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Small business and the 2020 budget speech

Investment in infrastructure, eradication of power cuts and lower data costs must be addressed for SMEs to thrive – Pieter Bensch, Sage.

MELITTA NGALONKULU: As we are racing towards the end of the country’s financial year there are a lot of pressing matters in the country that are in need of President Cyril Ramaphosa’s attention, as well as Minister of Finance Tito Mboweni’s: from the power cuts, fiscal deficit, as well as the public wage bill. However, this doesn’t mean that entrepreneurs should be forgotten because it has been said that SMEs [small and medium-sized enterprises] are the bedrock of developing countries.

It’s important is for small businesses to be aware of the government’s spending priorities and its plan to revive the economy. Today we have Pieter Bensch, who is the executive vice president of Sage in Africa and Middle East, to give us a few pointers on what small businesses should be attentive to during the budget speech on February 26. Hi Pieter, it’s so great to have you on the show today.

PIETER BENSCH: Hi, it’s good to meet you, thank you.

MELITTA NGALONKULU: 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?

PIETER BENSCH: 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.

READ: Ramaphosa talks tough on youth unemployment crisis

 

Some SMEs closing due to late payments

MELITTA NGALONKULU: 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?

PIETER BENSCH: 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.

MELITTA NGALONKULU: 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?

PIETER BENSCH: 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.

MELITTA NGALONKULU: 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?

PIETER BENSCH: 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.


Bridging the digital divide for SMEs

 MELITTA NGALONKULU: Pieter, what about the digital divide? How do you think the government will address having a wider adoption of digital technologies among smaller businesses that could help drive increased efficiency and growth?

PIETER BENSCH: This goes back to infrastructure investment – I think we need to see more. During load shedding some of our cell towers can’t manage that, and small businesses and entrepreneurs need digital platforms to grow faster and to be more innovative and creative, which requires the internet. So we need to see lower data costs and hopefully in the budget speech we’ll hear something around how government plans to lower the data cost. So tech is a requirement and to grow your business you need access to the internet and you need lower data costs. So hopefully we’ll see what the plans are around that and how government plans to address lower data costs and other investments around infrastructure and IT for small and medium businesses.

MELITTA NGALONKULU: What about funding?

PIETER BENSCH: Funding for entrepreneurs around government infrastructure projects is a great incentive for them to get involved. It does mean that we need to see the infrastructure investment first but funding towards data or towards initiatives to the private sector in general is something that can accelerate growth in this country. So it’s time for the president and the minister of finance to think about what we can do in funding initiatives from [the] private sector that can help boost small and medium businesses.

MELITTA NGALONKULU: That was Pieter Bensch, who is the executive vice president of Sage in Africa and Middle East.

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SME development as strong as the weakest link and there are not just many weak links but millstones like corruption hanging around our necks.

Colour me cynical. The Ramaphosa types are shareholders in big business so the last thing they really want is SMME development, unless they, or some ANC cadre has a piece of it. So it is just more hot air. blabber. I see it all the time; municipalities require 30% of contracts to be sub contracted to SMME’s BUT who are 76% minimum black owned and from the area etc. Reality is that many of these “SMME’s” are the local ANC councilor’s friends or relatives, often from other areas and are really just labour brokers who exploit the less connected. There is zero support for the genuine SMME’s.

End of comments.

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