Although the minister emphasised that the budget would continue to prioritise social grant recipients and public-sector workers, small businesses weren’t left out. The Department of Small Business Development has set aside R2.1bn over the medium term to support around 120,000 competitive SMEs—especially those owned by women, youth, and people with disabilities in townships and rural areas.
Additionally, the government allocated R313.7m to the establishment of SMME hubs to support business expansion, while the R1tn allocated to infrastructure will be a positive for SMEs due to its impact on the infrastructure supply chain and because all businesses will benefit from investment in roads, water management and railways.
There was a significant 51% reduction in the cost of a 1.5GB data bundle, which is good news for small businesses and individuals. Let’s hope that all these commitments remain intact when the budget finally makes it through the legislative process.
Miguel da Silva, group executive: business banking at TymeBank, takes a closer look at what will affect SMEs most in April and beyond.
Transformation Fund proposed
President Ramaphosa, in his 2025 State of the Nation Address on 6 February, announced the much-discussed R100bn Transformation Fund.
The aim: Over the next five years, black-owned small businesses will be able to access financial support through this fund, which is expected to be largely financed by the private sector.
The reality: There are significant, valid concerns raised about this proposed fund. There is heavy critique that the fund is mainly focussed on the contributions from big business rather than the desired outcomes, which leads to worries about it being yet another fund ripe for looting.
The Minister of Trade, Industry and Competition, Parks Tau, published the Draft Transformation Fund concept document on 19 March, with a deadline for public commentary of 7 May.
"We encourage members of the public and interested parties to send their inputs to az.vog.citdeht@dnufnoitamrofsnart. Let the tussles commence," says da Silva.
While fuel prices are down, load-shedding returns and VAT increase looms
The latest fuel price decrease is good news for SMEs that rely on vehicles for deliveries and logistics. Effective 2 April, the price of 95 unleaded petrol decreased by 72c/l and 93 unleaded petrol decreased by 58c/l, while diesel prices dropped by between 84c and 86c/l.
Unfortunately, after months of no load-shedding, the dreaded power outages have returned. To add insult to injury, as of 1 April, Eskom direct customers are now paying an extra 12.7% – well above the inflation rate – while municipal customers will see prices go up by at least 11.32% from 1 July.
The impact of these cost increases on SMEs will be substantial. Businesses may try and absorb them initially but will eventually need to either up their prices or find innovative ways to reduce them.
It’s clear that exploring energy alternatives is not just a matter of ensuring a stable supply – renewables in particular look more and more appealing from a cost-saving perspective as grid electricity continues to get more expensive.
SMEs will take another knock when the 0.5% VAT hike tabled for 1 May 2025 comes into effect. The proposed 2025 increase, which at this stage can only be stopped by a legislative intervention, will take VAT up to 15.5%.
Unless an SME is VAT-registered and works only with other businesses that are VAT-registered, it will have to pay more for its supplies.
Consumers will have to shoulder the burden of the higher tax, although the government is planning on expanding the basket of zero-VAT-rated food items, among other measures.
The SARB firm on the repo rate – for now
At least it did not go up! But by holding the repo rate firm at 7.5% on 30 March, the South African Reserve Bank has ensured there will be no relief for those who use credit.
This decision makes the prime lending rate 11%. The SARB cited rising inflation risks, global economic uncertainty, and the effect of fiscal policy changes as reasons for its cautious approach.
What is certain is that continued high rates will keep the screws on households and SMEs alike.
Spaza shops face onerous registration effort
According to research by Trade Intelligence, there are approximately 150,000 spaza shop owners across the country, collectively valued at around R197bn in 2023.
Recently government has sought to make shop owners register their businesses to ensure better safety, compliance and regulation.
The registration is onero,us to say the least. Shop owners need to assemble a mass of supporting documents, and the process is laborious and expensive.
Tens of thousands of spaza shops have already been found non-compliant, and hundreds have been closed. Consider the effects on a sector estimated by the 2021 South African Township Marketing Report to employ 2.6 million people and contribute 5.6% to GDP if these closures continue.
April’s SME environment is anything but a joke. While government departments profess their desire to help SMEs, we must still contend with regulations, red tape and a repo rate that keeps SMEs and citizens from gaining even the slightest financial relief.
Add in the depressive effects of a looming VAT hike and turning our sluggish GDP growth around becomes a really tall order.
