Na­tional Bud­get 2015: The ef­fects on SMMEs

Finweek English Edition - - IN THE NEWS - BY LISA ILLING­WORTH

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.

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