Ben Bierman, Chief Financial Officer at Business Partners Limited (BUSINESS/PARTNERS) says that the 2016 Budget Speech is also significant as the Finance Minister delivering the speech, Pravin Gordhan, is the same man who was brought in to fix what shook business owners to their core – the sudden removal of former Finance Minister, Nhlanhla Nene.
He adds that the uncertainty around this decision was evident among business owners, with the fourth quarter 2015 Business Partners Limited SME Index clearly revealing that average confidence levels had plummeted to 51% which is beyond the usual fluctuations. “Usually business owners’ confidence levels regarding the environment fluctuates, while their core belief in their own abilities to grow remains more or less optimistic. The latest survey shows for the first time that confidence in their own prospects had also been affected.”
Bierman attributes their bruised morale to the removal of Minister Nene, along with a year of load shedding, the worst drought in decades, the weakening rand and the global economic downturn. The question on many business owners’ minds is whether Minister Gordhan will provide the appropriate direction for business, labour and government to unify behind a plan to ensure the much needed relief when he makes his annual Budget speech.
Bierman believes that he can do so, albeit within the 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.”
He says if the recent State of the Nation Address by the President is anything to go by, Government is aware that a huge layer of bureaucracy is stifling entrepreneurship. “This 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.”
He adds: “A coordinated effort, perhaps led by the Small Business Ministry, is needed between the different spheres and departments of Government in order to prevent further proliferation of red tape.” For this, 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.
Expecting an announcement of further tax breaks for small business owners in the upcoming Budget Speech may be a little too optimistic, in light of the growing deficit facing the country, 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, and should the Government believe that it is unable to concede more, it can help simply help by softening its stance on issuing tax clearance certificates.”
He explains that 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 often don’t have the cash to bridge the gap. “The South African Revenue Services (SARS) only issues tax clearance certificates provided 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.
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 weak rand presents a major opportunity to boost the tourism sector, and many small businesses directly and indirectly linked to this sector are sure to benefit.”
Bierman also hopes the Budget Speech will set the tone for a collaborative year between labour, big business and small business. “While the Budget Speech discusses 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 to the extent of strain on the 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.”
Lastly, Bierman says that 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.