Hope is what will allow South Africa's community of business owners to leave the horrors of 2020 behind them and start afresh. It is a key ingredient to unleashing the innate energy of entrepreneurs, which in turn will spur the country significantly forward on the path to economic recovery.
However, the Minister of Finance will have to announce a number of concrete, credible measures in his upcoming Budget speech if he is to stir hope in an exhausted and wary SME sector.
At the top of business owners' wishlist for the Budget this year, says David, are measures to combat the worst levels of unemployment ever in South Africa. Third-quarter figures show a staggering loss of 2.2 million jobs, pushing the unemployment rate to 31 percent. The previous record was a loss of about 500 000 jobs in 2009 in the aftermath of the 2008 financial crisis.
As employers, business owners are at the centre of this national crisis and its solution. One possible measure is a bold tax incentive for businesses to re-employ those whom they have had to retrench, and to employ more workers. The current youth-employment tax incentive can be expanded to include all workers and strengthened by increasing its benefits.
Another tax break that business owners would like to see in the Budget is a reduction in corporate income tax, although it is unlikely given the government's fiscal constraints, says David. Perhaps more doable and suited to the current crisis is the zero-rating of health equipment and services, especially of any private medical services that can help to speed up the vaccination drive.
Another sensible measure would be to postpone the expiry of an important tax rebate for funds that invest in small and medium enterprises (SMEs). The rebate, encoded in Section 12j of the income tax act, is set to expire in June. Given the important of SMEs in the recovery of South Africa's economy, the incentive is more important than ever.
Second only to the pandemic is business owners' concerns around energy supply. Load shedding is disruptive to any business operation, and massively so in sectors with high machine start-up costs and refrigeration. Business owners will be looking carefully in the Budget for any concrete measures that can secure South Africa's electricity supply. It will have a direct impact on the expansion decisions of many businesses. Shorter term measures that can give business owners hope when it comes to energy supply include rebates on the use of alternative energy sources such as generators and solar systems. And any measures that will allow businesses to become generators and sellers of electricity will find no shortage of willing participants.
Announcements on new infrastructure in the Budget will pique the interest of business owners on two fronts. First, it can usher in a new era of investment-led growth in the economy, and, if done smartly, can unleash billions of Rands in private capital into our investment starved economy.
Second, carefully chosen infrastructure projects will benefit thousands of businesses way beyond the construction phase. The rehabilitation of the urban rail network, for example, will make it easier and cheaper for workers to commute, removing a major headache for business owners and another stumbling block in the way of employment. New and upgraded roads and railway lines can open markets and ease the flow of goods and services for generations. Similarly, the speedy roll-out of the latest generation broadband will facilitate business communication, IT innovation and allow businesses to keep abreast of their international peers.
If ever there was a time to put the easing of the compliance burden on small businesses into action, it is now. Study after study has shown that the cost of compliance is significantly higher for small businesses than for large companies. Blanket exemptions from onerous red tape for businesses under a certain size will help them to focus on survival and recovery. And the announcement of any improvements to make state licensing and registration processes easier will be welcomed by all businesses.
At present, South African trade with the rest of the world is overshadowed by travel restrictions due to the COVID-19 pandemic. But any strengthening of trade deals with other countries will give hope to business owners that new markets are waiting to be explored as soon as the pandemic is under control or over. Concrete measures to bring the African Continental Free Trade Area closer to reality can help spur expansion plans and clear up uncertainty around the position of economic migrants.
Finally, like all South Africans and investors in South Africa, business owners want certainty about the broad direction of the economy, says David. Is the government ready with plans to reign in the frightening levels of public debt? Can it consolidate a critical mass of South Africa around a path back to economic growth? Is it committed enough to its recovery plans that it won't be swayed by short-term distractions? If the Budget can persuade business owners, it means the first step towards recovery will have been taken.