting aside some money that could be used as an emergency fund for deserving small businesses who will otherwise fail in the difficult year ahead.
Like a drought-relief fund for farmers, it won’t bring the rain, but it will at least ensure that there are enough businesses around to plough the land when the weather turns.