The 2020 Budget Speech, delivered by Finance Minister Tito Mboweni, revealed opportunities for local small and medium enterprises (SMEs) despite a difficult environment.
This is according to Nadine Chetty, co-founder of Ecomm Accounting Solutions and Intuit QuickBooks trainer, who said that achieving economic growth and higher employment levels required a plan and that is what his speech gave us, a plan.
“He referred to our economy as an Aloe Ferox, a plant which is known to survive and thrive when times are tough, similar to our economy and our country.”
Reducing challenges faced by SMEs
She points out that Mr. Mboweni said the economy will grow by 0.9% this year, but where does this leave the small business owner? “In order for the economy to grow, we needed to get a number of jumpstarts, especially pertinent to small businesses in South Africa. These included the interest rate reductions which came into effect earlier this year, the very exciting changes to the electricity regulatory framework and the tax proposals he set out in the budget speech.”
Small businesses are particularly affected by load shedding and the uncertainty of where Eskom is going, Chetty says. “They generally don’t have the capital for generators or the diesel to run these, or solar power. Stable electricity is key to growing South Africa’s vital small and medium businesses.”
This is why Mr. Mboweni’s announcement that local government can now source their own electricity is so important. “Electricity supply will be the government’s number one task, according to Mr. Mboweni.”
There was more to the budget than electricity though. “Tito spelled out his vision of an economic strategy for South Africa that would benefit small businesses. This included strengthening the macroeconomic framework to give this sector certainty, transparency and lower borrowing costs,” she says.
“On a broader scale, the government will push more resources into education, health and social development, and work towards better access to African markets. It is focused on reducing the cost of doing business, which all would applaud. In addition, government will shine a bright light on those sectors that create most employment, such as agriculture and tourism.”
As far as how to reach these goals, he made some important announcements, she points out. “There will be no major tax increases and VAT and company tax will remain steady. The tax threshold has been increased to R83 100 for people under 65, a monthly salary of R6 925. The first tax bracket has been increased to R205 900.The small business tax threshold has been increased to R83 100 taxable income, where no tax is paid.”
Benefits for local small businesses
According to Chetty, it is important to look at where tax revenue will be spent: “We will invest a lot in climate change mitigation, education, health, agriculture, transport and social development. This opens doors for small businesses to enter these markets. It will require more schools, hospitals, training facilities and agricultural infrastructure. For example, learning will get R396 billion, health R230 billion and farming R495 billion.”
“Municipalities will be able to source their own electricity from independents, which will both ease supply issues and create new business opportunities. Free trade across Africa will boost opportunities, with our youth equipped to take advantage of this. Along with this, relaxation of Fintech regulations will free up much-needed funding.”
Compliance is key
Mr. Mboweni stressed that with tax and regulatory relief comes an increased demand for compliance, says Chetty. “SARS will come down hard on non-compliance in this field. With saying that, it is vitally important for small business owners to have their own accounting software which will aid them in record keeping and running their business so when it comes time to paying, Corporate Tax, VAT & PAYE, you are fully equipped to comply. QuickBooks Online is a great tool for just that. Mboweni also stressed that we are embracing the 4th industrial revolution, so if our country is embracing it, why shouldn’t we?”
Nadine Chetty explains: Small businesses should jump at these opportunities to grow and build. The Budget Speech has really shown that funding will be made accessible and that there is definitely room for the small business, but compliance is key. Utilising technologies and advisors such as accountants to help you deal with the compliance minefield is key in the success and growth of your business.