Opinion: Finance Minister Enoch Godongwana can unlock significant opportunities for small and medium businesses (SMEs) in the Medium-Term Budget Policy Statement through infrastructure driven growth. Picture: Legnan Koula, EPA.
Opinion: Finance Minister Enoch Godongwana can unlock significant opportunities for small and medium businesses (SMEs) in the Medium-Term Budget Policy Statement through infrastructure driven growth. Picture: Legnan Koula, EPA.

Small and medium businesses could do with infrastructure spending boost in the mid-term budget

By Time of article published Nov 11, 2021

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Shawn Theunissen

Finance Minister Enoch Godongwana can unlock significant opportunities for small and medium businesses (SMEs) in the Medium-Term Budget Policy Statement through infrastructure driven growth.

The SME sector’s optimism hangs on the extent of the government’s review of the public finance regulatory framework to boost infrastructure investment in the short term.

“We expect to hear progress on the infrastructure investment priorities which have the potential to provide the capital stimulus to accelerate SME participation through significant infrastructure spend,” he said.

“The national budget aims to support economic growth and job creation, and driving SME development is crucial to achieving this goal. It’s also critical to support the country’s biggest employers who are constantly punted as the economic recovery stimulators – this needs to be more than empty rhetoric.”

The list of the infrastructure investments details includes the following, among others:

  • The proposed amendments to Regulation 28 which seeks to make it easier for retirement funds to increase investment in infrastructure.
  • The Infrastructure Fund of R791.2-billion was set up to enhance collaboration and attract private-sector investment directed to three projects – student housing, digital infrastructure, and water infrastructure;
  • The municipal infrastructure grant to allow municipalities to use up to 5 percent of their allocation to develop infrastructure asset management plans; and
  • The integrated city development grant which was re-purposed to assist cities to build internal capacity or obtain technical support for key infrastructure projects.

Support for SMEs

Beyond infrastructure development, the sector was also expecting to see an increased allocation towards the support packages for SMEs, particularly those still feeling the effects of the July riots, many of which had just started to gain traction following the Covid-19 economic contraction.

In the 2021 Budget, R4-billion was allocated to the Department of Small Business Development, which prioritised funding to township and rural enterprises, including blended finance initiatives.

We need detail on how effective these funding interventions have been and whether this will continue to be the focus going forward.

Tourism

The Department of Tourism’s re-prioritisation of R540-million over the medium term to establish the Tourism Equity Fund to support the sector and its myriad of SMEs was much needed. More detail on this stimulus was required to provide confidence in the sector and begin the road to recovery.

It would be refreshing if an allocation was made for greater coordination between government and the private sector in creating a conducive environment for SMEs to excel and scale.

A balancing act

Overall, it was unlikely that there would be major shifts in the budget tabled at the beginning of 2021 and the mid-term budget, and therefore, little on policy regarding SMEs. The Minister still faces a tough balancing act with pressure to increase social grants but at the same time practice fiscal restraint by reducing the wage-bill and servicing high debt levels.

All eyes will be on the R40-billion tax revenue that needs to be collected over the next four years and the current tax shortfall. In this medium-term budget, we expect to get more details on how government plans to recover R40-billion and what this will mean for SMEs, corporates and consumers in the short to long term.

Energy security

Energy security was a perennial issue for SMEs due to load shedding, meaning the sector would welcome funding into Eskom on top of National Treasury allocating R32-billion for 2021/22. Progress on government’s plan to streamline Eskom and allow independent power producers will therefore be closely monitored.

Energy stability will certainly create more certainty for both large and small enterprises and is crucial to signal to the markets that government is taking the right steps to foster a stable environment for economic growth and job creation.

Small businesses could do without any further shocks to the system right now, and a more efficient and reliable Eskom would go a long way to maintaining a more conducive business environment.

Shawn Theunissen, founder of leading enterprise development platform, Property Point and current president of the Johannesburg Chamber of Commerce and Industry.

BUSINESS REPORT ONLINE

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