File image :A ten rand, twenty rand and a hundred rand note held in a person's hands, being counted. IOL.

CAPE TOWN - Spokesperson for the 2018 Entrepreneur of the Year competition, sponsored by  Sanlam and Business Partners, Kobus Engelbrecht says that entrepreneurs are headed for a tough time ahead. 

However, he says that there are ways in which small businesses and entrepreneurs can ease the added tax burden.

According to Engelbrecht, the main implication that the increase in VAT to 15% will have on entrepreneurs is that they will have to increase their product or service price. 

This can either be passed on directly to customers or business owners can absorb the costs themselves. They can also implement a mixture of the two where both the customer and owner contributes. 

However, the main repercussion of increasing the price of your goods or service is that sales may stifle. 

If this may be the case, businesses can choose the hard decision and absorb costs themselves. 

Engelbrecht says that although government noted in the State of the Nation Address that certain projects will aid small businesses in driving economic growth, it is ultimately dependent on the implementation by government. 

On the R2.1 billion that former Finance Minister Malusi Gigaba allocated for small businesses, Engelbrecht says that it also boils down to implementation. 

“It will depend on the implementation as well as the help that they will provide SMMEs with. Just providing funding does not mean a lot if the business owner does not have the competency to run a business.  Government also does not have the competency to run a business so I cannot see how they can assist business owners. For this initiative to be successful government needs to work with the private sector who has the knowledge”, said Engelbrecht. 

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He adds that small businesses are of the utmost importance as they will create the economic growth and the employment creating capacity we need.

However, he says that the 2018 budget does not adequately accommodate small businesses. 

When asked whether the VAT increase will harm small businesses, Engelbrecht said that it will depend on which market segment a particular business operates in. 

“In a low income market segment a business might suffer more than in a higher income market segment. It also depends on if the business is selling a necessity or a luxury”, said Engelbrecht. 

He added that an efficiently run government service will benefit all businesses as currently businesses are spending a lot of time and money dealing with a very inefficient bureaucracy.

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