SBI appeals to Finance Minister Tito Mboweni to lift the threshold of taxable small firms to R5 million of annual turnover. Photo: Pixabay

CAPE TOWN – The Small Business Institute is appealing to Finance Minister Tito Mboweni to lift the threshold of taxable small firms to R5 million of annual turnover to develop the small business segment in our country.

“If we are serious about job creation, then we have to spare no efforts in incentivising small firms. By lifting the threshold to R5 million and removing the VAT tax on payroll, we will greatly lessen the burden on the micro and small end of the segment.

The SBI also made other concrete proposals to Minister Mboweni ahead of his budget tomorrow. 

These include:

  • Auditing the outcomes of government’s R15.5 billion earmarked for support of SMMEs in our country;
  • Reviewing all tax incentives to make it more desirable for SMMEs to hire more people and considering an amnesty for businesses wanting to formalise;
  • Reviewing all tax compliance issues which burden SMMEs and move swiftly to reduce or simplify the code in respect of their obligations;
  • Ensuring while Eskom’s operations are under review the utility refrains from cutting services to municipalities in arrears; and,
  • Considering a voucher or credit for SMMEs to cover the costs of specialist advisors across the start-run-grow continuum.

According to SA’s first-ever baseline study on SMMEs, 98.5% of all businesses in SA are SMMEs and yet they create only 28% of jobs; the international norm is 60% - 70%.

The same study, which was conducted by SBI’s research partner Small Business Project (SBP), emphasized that medium-sized businesses are most likely to create jobs. There are only 17 397 in South Africa. They’ve increased since 2011 when there were 15 257 but far too slowly.

Government and the private sector devote more resources towards start-ups and incubators, but in fact nurturing larger SMEs will help address unemployment and poverty.

According to the Department of Trade and Industry, SA has one of the highest business start-up failure rates in the world – over 70% new businesses fail in less than two years.

“The implication of these stats is that our financial and non-financial support should be targeted at the firms that have escaped the two-year death trap which have better-than-average prospects of job creation,” according to Swanepoel.

“And non-financial help could come in the form of best practice raising finance and managing cash flow; attracting and keeping customers; bolstering leadership and managerial skills; employing digital technology; and exporting,” he says.

“Our view is that budgeting more funding for SMMEs is not the solution. The minister of the Department of Small Business Development estimates that R15.5 billion is earmarked for SMMEs. We believe this is a significant amount. Which of these programmes are failing to achieve targets? Which are succeeding and why? This will better guide priority fiscal allocation,” says Swanepoel.

The SBI also reiterates the call on the government to immediately gazette regulations giving effect to Section 18 of the National Small Business Act, which requires all state departments to conduct impact assessments on small business of all laws, policies and regulations they pass. “We believe implementing the provisions of this section will effectively require our ministers to Think Small First,” Swanepoel says.

Finally, “we implore Minister Mboweni to call out his colleagues who are killing small businesses through late payments,” says Swanepoel.

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