21 October 2020: While President Ramaphosa’s Economic Reconstruction and Recovery Plan provides an important framework for South Africa’s revitalisation and growth trajectory, it lacks necessary detail in terms of initiatives to support the small and medium-sized enterprises (SMEs) that will serve as the engine of growth for this economic recovery.
This is the opinion of Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who hopes to get greater clarity on some of these initiatives in the upcoming Medium-term Budget Policy Statement (MTBPS).
“Considering that SMEs currently represent more than 60 percent of the country’s businesses and are responsible for a quarter of private sector job growth, the implementation of practical steps to support this sector will prove key to realising the economic recovery that South Africa so desperately needs. Now, more than ever, we need a supplementary budget that prioritises the needs of SMEs.”
First on Lang’s SME agenda is to ensure energy security. “Energy security – particularly that of electricity supply— remains central to economic development in South Africa. This means that no recovery plan will succeed without a long-term solution to Eskom’s load shedding; and in the absence a solution, we propose the provision of subsidies for SMEs to buy generators.”
Lang’s second wish is around the provision of finance and technical assistance to SMEs. “We need to compile a database of business owners that did not qualify for or receive finance from the various COVID-19 Relief Fund, and alternative finance and technical assistance should be made available to viable businesses in this grouping. In addition, further funding is now also required by SMEs to replenish working capital requirements utilised to cover overheads during the various levels of lockdown.
“BUSINESS/PARTNERS has first-hand experience of how technical assistance programmes can aid small businesses,” he notes. “By making funds available in this area, businesses are able to obtain technical support in implementing anything from a proper accounting package, marketing plan, and new production method or a turnaround solution.”
On the topic of infrastructure spend and roll-out plans, Lang believes there is a need for purposeful initiatives to subcontract to SMEs. “Considering that these contracts will take some time to trickle down through the principal contractors to the SME sector, we hope to see plans for how the subcontracting process will work and protected from unfair practice and corruption.”
While in agreement with the proposed tax holidays, Lang hopes to see a special dispensation for SMEs in the Government’s employment tax incentive scheme. “There is also the question of whether South Africa can afford to keep the basic income rules for SMEs, given the current state of the economy. There might be a need for all affected parties including labour to enter into negotiations to find an interim solution,” he adds.
Lastly, but definitely not least, Lang raises the age-old SME gripe of late payments – especially from the public sector. “The fact remains that some of the biggest challenges threatening the survival of local SMEs are caused by bureaucracy, and the main one is the continued delay in payments to SMEs. As such, we hope to see Government – once and for all – implement measures to ensure the effective processing of payments to SMEs,” he concludes.