Blog


2020-03-03
What the State of the Nation Address and Budget Speech means for small business


A study conducted in October 2019, by Retail Capital, entitled, “Roll With The Punches, found, among other things, that collectively, small businesses employ 10.8 million people.  This accounted for 66% of all formal jobs.  It further found that small businesses contributed 20% of the GDP.  These figures do not include informal traders. 

Clearly small businesses play a significant role in the economy.  However, many small business owners tend to have closer ties to communities and therefore more involved in community projects.  One would easily find a small business owner supporting community initiatives either contributing financially or giving back some other tangible and intangible initiatives and projects that uplift communities.

Sadly, the study also found that 90% of small businesses are struggling, mostly due to the weak economy.  Unlike multinationals and big corporates that have more resources to deal with compliance issues, can absorb financial strains, etc, the small business owner carries all the risks.

It was encouraging to hear the Minister of Finance acknowledge that start-ups will ignite the economy and that these start-ups and small businesses are supported in a number of ways, including the preferential small business tax regime, the VAT registration threshold and the turnover tax.

It is therefore of the utmost importance that the entrepreneur and small business owner ensures that he or she is not isolated but within a network of other entrepreneurs and small businesses owners.  The reason for this is that the President made a call and emphasised the need for social compacts between various stakeholders.  Clearly, government and our politicians are not in a position to solve the problems highlighted in the President’s State of the Nation Address (SONA) on their own.  In fact, the problems facing our country, will require the involvement of all key stakeholders, including the voice and interest of small business.

The call from the President, indicates a need for input in conducting oversight and input into making better policies.  In fact, the President stated that social partners have been meeting every two weeks to discuss the issues around electricity.  This begs the question, was small business organisations represented at these meetings?  

It is therefore crucial that small businesses become more organised and raise their voice in these forums.  The President and Minister of Finance, highlighted many opportunities for big and small businesses.  Some of these opportunities are listed below.

The Infrastructure Fund was first mentioned in SONA 2019.  The state will commit  to contributing R100 billion into the Infrastructure Fund over a 10-year period.  In the June 2019 SONA, the President stated that the  fund will give a much-needed boost to the construction industry, and that private investors, such as pension funds, are enthusiastic about participating in the fund.  SONA 2020, the President pointed out that the implementation team has finalised the list of shovel-ready projects and has begun work to expand private investment into public infrastructure sectors with revenue streams.  The Minister of Finance stated that the public can now find information on these infrastructure projects on the VulekaMali internet portal.  Local government will be allocated R426 billion.  Municipalities will use part of these funds to maintain and build new infrastructure.

Government will be launching a Tourism Equity Fund this year to stimulate transformation in tourism.  To further support tourism, the Minister of Finance said that National Treasury will engage the tourism sector on formalising the tourism levy.  This will have a ripple effect on small businesses.

As a small business, it is important to be aware of the African Continental Free Trade Agreement (AfCFTA).  The objectives behind the AfCFTA are to boost intra-African trade through the creation of a single market for goods and services, to contribute to the movement of capital and natural persons. The AfCFTA entered into force on 30 May 2019 and will become operational on 1 July 2020.   This is an opportunity for a small business wishing to expand its footprint in Africa.  Bearing in mind that businesses from Africa, will also have access to South Africa’s market.

The Minister of Finance highlighted that R6.5 billion will be allocated for small business incentive programmes of which R2.2 billion will be transferred to the Small Enterprise Development Agency. 

Government is lookin g at developing new and innovative ways to support youth entrepreneurship and self-employment.  The National Youth Development Agency and the Department of Small Business Development will provide grant funding and business support to 1,000 young entrepreneurs in the next 100 days. 

Government will also be introducing the SheTradesZA platform.  The aim of this platform is to assist women-owned businesses to participate in global value chains and markets.

In the following weeks to come, parliamentary committees will be conducting oversight over the various departments and government entities, with a focus on how the above opportunities will be rolled out. 

Small businesses do more than create employment.  They are also engines of economic growth and social development.  However, it is difficult for government to deal with individual stakeholders. Hence, why it is important for small businesses become more organised.  Therefore, as an entrepreneur and small business owner, enquire how these opportunities can be accessed, enlist the help of your local councillor, establish a network or join an organisation.  This is only way that small businesses will be in a position to unlock these new and exciting opportunities.

 

Zelna Jansen

Chief Executive

Zelna Jansen Consultancy