After an optimistic start to the year, recent weeks saw new challenges emerging that could affect not only SMEs but the economy as a whole. This includes the return of loadshedding and the prospect of a further fuel price increase in March, although the price of diesel is expected to drop marginally.
We’re also seeing the souring of US-SA relations, which is a worrying development. More generally, South Africa will feel the pain of the global trade war that is unfolding under US President Donald Trump’s administration. At home, the last-minute postponement of the National Budget Speech has created concern and uncertainty about the future of the GNU, although President Cyril Ramaphosa has reassured South Africans that “such differences don’t mean that the GNU is in crisis. It means that democracy is working.”
The revised Budget: what will the minister do for SMEs this time?
While South Africa needs to raise more money to finance its long list of urgent needs, it has already been made clear that increased borrowing is not an option. Now that the controversial 2% VAT increase is no longer on the table, there is talk of a 0.75% increase instead. Regardless, the finance minister will have to find other ways to fund the revenue shortfall.
VAT aside, increasing personal and company taxes is one way to do this. The issue, however, is that South African taxpayers are already taxed to the hilt. According to South African Revenue Services’ 2024 tax statistics report, 2.6% of South Africa’s citizens pay 76.2% of all personal tax. When it comes to company tax, approximately 1 000 companies pay 72.3% of all the tax collected.
So how will the government balance its books? Some analysts expect this to come from an increase in so-called “sin taxes” as well as additional taxes on luxury items, and it is understood that a wealth tax is also being considered.
Cutting back on expenditure is a likely scenario. Let us hope that whatever budget cuts are being considered, there will be some money allocated to SME support – after all, SMEs’ increased participation in the economy will boost tax revenue while creating much needed jobs.
An increased allocation of the national budget towards infrastructure development would also be a welcome development for SMEs, given the opportunities that could emerge in the sub-contracting space.
Government must reduce regulatory burdens and increase funding access for SMEs to grow
Red tape has long been a major obstacle for SMEs. There are multiple independent initiatives that seek to address this and other issues. This includes the proposed Startup Act that SiMODisa, a powerful industry-led initiative, has been lobbying for in its effort to overcome the barriers that SMEs and startups face, including access to capital, access to markets, access to talent and the lack of supportive enabling environments.
There is also the proposed R100-billion Transformation Fund, an initiative aimed at supporting black-owned businesses and SMMEs. It is envisaged that the government-led initiative, which has attracted widespread criticism, will be funded through private sector profits. Since the plan is still being developed and has yet to be made available for public comment, it will be interesting to see whether it is mentioned in the upcoming budget speech. While any initiative aimed at supporting SMMEs is welcomed, it remains to be seen whether the Transformation Fund in its final form will deliver the intended benefits.
B20 and what it means for SMEs
South Africa has assumed the presidency of the G20 – a global forum for international cooperation on economic issues. It is also taking the helm of Business 20 (B20), which serves as the official G20 dialogue forum with the global business community. The B20 kicked off in Cape Town on 24 February, marking the start of a year of global business engagement to set priorities for business in conjunction with the G20. The B20 platform consists of eight task forces, each focusing on a critical area of economic and social importance.
Of interest to SMEs is the Finance and Infrastructure Task Force. According to B20 literature, the task force will focus on driving innovation in financing models, ensuring greater inclusivity in financial systems, and addressing infrastructure gaps critical to economic growth. Particular attention will be given to empowering small and medium-sized enterprises (SMEs) by removing financial barriers, expanding access to affordable credit, and fostering their integration into global markets. This is music to every small business’s ears – let us see how this translates into meaningful action. We are particularly keen to hear about what will be done to make SMEs export- ready.
Turbo-boosting SMEs’ scalability: how cloud-computing and data analytics accelerate growth
In recent years, the use of cloud-computing technology among SMEs globally has sky-rocketed to 80%, according to a recent report by Gartner. Once the domain of large corporates, it is attractive for SMEs in that it reduces the need for expensive hardware and software licenses – since Cloud providers manage software updates, this reduces the cost of IT maintenance.
SMEs are also recognising the benefits of data analytics as a tool to help them make more informed decisions regarding operations, market trends, customer engagement and strategy development, ultimately enhancing their competitiveness and efficiency.
As with all technologies, there are also some challenges. Apart from data quality and privacy issues, implementation can be complex and requires the upskilling of staff. Still, for more established SMEs, both technologies are worth exploring to see if they align with their specific requirements.
With specific reference to the upcoming budget, it is critical that we see more being done by way of reforms that reduce red tape and policy restrictions that continue to stifle SMEs’ growth. We look forward to a budget that strongly considers SMEs’ needs, given the critical role they play in our economy and creating jobs for millions of unemployed people.”
