Small business and the 2020 budget speech

2020-02-17T11:00:34+00:00February 17th, 2020|News|

The following is a Q&A published in Moneyweb. Investment in infrastructure, eradication of power cuts and lower data costs must be addressed for SMEs to thrive – Pieter Bensch (PB), Sage. Questions by Moneyweb’s Melitta Ngalonkulu (MN).

SMEs are tired of lip talk and want effective action. Image credit: ESSPO

SMEs are tired of lip talk and want effective action. Image credit: ESSPO

MN: What would you say are the main things that entrepreneurs should look out for during the minister of finance’s budget speech on February 26?

PB: I think for me the key is our country’s growth can only be fuelled by small businesses and we need to create an opportunity, and the minister needs to create an opportunity for small businesses to thrive in this country. If you think about large businesses, they all expect and rely on small businesses to survive or to grow. So small businesses are the key for us, and entrepreneurs are the base of that.

…we need to see more investment in infrastructure projects, railroads and so on – that all creates opportunity for entrepreneurs and small businesses to thrive. We need to see something to address unemployment; it’s hard for SMEs and entrepreneurs to find skilled resources in South Africa, and with unemployment sitting at over 29%, this is something that needs to be addressed.

MN: Late payments for SMEs by public institutions have been a major problem or a hurdle in the past. I am also aware that in August 2019 President Cyril Ramaphosa had made a call for SMEs to be paid within 30 days. So, are we not also expecting to hear some sort of progress or announcement about this?

PB: It will be interesting to hear an update about this. Our records show that SMEs are still getting paid on average 101 days after – not 30 days, as the president indicated. So, although the president made that announcement or made that call, I don’t think it’s being enforced. That brings me back to [the point] that we need to see decisions from the president. He needs to make decisions, and this has to be enforced in the country. So, if there are statements made like this, it has to be enforced. We can’t expect SMEs and entrepreneurs to be paid late – they are small businesses; they do not have cash flow and we actually see some of these businesses closing down because of late payments from government, and 101 days is totally unacceptable.

MN: What about corporate income tax – what can we expect in that regard, because South Africa already has a relatively high corporate income tax burden at 4.3% of the GDP?

PB: I don’t expect to see a decrease in corporate income tax and I certainly hope not to see an increase… Our income tax is one of the highest in the world. If you look at some of the other larger countries, at 21% we are too high. We do want to see sin taxes possibly increase and I think there are some rumours about Vat being increased and PAYE to target the high-income earners. But sin taxes – the new sugar taxes have contributed quite significantly in the last 12 months, so let’s see if we are going to hear anything around that in the future.

MN: Eskom obviously is a big topic in the country at this point. What would small businesses like to hear concerning Eskom and the power cuts that we have been experiencing for the past couple of years?

PB: I think we want to hear more around state-owned entities, not just Eskom. But if you look at the Eskom situation, you can imagine a small business not being able to trade for 20 hours in a week. That’s a minimum if you take a four-hour power cut a day. Just walk around any mall and you’ll see all the small businesses shut for those four hours. Small businesses cannot afford to buy batteries, solar systems or generators. So they merely close their doors during load shedding. We need to see more investment, we need to see aggressive decisions, [and] we need to see alliances with neighbouring countries or other countries friendly to South Africa to see how we can improve this. There are quick wins, but we need to see the president taking action around that.