Whilst all eyes are on expected tax increases, it’s vital that Finance Minister Pravin Gordhan prioritises small business growth in his 2017 Budget Speech on February 22nd. It was great to see some measures announced in the October mini budget, but we need more.
In advance of the speech, Small Business Development Minister Lindiwe Zulu has called for more budget to be allocated to her department. Small businesses help power the country’s economy and South Africa’s National Development Plan aims to create 11 million jobs by 2030. Small businesses will be key to this. However, without real investment in entrepreneurship and small business growth, this could end up being a pipe dream.
To boost South Africa’s small businesses, and the economy, we’d like to see the following in the 2017 budget announcements:
Gordhan should allocate budget for subsidies to help people start businesses in key sectors. In the 2017 State of the Nation Address, President Jacob Zuma said “Government will also continue to pursue policies that seek to broaden the participation of black people and SMEs, including those owned by women and the youth, in the Information and Communication Technologies (ICT) sector.” ICT is only one of many sectors that offer an opportunity to SMEs.
However, many entrepreneurs are unable to start their businesses because of difficulty accessing funding. According to Xero’s 2016 State of SA Small Business report, 27% of business owners reported access to funding as their biggest challenge. Increased budget allocation will help remove this roadblock and drive job creation.
2. Reduced red tape
For SMEs to truly thrive, we need less red tape. Therefore, we’d like to see the Finance Minister outline concrete plans to cut out unnecessary red tape. Gordhan has touched on this before. But he has yet to explain how the government will achieve this and ease the regulatory burden for SMEs.
3. Infrastructure investment
Infrastructure investment could be a boon for SMEs. If the Minister increased spending on infrastructure — better roads and broadband — SMEs could more easily do business. And this could create new business opportunities as well.
The President touched on this in the State of the Nation Address. He said the Department of Public Works will invest approximately R100 million this year on critical capital and maintenance programmes to modernise harbours. He stated that they will also continue generating revenue from letting state owned harbours and coastline properties, which will benefit black owned SMMEs.
We hope to see Gordhan build on this and announce even more infrastructure investment.
4. Government contracts
We also hope to see the Minister announce further initiatives to make it easier for SMEs to do business with government. If SMEs are able to secure more government contracts it will help them grow.
A 2015 announcement set a 30% target for public procurement of goods and services from SMMEs and co-operatives. This has not yet come into force. The implementation of the policy would require an amendment to the Preferential Procurement Policy Framework Act (PPPFA) — a legislative review that will take a long time to complete.
However, in December 2015 the National Treasury announced their intent to amend the PPPFA regulations of 2011 to offer more opportunities for SMEs. We hope that Gordhan will provide a progress report on this.
The importance of small businesses in the local South African economy is widely acknowledged by both the government and the private sector. What we need now is concrete policies implemented to boost local SMEs, and the wider economy.