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.”
Here Miguel da Silva, group executive of business banking at TymeBank, considers some of the things that SMEs are hoping to hear in the Budget Speech (rescheduled for 12 March), and highlights other aspects that need to be top of mind, now and in the months ahead.
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.
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 R100bn 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.
