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 Budget Speech commentary by Business Partners Limited – Ben Bierman

 

 The sentiment and tone of Minister of Finance, Pravin Gordhan’s 2016 Budget Speech provides the necessary direction that South African businesses required. This is according to Ben Bierman, CFO of Business Partners Limited, commenting on the 2016 Budget Speech, delivered on 24 February 2016.

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The Finance Minister has set a tone of amplified prudent financial management by government in lowering the ceiling of expenditure. The fiscal prudence will result in a decrease in the fiscal deficit from 3.9% in 2016 to 2.4% in 2019. This represents an extraordinary effort, and might just be enough fiscal consolidation to avoid a ratings downgrade.” 

 
He adds: “There was a strong narrative in the 2016 Budget Speech implying for closer engagement and partnership between Government, business and civil society. This was clearly illustrated in the Minister’s views on the restructuring of and potential co-investing in some state-owned entities. This higher degree of economic engagement can only be positive for investment and growth in the country over the medium term.”

 
Bierman highlights the following key elements from the speech which have the potential to assist with the growth and development of small and medium enterprises (SMEs):

 
Infrastructure spend: “The allocation of R870 billion to the public sector infrastructure programme over the next three years, which includes energy, transport and logistics, residential services, health and education projects, is significant. This type of infrastructure spend has the potential to stimulate growth in the country. It also appears that the budget allocation to ensure electricity supply, combined with the inclusion of Coal and Gas power projects as part of the Independent Power Producers programme, will remove the scourge of intermittent electricity supply from the South African economy and present business opportunities for innovative SMEs.”

 

 
Some relief for small businesses: “The tax amendments highlighted in the 2016 budget show some relief for the SME sector in the adjustment to the Income tax for Small Business Corporations. While it’s disappointing to note that that the Turnover Tax for Micro Businesses was not adjusted, the relief provided for individual taxpayers, and the unchanged marginal tax rate, will however ensure that consumer spend, in the context of rising interest rates and inflation, is not too negatively affected. 

 

 
Business support and empowerment: Minister Gordhan announced that R475 million has been reprioritised to the Department of Small Business Development for assistance to small and medium enterprises and cooperatives. “This is a significant allocation and exactly what the sector was calling for ahead of the budget – support and empowerment of small business in South Africa. We do however hope that the Small Business Development Ministry will in its Budget Vote clarify how this allocation will be applied to either provide financing support or assistance to small business in other initiatives.” He adds that mention in the speech of the Land Bank’s concessionary loan facility to assist farmers in recovering from the impact of the current drought conditions is also a welcomed initiative.

 

 

 
Steps to reduce the regulatory burden for business investors are in progress. These include the establishment of Invest South Africa as a partnership with the private sector and concerted efforts by our largest cities to reduce the administrative costs of starting businesses. A review of business incentives has been initiated, to strengthen their impact on growth, productivity, competitiveness, trade and competitiveness.

 
“The inclusion of this statement in the Budget Speech signifies that Government is aware of the constraints that some regulations bring to small businesses and entrepreneurs. This allocation of resources will ease the burden for small businesses, and the announcement of the roll-out of Small business desks by the SARS to facilitate the single registration process is welcomed,” says Bierman. 


 

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