SMALL businesses were a “willing and capable partner” that looked forward to engaging further with the government on the SMEs specific announcements made by Finance Minister Enoch Godongwana in his Budget yesterday, the Small Business Institute (SBI) said yesterday.
John Dludlu, the organisation’s chief executive, said yesterday that from a small business perspective, they acknowledged the government’s, especially National Treasury’s and the Presidency’s determination to be inclusive, consultative and their willingness to listen to players in the SME ecosystem in formulating interventions to assist SMEs to contribute to economic growth and jobs. “We welcome the three SME-specific announcements on job incentives and bounce-back measures,” said Dludlu.
In his Budget speech, Godongwana announced the bounce-back scheme to support SMEs. This was intended to support businesses in distress owing to the Covid-19 pandemic.
The minister said a new business bounce-back scheme would be launched, using two mechanisms, which would be introduced sequentially.
Firstly, small business loan guarantees of R15 billion would be facilitated through participating banks and development finance institutions. This allowed access for qualifying non-bank small and medium loan providers. The government would partner with loan providers by underwriting the first 20 percent of losses for banks and other eligible small and medium loan providers. The eligibility criteria, including the requirement for collateral, has been loosened. This mechanism will be launched and operational next month.
Secondly, the minister announced that by April, they intended to introduce a business equity-linked loan guarantee support mechanism.
“We intend to bring the total support package through the bounce-back scheme to R20 billion. The equity support mechanism of this scheme will be facilitated through DFIs. It will also be available to qualifying non-bank small and medium finance providers. Details of the terms of the equity-linked guarantee mechanism will be provided soon,” said Godongwana.
Dludlu said given the state of South Africa’s economy for both households and firms, they thought the Budget sought and succeeded to strike the appropriate balance, and was reflective of the realities South Africa found itself in.
“We commend the minister for not raising taxes for individuals and companies, and for providing relief albeit modest one.”
The SBI cautioned the country regarding the “tax bonanza” the country had, saying that it was important for South Africans to keep it in mind that it was the result of one sector’s contribution and not the rest of the economy.
Godongwana said tax collections since the time of the Medium-Term Budget Policy Statement had been much stronger than expected. As they now estimated tax revenue for 2021/22 to be R1.55 trillion. This was R62bn higher than the estimates from four months ago, and R182bn higher than estimates from last year’s Budget.
“This follows a shortfall of R176 billion for 2020/21 when compared to the 2020 Budget forecasts. This positive surprise has come mainly from the mining sector due to higher commodity prices. Madam Speaker, one swallow does not make a summer. The improved revenue performance is not a reflection of an improvement in the capacity of our economy.
“As such, we cannot plan permanent expenditure on the basis of short-term increases in commodity prices. To be clear, any permanent increases in spending should be financed in a way that doesn’t worsen the fiscal deficit. We have also seen higher revenue from other sectors and other tax instruments, such as personal income tax and value-added tax,” Godongwana said.
THE SBI also appealed to the government urging officials to spend efficiently and effectively since a lot of money gets lost to corruption, fruitless and wasteful expenditure. “We need to stop this at once,” Dludlu said.
The organisation also called on the government to now focus on the implementation of the plans as well as accelerate long-agreed structural reforms to strengthen green shoots the local economy was witnessing as the Covid-19 pandemic showed signs of fading away.
The National Youth Development Agency (NYDA) chief executive Waseem Carrim said that the adjustments to the Employment Tax Incentive announced in the State of the Nation Address was exciting as the incentive supported the employment of close to 1 million young people.
“The incentive could increase this amount and bring more small businesses on board. It also ensures that the government and the private sector are working in collaboration,” Carrim said.
The NYDA said another policy amendment that could be considered was the adjustment to the Youth Employment Service (YES) policy to allow more small businesses to participate and thus increase the intake of young people.