National Budget 2015: The effects on SMMEs
Finance minister Nhlanhla Nene’s Budget proposed v a r i ous c ha nges to t he administration of SMMEs and the regulatory environment aimed at reducing red tape and alleviating the burden of compliance encountered by small- and medium-sized businesses.
“We a p pl a u d t he min i s t e r ’ s announcement of the introduction of a central data base which will facilitate single registration when transacting with the state. This will certainly ease the administrative burden for the business community and should have a positive impact on the establishment/formation of small- and medium-sized enterprises,” says Mike Betts, a partner and SMME tax specialist at Grant Thornton.
The e l e c t r onic database wi l l consolidate tax details, BEE statuses and act as a centralised platform for tender documents and applications. Nene hopes its introduction will simplify application procedures for government work. As a spin-off, corruption in the tender process may be reduced.
Even though considerable relief was extended to SMMEs in the Budget, tax relief was only extended to businesses with turnover under R1m, with turnover tax being dropped from a maximum rate of 6% to 3%. Those with turnover of less than R335 000 will not pay.
“The reduction i n ta x rates for micro businesses will be beneficial to this segment of the market and may encourage more participants to avail themselves of the turnover tax regime.
“However, we’re disappointed that similar benefits could not be extended to the broader small business community operating above the R1m threshold but we assume that budget constraints probably limited the scope for such a concession,” says Betts.
There was some emphasis on making t he regulator y environment more lenient on micro enterprises, but relief was not extended to entrepreneurs and businesses that are scaling up. The OECD entrepreneurship study in 2013 indicated that to create the necessary economic movement and solve the unemployment crisis in Sub-Saharan Africa, government needs to help create 6 300 survival or necessity startup businesses or alternatively 43 highimpact scale-up businesses by 2020. Yet the government continues to focus its efforts on the initial business cycle phase.
Heather Lowe, head of enterprise development at FNB Business, says that South Africa “needs to start prioritising scale-up business to create the economic growth momentum necessary for job creation. Our best and realistic chance of accelerating job creation depends on creating an enabling ecosystem for scaleup business because they have the highest growth potential.”
Betts says it is disappointing that the Davis Commission’s recommendations for small businesses with a turnover of R20m a year or less did not filter through. “We hope that these recommendations are still under consideration and that they will receive some attention in the 2015 amendments to the tax legislation.”
On 1 March, new legislation on the tax exemption of funding to SMMEs came into effect. “Coupled with further concessions granted to venture capital companies in the 2014 tax amendments, these measures should provide a stimulus to the funding of SMMEs, which has been one of the major constraints facing this sector. All in all, these are positive developments,’’ says Betts.