What the Budget means for SMEs
In the 2014 Budget, Minister Pravin Gordhan trod a prudent course between the demands of an election-year constituency and South Africa's fiscal stability. Reiterating that the National Development Plan is the keystone of South Africa's future, he also pressed the message that the country desperately needs improved economic growth.
The NDP envisages growth, particularly employment growth, powered by "small and expanding firms". South Africa's prospects are not linked merely to small and medium enterprises, but to SMEs able to grow successfully. So does the budget encourage their success?
The budget recognises the importance of SMEs to South Africa. It allocates billions to dedicated SME support, and more to stimulate selected sectors. It also notes criticism of the compliance burden across the economy. Tax matters receive particular attention. The turnover tax is to be simplified, and SARS will take "further steps to lower the cost of tax compliance in South Africa".
This is good news. SBP's annual SME Growth Index, a longitudinal survey of a panel of 500 established SMEs, has found red tape to be a severe impediment to SME growth. Compliance demands and inefficiencies within SARS are a prime problem. In the 2013 round (the results of which have just been published in a report entitled Growth and Competitiveness) we found that an average SME was committing some 75 hours of staff time every month to red tape.
Perhaps most importantly, the budget - and Minister Gordhan's speech - stresses the need for national competitiveness. South Africa cannot avoid being measured against its peers; it must recognise both its national deficiencies and national advantages. The priorities accorded improved educational quality, innovation and expansion into foreign - particularly African - markets are encouraging for the SME community.