SME experts weigh in on Budget 2016

Posted on February 26th, 2016
Funding
SME experts weigh in on Budget 2016
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The general reaction to Minister of Finance, Pravin Gordhan’s 2016 Budget Speech has been positive and it has been lauded by economists.

The minister placed heavy emphasis on the need to foster economic growth and for closer engagement and partnership between the government, business and civil society.

With regards to SMEs, the minister spoke at length about the key disciplines affecting SMEs, announcing that government has earmarked R475 million for the Department of Small Business to help small and medium businesses and a promise to ease regulatory burdens for businesses.

Here are the experts’ reactions to these announcements and others from the 2016 speech.

ON THE SMALL BUSINESS DEVELOPMENT MINISTRY

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.  – Ben Bierman, CFO of Business Partners Limited 

This is a positive development, but we’d love to see more detail about how the Department will be spending this money. In countries such as the United Kingdom, governments support start-up companies and entrepreneurs through access to mentoring programmes and funding; we would welcome a similar approach in South Africa. – Anton van Heerden, executive vice-president and managing director, Sage South and Southern Africa

ON RELIEF FOR SMEs

The tax-free portion of the taxable income for small business corporations has been adjusted marginally from R73 650 to R75 000.

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 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. – Ben Bierman

On the tax front, turnover tax already simplifies tax administration for the smallest businesses, but we would have liked to have seen the concept extended to companies with more than R1 million in turnover. Perhaps R5 million would be a more appropriate level. As a micro-business owner, you should be encouraged to grow rather than face more onerous tax and regulatory burdens once your turnover exceeds R1 million. – Anton van Heerden

ON INFRASTRUCTURE SPEND

Gordhan announced 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.

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– Ben Bierman

ON RED TAPE

The Minister announced that steps to reduce the regulatory burden for business investors are in progress including 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. The minister also announced that 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 SARS to facilitate the single registration process is welcomed.  – Ben Bierman

His [Pravin Gordhan] promise to ease regulatory burdens for businesses is encouraging. Though he didn’t give much detail about what this will entail, we welcome any moves to make it easier to do business. Red tape ultimately benefits big businesses who have the resources to manage complex compliance requirements. Less administrative overheads will help smaller businesses to focus on growing rather than on ticking regulatory boxes. We look forward to seeing more specifics here – we believe that there is scope to make labour relations, registering a company, and dealing with the South African Revenue Service much easier for SMMEs. – Anton van Heerden

Invest SA promises to help reduce regulatory burdens for foreign investors who want to start up their own businesses in SA, leaving SA as a more friendly investment destination. – Johan Gouws, head of Absa Asset Consultants

It is a step in the right direction. All cohesive efforts have to go towards making it easier to do business. – Ethel Nyembehead of Small Enterprise at Standard Bank  

ON VAT 

The minister announced that there would be no increase on Value Added Tax. 

We are also pleased that Minister Gordhan has managed to balance the books without needing to hike company tax, personal income tax, or VAT. Many market observers had expected tax increases, but these would have been counterproductive in our current economic climate. Our SMMEs are already deeply challenged by the collapse in the value of the rand, electricity price hikes, high interest rates and slow economic growth. Tax hikes would simply have hurt consumer and business confidence further and dampened economic growth. – Anton van Heerden

It has been in discussion for a while. But I think what this means is that we see that there is a possibility that it could happen in the future. Businesses should in this regard start thinking of how it will impact their customers and how their business will respond to the possibility. – Ethel Nyembe 

ON UNEMPLOYMENT

Minister of Finance Pravin Gordhan emphasised the need to accelerate employment in order to achieve inclusive growth in his 2016 Budget.

There are mixed views to this. What I know is that research shows that in any country, SMEs are the answer to creating jobs and opportunities. We still have a long way to go, just looking at university students and getting them to graduate with the mindset of being employers and not employees. – Ethel Nyembe

Thirteen percent of personal income tax payers contribute 64% of total income tax revenue highlights the need for us to create skilled jobs in the economy. Skilled jobs in professional sectors and artisanal trades results in higher income generating individuals who pay more tax. It’s not enough to cite job creation as an objective this plans for it  to be met through public works expenditure. A most the jobs that are created are cyclical and for semi-skilled individuals. – Kalnisha Singh,  economic strategist at K Strategies