Although few owner-managers would be able to pin-point the immediate and direct impact on their businesses were South Africa to lose its investment grade rating, such a loss might well feel to many of them like a psychological gut punch after several years of difficult business conditions.
Being more invested in their own businesses than in the JSE, business owners might be shielded from the first direct impact of a ratings downgrade, but the overall economic gloom that would follow such an announcement by Moody’s at the end of March would do nothing improve their prospects. A subsequent fall in the rand would hurt many.
Downgrade or not, on a much more immediate level South African business owners will be listening out for additional signs of commitment from the government to improve conditions for running a business.
Foremost among these by far is the electricity supply. Load-shedding is causing real damage to production schedules, productivity, profitability and survivability. It is safe to say that right at the top of virtually every small business owner’s Budget wish list is the tackling of load shedding on the scale and urgency of a national emergency, including providing subsidies for small businesses to buy generators.
The measures to end load shedding as announced by President Cyril Ramaphosa in his recent State of the Nation Address (SONA) are promising, but are medium to long term or only pertain to large businesses, such as the lifting of restrictions on businesses for generating their own power. Small and medium business owners will want to hear concrete plans with clear timelines and interim relief.
Thousands of business owners will also listen attentively for any plans to take control of the many collapsing municipalities. Unlike large businesses, that to a certain extent can build enclaves to shield themselves from the crumbling infrastructure, small businesses have to grapple directly with failing municipal services and administrative collapse.
The unreliable metropolitan commuter rail services has hit thousands of small businesses and their employees hard. Business owners want to see commitment in the Budget to fixing Prasa.
Many business owners in construction and related industries will take a keen interest in any signs of the roll-out of the long-awaited government infrastructure spend, although they know that contracts will take a while to trickle down through the principal contractors to the level of small and medium businesses.
President Ramaphosa mentioned in his SONA that South Africa’s ratio between expenditure and income is unsustainable and that the Budget would contain steps to rebalance it, raising the specter of higher taxes. The fervent wish of business owners is that the Budget would slash expenses rather than raise taxes.
For many years, the threshold for VAT registration has been an annual turnover of R1 million. As soon as a business hits sales of about R80 000 per month, they are obliged to add VAT to their prices and administer its collection for the tax man. Raising the VAT exemption threshold to at least R2m will be an excellent way for the government to support smaller businesses in difficult circumstances.