Last week, Disrupt Africa speculated on what South African startups could expect from the budget speech made by finance minister Pravin Gordhan. Now that the dust has settled, what did they actually get?
Surprisingly much, according to Anton van Heerden, executive vice-president and managing director of Sage South and Southern Africa.
Though van Heerden said the South African government is well aware that the small, medium and micro enterprise (SMME) sector is the key to unlocking job creation and economic growth over the next few years, often startups and other small businesses are forgotten by policymakers.
“In that context, it was refreshing to hear Finance Minister Gordhan use the 2016 Budget Speech to mention some small business-friendly steps the government plans to take in the next year or so,” he said.
These include a promise to ease regulatory burdens for businesses, which van Heerden said is encouraging.
“Though he didn’t give much detail about what this will entail, we welcome any moves to make it easier to do business. Red tape ultimately benefits big businesses who have the resources to manage complex compliance requirements,” he said.
“Less administrative overheads will help smaller businesses to focus on growing rather than on ticking regulatory boxes. We look forward to seeing more specifics here – we believe that there is scope to make labour relations, registering a company, and dealing with the South African Revenue Service (SARS) much easier for SMMEs.”
Gordhan also announced the government has earmarked ZAR475 million (US$30.5 million) for the Department of Small Business in order to help small and medium businesses. Again, van Heerden said this is a positive development, but more detail is needed on how the department will be spending this money.
“In countries such as the United Kingdom, governments support startup companies and entrepreneurs through access to mentoring programmes and funding; we would welcome a similar approach in South Africa,” he said.
He also praised Gordhan for balancing the books without needing to hike company tax, personal income tax, or VAT, as many market observers had expected.
“These would have been counterproductive in our current economic climate,” van Heerden said.
“Our SMMEs are already deeply challenged by the collapse in the value of the rand, electricity price hikes, high interest rates and slow economic growth. Tax hikes would simply have hurt consumer and business confidence further and dampened economic growth.”
Overall, van Heerden said the promises made in the speech were a step in the right direction.
“In an economy where big businesses are automating their processes and downsising, it is small businesses who will lead the country’s fight against poverty, inequality and unemployment,” he said.
“Yet South Africa has low rates of entrepreneurial activity and high rates of business failure compared to developed and developing world peers. We hope that government is truly committed to removing the barriers to SMME success.”