23 June 2020: On Wednesday, 24 June, Minister Mboweni will table the Special Adjustment Budget, which has come about as a result of the COVID-19 pandemic and ensuing national lockdown. With certain sectors of the economy still struggling to get back on their feet, there is a real need to provide greater support for the small and medium enterprises (SMEs) that have been hit the hardest by this pandemic.
This is according to David Morobe, Executive General Manager for Impact Investing at Business Partners Limited (BUSINESS/PARTNERS) – one of Africa’s leading financier for formal small and medium owner-managed businesses – who says the National Treasury must prioritise a number of interventions as part of the Special Adjustment Budget if SMEs are to survive in South Africa over the coming months and years.
“To start, Government could consider supporting SMEs with a tax rebate that can be off-set against tax payable arising from each and every staff member that the SME retains for the year. This will give much-needed recognition to the role that SMEs play in job creation. It will also assist in reducing unemployment during this difficult economic time, which would in turn ease the burden on the Unemployment Insurance Fund and social grant support needed to support the unemployed.”
He says that deferment of VAT and Company Income Tax for the remainder of the Tax year, revised PAYE thresholds, and deferring servicing of utility bills for businesses at local government level, can all help to improve business liquidity. “At the very least, National Treasury could introduce a moratorium on future tax payments as they fall due. A freeze on tax payments by at least three months will go a long way in bolstering the cash flow of SMEs when they need it most.”
With SMEs facing a significant degree of uncertainty in the market, deploying the recently announced guarantee scheme could really bode well for SMEs and some sectors that were negatively impacted by the lockdown, according to Morobe. “The guarantees can enable export businesses to either continue their operation, or receive financial support if their businesses are disrupted by future health and safety measures. The SMEs can also leverage the guarantee scheme to access lines of credit which will enable them to maintain or adapt their businesses as needed.”
In addition, Morobe states that Government should consider allocating funds to various areas for the foreseeable future. “The pandemic is expected to continue for quite some time, so there needs to be additional spending on medical resources for the general populace impacted as the infection rate continues to rise. Direct subsidies and relief to business owners through development finance institutions and private sector initiatives can help to keep businesses alive, people employed and preserve the taxpayer base. There may also be a need for further social grants for the unemployed and child welfare as many jobs will invariably be shed despite all efforts to preserve them. Finally, we believe that all businesses in the country will benefit from additional spending on South Africa’s technology infrastructure in order to increase internet access and make this resource more affordable.”
In closing, Morobe states that there is still a high degree of uncertainty over when the country can return to some semblance of normal operation. “If government does everything in its power to support SMEs during this time, we are confident that it will benefit the economy greatly and aid our whole country in its recovery in the future,” he concludes.