Mr Enoch Godongwana, South Africa’s Minister of Finance, will table the Medium-Term Budget Policy Statement (MTBPS) on 11 November 2021. The benchmarks set for the small business sector in the 2021 Budget Speech; albeit ambitious and welcomed by the industry, were substantially disrupted by the onset of the COVID-19 pandemic, which diverted the focus of government. Now, the national move towards economic recovery will; and should, coincide with a renewed commitment to make the economic climate in South Africa more conducive to entrepreneurship and small and medium enterprise (SME) success.
This is the opinion of Jeremy Lang, Executive Director at Business Partners Limited, who comments that: “While plans to support the small business sector were underpinned by the best of intentions, the second and third waves of COVID-19 meant that the focus shifted from helping SMEs to thrive and grow, to helping them keep their doors open and prevent job losses where possible. The road to recovery is sure, but it will be slow. Nonetheless there are a few fundamentals that government needs to hone in on to support SMEs, as the backbone of our economy.”
Lang says that going forward, the small business sector must be reprioritised, in the interests not only of progressing towards economic recovery but to directly address the prevailing unemployment crisis in the country. This renewed focus needs to manifest directly (through support, financial relief initiatives and incentivisation) and indirectly (by improving public services). As Lang explains, “there are a few fundamental aspects that we hope to see pushed to the top of government’s to-do list as we approach the MTBPS.” These include the following:
The stability of the energy supply
“Let’s address the elephant in the room,” says Lang, “which is the instability of our energy grid. This has compounded the challenges of a sector that was (and still is) suffering the impact of the pandemic.” Lang asserts that energy needs to become more stable, more accessible and more affordable.
“We are encouraged by the President’s announcement that Government will increase the embedded generation threshold to 100MW, but we also know that setting up the infrastructure we need to turn this imperative into a reality, will take time.”
Lang encourages financiers including government institutions to offer their SME clients additional finance to purchase back-up generators or to implement measures and where necessary install technology to ensure sustainable energy, as Business Partners Ltd has done for its clients.
The reliability of broadband
With the “new normal” affecting every area of civil society, including the way that people see and operate within the world of work, remote or hybrid systems of working rely heavily on fast and resilient broadband. “We need broadband access to be rolled out much quicker across South Africa’s metros if we are to make headway in this new dispensation,” says Lang.
The safety of public transport
Many small business employees rely on public transport to get to and from work. This should be a focus for the upcoming budget – a plan that will revitalize the current system to help employees get to work safely and on time.
The rollout of the National Infrastructure Plan
The National Infrastructure Plan, as adopted in 2012 was designed to transform the South African economic landscape, create jobs and improve the delivery of basic services. Lang explains, “where this National Infrastructure Plan is concerned, we have a lot of work to do. Small businesses are built around infrastructure like bridges and roads, not only as beneficiaries of better service provision but as the ones who compete for tenders to complete this work. If we don’t roll out the Plan faster, we could jeopardize the potential profitability of these SMEs. There is some pressure on the minister to increase infrastructure spend, however, it’s not clear where this funding will come from.”
Concessionary funding for SMEs
“Both the public and private sector have the opportunity to increase entrepreneurs’ ability to expand and invest. Funding delivery mechanisms need to be simpler. We need to see more tax incentives to address particular agendas, like grants and incentives for women, the unemployed and the previously disadvantaged,” Lang asserts.
Support programmes for South African SMEs trading in Africa
The signing of the African Continental Free Trade Agreement (ACFTA), came into effect on 1 January 2021, to encourage intra-Africa trading between small businesses. However, there are significant roadblocks to overcome in terms of the skills gap – SME owners need to receive support and training on how to import and export to and from Africa. “We need to teach SMEs how to de-risk their industry and there is more required from government in this regard,” says Lang.
Bureaucracy poses a significant threat to aspiring small business owners, who have reported that “red tape” is an obstacle to trade. Issues like the costs involved with compliance, barriers to entry at registration phase and tax requirements, impact on an SME’s ability to get off the ground. This needs to be addressed as a matter of priority,” explains Lang.
Recommitment to pay SMEs within 30 days
Delayed payments are crippling many SMEs particularly as their reserves may have been exhausted from extended periods of low activity due to COVID-19. “We appeal to the Minister of Finance and all other ministers to recommit government to paying SMEs within 30 days or less. SMEs should not bear the brunt of lack of financial planning by government entities; there should never be an excuse that a government entity has exhausted its budget for the financial year,” asserts Lang.
“As we look with optimism towards the Medium-Term Budget Policy Statement, we hope that government will take the needs of small businesses into account, as important contributors to civil society and the economy. If the public and private sectors improve on how they work together, we can leverage the efficacy of the industry to promote positive growth,” Lang concludes.
By: Jeremy Lang, Executive Director at Business Partners Limited