Tips for Tito – How Finance Minister can boost SMEs in his 2020 Budget Speech
Policy Certainty and Implementation:
On 27th August 2019 the National Treasury released the economic policy for public commentary. If approved it will be an additional policy in a basket of policies aimed to set the economy on a trajectory of inclusive high growth. However, that lack of coordination and limited implementation of policy and incentives leads to uncertainty coupled with a low growth environment resulting in a volatile economy. SMEs are more vulnerable to uncertainty and require a level of certainty to flourish and implement growth strategies. As a country we are policy fatigued and in the 2020 budget we hope to see a clearer communication and implementation plan to drive economic growth and policy certainty. (Identify an example a policy that is uncertain)
Access to funding:
In was announced during the 2019 SONA, and subsequently by The Minister for Small Business Development Khumbudzo Ntshavheni that government would introduce to SMEs a blended finance programme which would include a mix of grants and loans. The aim of this programme is to improve access to finance for SMEs by strengthening SME capital structure and improve the chance of sustainability through affordable funding options. Also highlighted was the importance of crowding-in private sector investment towards SMEs such as through an SME fund. As we go into the 2020 budget speech it would be crucial for the Minister to update SMEs on how much progress it has made on these funds and how government will continue to support access to funding initiatives for SMEs, particularly in the light of recent discussions regarding the creation of a State Bank.
Access to opportunities and resolving the issue of late payments:
The Procurement Bill referred to by the President at the 2020 SONA that will be presented to parliament will be critical to unlocking opportunities for SMEs in the public sector. However many government departments, state-owned enterprises and municipalities still have a reputation for slow payment, forcing their small suppliers to wait 60 days, 90 days or more for their money, This, in turn, hurts the profitability of small businesses and makes it hard for them to pay their suppliers on time. Government needs to put mechanisms in place to ensure that SMEs are paid on time by government departments.
Women and Youth Entrepreneurship:
In the 2020 SONA address there was a big emphasis on supporting youth and women entrepreneurship through various initiatives including, NYDA support of 100 000 young entrepreneurs, the SheTradesZA platform, and the IDC target of R10 billion for women-owned businesses. In the 2020 budget we hope that support towards women and youth entrepreneurship is further reinforced as it will play a crucial role driving economic growth and job creation.
Reducing red tape and lowering tax compliance cost for SMEs:
According to the World Bank Doing Business Survey 2019, South Africa is ranked 134th out of 190 countries in terms of ease of starting a business. We welcome the ministers announcement last year to reduce red tape by 25% and the President’s announcement at 2020 SONA of the introduction of Bizportal which will reduce the amount of time spent registering a company. However, there is a need for continued efforts to ensure that red tape is cut, and we meet the 25% target. Further the cost of tax compliance also remains a significant challenge for small businesses. Addressing this issue, in conjunction with other measures, such as tax incentives or tax breaks for small and medium-sized enterprises, would reduce the cost of doing business.