Government Interventions and Legislative Changes That Impacted SMEs this Year #BestofSMESA2018

Updated on 20 December 2018

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In 2018 SMEs were again at the centre of the governments efforts to boost the economy and create jobs, and were a major point of focus in President Cyril Ramaphosa’s economic recovery plan announced this year.

The stimulus package includes a new Mining Charter, major changes to visa requirements to boost the tourism sector, the development of industrial parks and township businesses.

Small businesses were also the focus of some legislative and regulatory changes, this year Europe’s GDPR came into the spotlight, with requirements for how personal data is handled and stored by companies.

We also saw some effort from the government to bring greater clarity to the regulation of cryptocurrency in the country. In April this year the Reserve Bank announced a task team to assist the Sarb with appropriate policy framework for the possible regulation of cryptocurrencies and fintech innovations.

There has also been major changes to labour laws and we can expect to see a number of amendments to the country’s core labour law acts – the Basic Conditions of Employment Act and the Unemployment Insurance Act – over the next couple of years.

Let’s run through a few of the most important government initiatives and legislative changes:

Budget 2018

Business Partners, the SME lender, shared some of the highlights from this year’s budget, they include:

Government’s commitment to the Preferential Procurement Regulations. This regulation will ensure that SMEs are able to participate fairly in the public procurement process, which will in turn promote black economic empowerment, industrialisation and allow SMEs to create more job opportunities.

“It is also key to note that a directive will be issued next week to all government departments and public institutions, instructing them to pay suppliers on time or be charged with financial misconduct. This is crucial to the survival of small businesses as late payment has a direct impact on the cash flow of an enterprise and the speed of its cash conversion cycle, which ultimately impacts its overall profitability.

“While this Government decision is nothing new, the threat of being charged with financial misconduct is a welcome addition.”

Another positive opportunity for SMEs was the announcement of R100 billion Black Business Growth Fund to be created as a result of the finalisation of the revised Financial Sector Codes. This could have a significant impact on black businesses growth as the initiative is expected to dramatically improve access to funding for black owned businesses who previously may have had difficulty to obtain this kind of funding.

It was also announced the approval of six Special Economic Zones set to benefit from additional tax incentives including a reduced corporate tax rate for qualifying firms.

This overall policy is driven by the Department of Trade and Industry and seeks to encourage investment in the manufacturing and tradable services sectors, and, as such, will provide opportunities for SMEs to tap into by either supplying infrastructure or material in these zones.

Under the YES programme, businesses will create one-year paid positions for youth aged between 18 and 35.

YES

Youth Employment Service (YES) is a government-led programme that aims to offer one million unemployed youth an opportunity at a work experience launched in March this year. The YES programme is an initiative between business, government, labour, civil society and young people.

South African President Cyril Ramaphosa said that the YES initiative would improve young people’s prospects of finding employment and would help to build a more inclusive and sustainable economy.

Under the programme, businesses will create one-year paid positions for youth aged between 18 and 35, with a minimum paid stipend of R3,500 a month.

Those businesses which do not have the capacity to place more people in their organisations have the option of sponsoring the salary for a one-year placement in small and medium enterprises or to help young people start and grow their own businesses through seed funding.

InvestSA One Stop Shop

The South African government earlier this year announced that it was set to launch a provincial InvestSA One Stop Shop (OSS) in Gauteng in a bid to attract investment in the province, the Department of Trade and Industry (the dti) said.

The dti said that the objective of the provincial InvestSA OSS is to provide professional service to all investors through specialist advisory, reduce regulatory inefficiencies, and reduce red tape for investors looking to invest in Gauteng.

The Gauteng InvestSA OSS will be launched by the dti Minister Dr. Rob Davies, together with Gauteng Premier David Makhura on Tuesday in Sandton.

The InvestSA OSS is a Presidential programme to promote and facilitate investment in South Africa. Read more here

The Jobs Summit

In an effort to tackle the surging levels of unemployment in the country President Cyril Ramaphosa launched the Jobs Summit in October this year.

The summit brought together government, business, labour and community organisations to discuss interventions to drive job creation, job retention and economic growth and provided a platform for open discussion on the challenges faced by each social partner in the creation of jobs.

Announcing the summit during his 2018 State of the Nation Address, President Cyril Ramaphosa highlighted that jobs, especially for the youth, will were at the centre of the 2018 national agenda.

Speaking at the inaugural Jobs Summit where he was delivering the keynote address President Cyril Ramaphosa urged companies doing business in South Africa, government entities and the general populace to prioritize purchasing locally manufactured goods and products in a bid to create and save jobs.

The Investment Conference seeks to market South Africa as having compelling investment opportunities for multinational corporation.

South Africa Investment Conference 2018

President Cyril Ramaphosa led the South African government to the inaugural South Africa Investment Conference which is a key milestone in the country’s bold ambition to raise at least U.S.$100 billion in new domestic and intentional investment over the next five years.

The purpose of the Investment Conference was to market South Africa as having compelling investment opportunities for multinational corporations in the manufacturing, mining, tourism, finance, and agro-processing sectors.

This is all part of the government’s interventions geared at boosting economic growth and creating much-needed jobs as the unemployment rate has recently pushed above 27 per cent. Read more here

Legislative changes

National Minimum Wage Bill

Parliament’s Select Committee on Economic and Business Development recently passed a series of Labour Bills which will affect a broad range of labour issues including minimum wage, parental leave, disputes and strike action.

The national minimum wage is increased as follows: R3,900 per month for full-time workers (who work 45 hours per week); or R3,500 per month for full-time workers (who work 40 hours per week); or R800 per week; or  R20 per hour.

This bill also introduces different hourly wage rates for agricultural workers (R18 per hour) and domestic workers (R15 per hour).
The bill creates and establishes a National Minimum Wage Commission who will be responsible for annually reviewing the national minimum wage.

This bill also proposes to make various changes to the Labour Relations Act 66 of 1995. These changes mainly concern collective bargaining; and seeks to amend the Basic Conditions of Employment Act 75 of 1997. The bill creates parental leave, adoption leave and commissioning parental leave to employees. Read more here

Unemployment Insurance Benefits

Parliament has amended the Unemployment Insurance Act to increase benefit values, simplify their administration, and clarify that foreign national employees and learners employed on a learnership agreement are eligible to claim benefits. It also amended the Unemployment Insurance Contributions Act to make it compulsory for foreign national employees and people on a learnership to contribute to the Unemployment Insurance Fund (UIF)—which makes sense since you need to contribute to an insurance fund to benefit from it.

The changes to the Contributions Act took effect from March 2018, but there is not yet a concrete date for the changes to the benefits offered under terms of the Unemployment Insurance Act. Until the legislation is synchronised, the Fund promises to honour benefit claims from the affected employees.

GDPR

The year 2018 is officially the year of privacy: The EU’s General Data Protection Regulation (GDPR) officially come into force on 25 May, followed by its local cousin, POPIA in the second or third quarter of the year.

Both GDPR and POPIA are set to dramatically change the way South African organisations do business – especially how personal data is handled and stored.

GDPR has a far-reaching impact on global communication, and the way countries outside of this regulation do business. Businesses that do not have stringent data management processes in place, and cannot illustrate that you obtained your data with the consent of your audience, you could face severe penalties or lose international business.

In countries like South Africa, where there are not comprehensive privacy laws (yet), local businesses are being forced to conclude contracts in which they undertake to follow the GDPR. They are also often forced to demonstrate that they are compliant. If they cannot do this, the contract will be awarded to someone else. This type of commercial force has been the true sting in the GDPR’s tail for SA companies. Read more here

Normal Tax Rules Apply to Cryptocurrencies – SARS

The South African Revenue Service (SARS) will continue to apply “normal income tax rules” to cryptocurrencies such as bitcoin and has urged taxpayers to declare cryptocurrency gains or losses as part of their taxable income, Moneyweb reported.

“The growing popularity of cryptocurrencies such as bitcoin and ethereum and the rollercoaster ride some of these have experienced over the past year, have increasingly resulted in questions about their tax treatment in the local context,” said Moneyweb.

In a statement released by SARS said it was in discussions with several top technology companies globally to enable it to track cryptocurrency trades more efficiently.

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