Budget Speech lacks critical detail on SMMEs development and remains ignorant of the tough economic environment they are operating in
Wednesday’s much anticipated budget speech by Finance Minister Tito Mboweni lacked concrete plans to assist and create a more conducive environment for SMME’s, resulting in major concerns for this crucial sector of the economy, Innovative Accounting Solutions Director, Stefani du Preez says.
“We were anticipating a conservative approach by Minister Mboweni in his budget speech, this year being an election year; the economy having slowed down and the country still reeling from last year’s technical recession. But the lack of detailed plans regarding Small to Medium and Micro-sized Enterprises (SMMEs) and the continuous bail-out of Eskom left a bitter taste in most of our mouths,” du Preez says.
Du Preez says Minister Mboweni’s mention of SMMEs not only lacked detail but were incognisant of the tough economic environment they were operating in.
“SMMEs are widely recognised as the building blocks of the economy. Without their contribution, sustainable growth cannot be achieved in South Africa,” du Preez says. According to a baseline study conducted by Small Business Project on SMMEs, 98.5% of all businesses in South Africa are SMMEs and yet they create only 28% of jobs; whilst the international norm is between 60% - 70%.
The Department of Trade and Industry, says South Africa has one of the highest business start-up failure rates in the world – over 70% of new businesses fail in less than two years.
“With 90% of jobs expected to be created by small businesses, Innovative Accounting Solutions believes the R481.6 million allocated to the Small Enterprise Development Agency to expand the small business incubation programme, although welcome, is not enough,” du Preez says.
She says to assist SMME’s government could increase the threshold turnover from R1 million per annum to R5 million.
“The government should also do away with stifling regulations and complicated taxes for small businesses, these include streamlining of processes at South African Revenue Services (SARS) such as VAT refunds and the issuing of tax clearances certificates. We would have loved to hear the minister speaking to the auditing of the outcomes of government’s R15.5 billion earmarked for supporting of SMMEs in our country, as well,” du Preez adds.
Mboweni also affirmed the government’s commitment to improving administration and compliance at SARS, with Judge Dennis Davis to assess the tax gap.
“The government will be very stringent on tax compliance, especially on the collection of corporate tax. This means SMME’s wishing to avoid being in the government’s crosshairs for lack of compliance should leverage the skills and expertise of tax specialists. This will allow those SMME’s to focus on growing their business rather than worry about the administrative burden associated with accounting,” du Preez continues.
Whilst the Minister of Finance’s National Budget Speech was relatively well received by the country and the international community at large, it was lacking a few details and downright disappointing on some aspects, with specific reference to state-owned companies.
Mboweni predicted that budget deficits would be wider than expected four months ago owing to a weak economy, another shortfall in revenue collection and the need to set aside money towards financially struggling state-owned companies (SOCs).
Eskom is currently burdened with a debt of R400 billion, largely accumulated over its capital expansion projects that have been plagued by allegations of mismanagement over a period in which the SOC was also marred by serious allegations of corruption.
“Even the Minister admitted how otiose putting money into Eskom was. But the conditions associated with the R23 billion bailout were somewhat reassuring. The government needs to further ensure its appointed independent chief reorganisation officers are not be influenced by the various boards and politicians who manage the various state-owned companies,” du Preez concluded.