Tito Mboweni

Finance Minister Tito Mboweni.

Photo: Nokuthula Mbatha / African News Agency (ANA)

Budget 2020: What small business needs to hear from the finance minister

More support for young entrepreneurs, an emphasis on growing technology skills and faster payment are all on the wish list.

Tito Mboweni

Finance Minister Tito Mboweni.

Photo: Nokuthula Mbatha / African News Agency (ANA)

With small business having long been identified as a critical part of the economy and a key creator of jobs, what will owners of SMEs and entrepreneurs be looking out for in the 2020 Budget Speech?

Colin Timmis, general country manager for cloud-based accounting software company Xero SA, said SMEs contribute around 98.5% of the number of formal firms in the economy and account for a significant percentage of jobs. 

He saw positives in President Cyril Ramaphosa’s 2020 State of the Nation Address (SONA) in mid-February and hopes that at least some of these will be fleshed out by Finance Minister Tito Mboweni in his upcoming Budget Speech.

More detail on grant funding, support for 1 000 entrepreneurs

“The Government’s commitment to assisting 1 000 young entrepreneurs with grant funding and business support in 100 days is a step in the right direction” he believes. “In addition to this, a longer-term goal of assisting 100 000 young entrepreneurs over the next three years to access business skills training, funding and market facilitation, depicts a focus on sustainable growth.”

Timmis says it was also good to see an increased emphasis on technology skills in the State of the Nation address. “We know how much technology is changing the way we work and the role it can play in boosting productivity. It requires a workforce of the future that understands these changes and has the right skills to drive a strong economy.”

Tax hikes – rather increase revenues by promoting economic growth

Pieter Bensch, executive vice-president for Africa and the Middle East at accounting and payroll firm Sage, would like government to look for ways to increase revenues by promoting economic growth, rather than hiking VAT or increasing personal income tax.

“With consumers, especially low- to mid-income earners, already under significant financial pressure, tax hikes could eat into disposable income and stifle economic growth,” he observed.

“It could harm small businesses because their customers will have less money to spend. Plus, many small businesses ended up absorbing the last one percentage point increase in VAT, hurting their profitability.”

Resolve problem of long waits for payment by state-related entities

The long wait for payment from state-related entities continues to be problematic for small businesses, he warns. 

“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.”

Bensch says previous Budget Speeches and State of the Nation addresses have highlighted this concern. “Small businesses would like to hear about tangible steps such as new regulations and legislation to speed up the government payment and procurement process.”

Reduce the cost of tax compliance for small businesses

Delia Ndlovu, managing director for Africa Tax & Legal at Deloitte Africa, noted that the cost of tax compliance 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 and aid this important segment of the economy,” she states.