By Colin Timmis, General Country Manager, Xero SA
Finance Minister Tito Mboweni delivered his 2020 Budget address this week under trying circumstances – but there were some encouraging signs. Most encouraging was the government’s decision not to increase personal taxes. Instead, taxpayers will see some slight relief and VAT remains unchanged.
The minister admitted that there are still some hurdles to clear. Low economic growth, unemployment at a record high and a mounting budget deficit continue to be challenging issues to contend with.
Minister Mboweni also made some welcome statements about start-ups and small businesses. It was encouraging to see him acknowledging their importance in the local economy, and indicate that the government would focus on the effectiveness of the tax system in supporting them. However, as President Cyril Ramaphosa pointed out in the SONA earlier in February, the government cannot fix the country’s economic woes alone. Building a strong economy will take a collective effort from both the public and private sectors.
Currently, formal SMEs make up around 98.5% of the number of formal firms in the economy but account for only 28% of jobs. It’s clear that substantial investment is necessary to achieve the National Development Plan’s goal of SMEs providing nearly 90% of all jobs by 2030.
Fortunately, the minister’s announcement that the government will allocate R6.5 billion for small business incentive programmes is a step in the right direction. It’s also good to see that the government will focus on raising skills in the education sector and address youth unemployment. They are the workforce of the future so it’s vital they have the right skills – especially as technology continues to change the way we work.
Technology adoption will be key to SME growth and productivity in the future. Early adopters of technology in the SME sector are more likely to be more stable, show faster economic growth, and run more efficiently. We’ve seen this amongst small businesses who have embraced cloud technology. That is what sustainability is all about, and it’s something our country desperately needs.
So it’s really encouraging to hear minister Mboweni’s intent to relax regulations to help South Africa’s flourishing FinTech sector to grow. This will hopefully encourage more innovation in the tech sector and great adoption in future.