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DEPENDING on who you speak to, you will get differing answers but in the US small business is expected to contribute between 60% and 75% of all new jobs in the economy over the next decade.
Now bear in mind the statistics economist Mike Schüssler rolled out last week, which showed that of the roughly 13 million South Africans who have jobs, 5 million pay taxes which have to support nearly 14 million people on welfare grants. This illustrates why the small- and medium-sized enterprise (SME) sector is so critical to the country.
As columnist Michael Snyder points out in a recent submission for the Business Insider, the US solution to the economic crisis has been to create all sorts of business and personal taxes, and to introduce as many rules as possible to protect those already employed from ruthless bosses who might want to cut their jobs.
"The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies," he quotes a business owner as saying.
Starting to sound familiar to what we have closer to home? Who is going to start a business when they read headlines that the head of the SA Revenue Service is telling the tax base how his organisation is going to start taking money from tax offenders directly out of their bank accounts?
The fact that nearly a million more people are claiming welfare benefits than those in formal employment is not really going to inspire me to be a productive member of society.
Who is going to start a small business in a country where trained accountants have given up trying to help SMEs with VAT registrations and returns, simply because the process gets more and more complicated?
Or when your bank can turn around and sheepishly say it needs to close your bank accounts and could seize your assets because the Companies and Intellectual Property Registration Office can neither confirm nor deny that you have paid a R400 registration fee?
Tipping point in trade union action
Would you start a business in a country where essential services like electricity can be shut down because the workers say so and the law be damned?
Would you try and build a business which exports products and brings in hard currency when transport unions can close down the streets and ports until their demands are met?
Of course not.
Government and trade unions can argue all they like about how they are protecting people's rights, but a tipping point has been reached. As Schüssler said last week, there are people who have been working at that Aurora mine since February in the hope of getting a salary somewhere along the line. I don't see the regulations helping those people.
Those who follow futurist Graeme Codrington will know that he talks extensively about how freelancers are becoming the new permanent employees. In the US there were 12 million freelancers or independent contractors last year, and that number is expected to rise by double-digit percentages for at least the next three to five years.
A few years back, local government was talking about how call centres would be a great source of inbound revenue and foreign investment for South Africa. But technology means that now anybody at home with a phone line can be plugged into a global call centre and if the phone doesn't ring, those people simply don't get paid.
Jingle or ring tone designers in South Africa could for $5 develop something for a company in Uzbekistan and bring foreign revenue into the country, but I am pretty sure they are not going to rush to declare that income to revenue authorities.
The more heavy-handed regulators become, the more people are going to try and find ways to hide the money - then we lose out on tax revenue and stifle business creation.
State must play its part
I see it in my own small business. If I want development work done, I go to an independent contractor. Ditto for book-keeping, administration and graphic design. I don't offer security - I offer to pay for what you can offer me here and now and if I don't like your price, I will go somewhere else.
The regulatory problem with this is that instead of having a single business entity to tax, you now have lots of individuals doing everything they can to stay under the radar, which makes it a lot harder to track.
In humble conclusion: you can't say unemployment is a problem when all the rights sit with the employees, irrespective of work performance. Nor can you say you're going to get tough on tax offenders, by pointing out to those who do pay that you now have an even bigger stick to wave at them.
The finance minister can't stand up - as he recently did - and say we should be exporting the technology our universities develop, when there are no incentives for private financiers to partner with these institutions to monetise the technologies.
Then there is my personal favourite: pick a tax and throw it at healthcare, dividends on shares, trading of shares, interest on savings, pensions and pretty much every other savings vehicle - and then turn around and bemoan the fact that only 5% of South Africa saves.
If you over-cook the golden goose, the wrong people are going to get fried.
- Fin24.com
Now bear in mind the statistics economist Mike Schüssler rolled out last week, which showed that of the roughly 13 million South Africans who have jobs, 5 million pay taxes which have to support nearly 14 million people on welfare grants. This illustrates why the small- and medium-sized enterprise (SME) sector is so critical to the country.
As columnist Michael Snyder points out in a recent submission for the Business Insider, the US solution to the economic crisis has been to create all sorts of business and personal taxes, and to introduce as many rules as possible to protect those already employed from ruthless bosses who might want to cut their jobs.
"The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies," he quotes a business owner as saying.
Starting to sound familiar to what we have closer to home? Who is going to start a business when they read headlines that the head of the SA Revenue Service is telling the tax base how his organisation is going to start taking money from tax offenders directly out of their bank accounts?
The fact that nearly a million more people are claiming welfare benefits than those in formal employment is not really going to inspire me to be a productive member of society.
Who is going to start a small business in a country where trained accountants have given up trying to help SMEs with VAT registrations and returns, simply because the process gets more and more complicated?
Or when your bank can turn around and sheepishly say it needs to close your bank accounts and could seize your assets because the Companies and Intellectual Property Registration Office can neither confirm nor deny that you have paid a R400 registration fee?
Tipping point in trade union action
Would you start a business in a country where essential services like electricity can be shut down because the workers say so and the law be damned?
Would you try and build a business which exports products and brings in hard currency when transport unions can close down the streets and ports until their demands are met?
Of course not.
Government and trade unions can argue all they like about how they are protecting people's rights, but a tipping point has been reached. As Schüssler said last week, there are people who have been working at that Aurora mine since February in the hope of getting a salary somewhere along the line. I don't see the regulations helping those people.
Those who follow futurist Graeme Codrington will know that he talks extensively about how freelancers are becoming the new permanent employees. In the US there were 12 million freelancers or independent contractors last year, and that number is expected to rise by double-digit percentages for at least the next three to five years.
A few years back, local government was talking about how call centres would be a great source of inbound revenue and foreign investment for South Africa. But technology means that now anybody at home with a phone line can be plugged into a global call centre and if the phone doesn't ring, those people simply don't get paid.
Jingle or ring tone designers in South Africa could for $5 develop something for a company in Uzbekistan and bring foreign revenue into the country, but I am pretty sure they are not going to rush to declare that income to revenue authorities.
The more heavy-handed regulators become, the more people are going to try and find ways to hide the money - then we lose out on tax revenue and stifle business creation.
State must play its part
I see it in my own small business. If I want development work done, I go to an independent contractor. Ditto for book-keeping, administration and graphic design. I don't offer security - I offer to pay for what you can offer me here and now and if I don't like your price, I will go somewhere else.
The regulatory problem with this is that instead of having a single business entity to tax, you now have lots of individuals doing everything they can to stay under the radar, which makes it a lot harder to track.
In humble conclusion: you can't say unemployment is a problem when all the rights sit with the employees, irrespective of work performance. Nor can you say you're going to get tough on tax offenders, by pointing out to those who do pay that you now have an even bigger stick to wave at them.
The finance minister can't stand up - as he recently did - and say we should be exporting the technology our universities develop, when there are no incentives for private financiers to partner with these institutions to monetise the technologies.
Then there is my personal favourite: pick a tax and throw it at healthcare, dividends on shares, trading of shares, interest on savings, pensions and pretty much every other savings vehicle - and then turn around and bemoan the fact that only 5% of South Africa saves.
If you over-cook the golden goose, the wrong people are going to get fried.
- Fin24.com
