Though the 2014/15 Budget has outlined numerous plans to stimulate the development of both the small and medium enterprise (SME) sector, as well as entrepreneurs, there still remain significant challenges in order to reach South Africa’s required job creation targets.
This is according to Christo Botes, spokesperson for the Sanlam / Business Partners Entrepreneur of the Year® competition, who says that the main challenges Government is likely to struggle with over the next budget period will lie with the implementation of these policies. “Should these policies and plans be correctly implemented within the proposed time frame, SMEs will benefit greatly. It is however doubtful that SMEs will see much growth opportunity going forward should these policies not be implemented.”
Botes says that it is therefore of utmost importance that Government pay special attention to implementation plans and the timelines thereof, as well as the rollout of the National Development Plan (NDP) in 2014, which should be broken down into short, medium and long term targets. “The overall plan has many impactful objectives, but in order to successfully implement, will need to be broken down into manageable chunks.”
He says that Government’s medium-term budget priorities are key to SME development and include improvements to public infrastructure, actions to draw more young people to employment and improvements in quality of service. “Without a world class broadband infrastructure linked to a stable and consistent electricity supply grid, growth will remain subdued. Entrepreneurs generally thrive on growing their businesses, but the without the basic infrastructure to assist their growth trajectory it is not likely that they achieve their growth.
“R 847 billion was earmarked to be spent on infrastructure development over the next three years – a remarkable stimulus that can truly get the economy going again. Increased infrastructure spend will assist businesses within the construction and transport sectors, to name a couple. The problem however may be the capacity of the state to spend the money, and spend it effectively.”
Botes says that the NDP’s approach to expanded collaboration between public and private sector is positive for job creation as the exercise cannot be championed by one of the sectors without the commitment and assistance from the other. “Recent examples of this combined approach, which seem to be successful thus far, include The Jobs Fund, which matches both public-sector and private-sector funding and support to stimulate job creation.
“Commitment from Government to create 6 million jobs via the expanded Public Works Programme by 2020, while very positive, is however not sustainable as all of the jobs are temporary and will not make an impact over the medium to long term. These jobs do however give otherwise unemployed citizens a chance to make money and allows for their basic needs to be met.”
He says that the youth employment tax incentive also has its limitations, and although it has during the first month benefitted 56 000 youths, it could have a far better reach if the incentive is adjusted somewhat. “As the incentive is aimed towards lower salary brackets it is not particularly attractive to knowledge industries, where the average wage for a young first time graduate is on average R10 000 per month. Employers in knowledge industries will therefore need to pay graduates more and could rather opt to employ fewer youths for a self-funded cadet or graduate internship programme.”
Botes also welcomes the proposed amendment to the turnover tax regime to further reduce the tax burden on micro-enterprises. “We welcome and support the proposed tax breaks that micro-enterprises receive. If a business’s turnover is below R335 000 no tax needs to be paid at all, and tax rates for businesses which generate turnover of between R335 000 and R1million has been reduced from 6% to 5%. Instead of two returns per year only one will now be required, which again supports the endeavours to reduce red tape.
“The 2014 / 2015 budget is testament that Government acknowledges the important role that small business plays in the economy and the contribution it makes towards job creation. We applaud this commitment, as the only way to promote long-term economic growth and create jobs in the current economic climate is to support South Africa’s business owners,” concludes Botes.