Using windfall taxes to reduce debt to GDP was positive and expected to be at 69% of GDP in 2024/25 thereby translating to lower debt and servicing costs that would allow SMEs to have extra to spend on the things that matter, like fixing Eskom, and investing in real growth, according to SME services provider Lulalend.
The company’s Chief Risk Officer, Garth Rossiter, said that their concern was that, until they saw the government getting serious about creating an enabling environment for SMEs, they were going to be facing an uphill battle in dealing with low economic growth and high unemployment.
“Keeping the lights on is vital for all businesses, and for small businesses in particular, so we’re happy that power generation is at the top of the budget agenda. While we have seen some really great growth and recovery in the SME sector post Covid, it is critical that everything is done to create an enabling environment for this critical business segment,” Rossiter said.
He said the solution, as they have been saying consistently about previous budgets, to stimulate the economy and drive GDP growth.
He said this would then generate tax revenue as a by-product which was ultimately what the government wanted.
“Given how bloated the public sector is at the moment, this growth will have to come from the private sector which contributes over 60% of our GDP, but it has to be driven by small businesses, which generate the vast majority of private sector jobs.”
Rossiter said they were encouraged by the minister’s comments on lowering the barriers to entry as to them this was key to making it easier to do business and thereby growing the local economy.
“The more we can do that, the more we can create employment and grow our economy which ultimately grows the tax base.”
The company said that Wednesday’s budget review came in an environment where small businesses were dealing with low economic growth, high inflation and rising interest rates that reduced disposable income and their ability to invest and grow.
It said that in addition to these challenges, continuous load shedding by Eskom had created a perfect storm for these struggling businesses.
Rossiter said since the country faced an ANC election year and with general elections coming up in a couple of years, Minister Enoch Godongwana needed to play a political game and do some juggling to keep all parties happy.
“I think he has probably done the best he can with limited scope to move.”
“In an ideal world we would have seen more being done for SMEs, but the government does seem to be listening to us and talking about creating a more enabling environment which is what we need. The minister wasn’t clear though on exactly how they plan to do this, so some clarity here might have been beneficial, but he is saying the right things,” Rossiter said.
According to research by accounting, financial, HR and payroll technology for small and mid-sized businesses (SMB) company Sage, SMBs were ready to face the future post-Covid.
Despite the barriers faced, South African SMBs felt more resilient and were confident in their ability to navigate future risks.
As many as 59% surveyed felt they had coped well with the barriers faced, most often by cutting costs, relying on savings, offering new products, and through the adoption of new technology.
BUSINESS REPORT