SME sector applauds Gigaba’s start-up fund

2017-10-26 12:56 - Carin Smith
(iStock) ~ iStock

Cape Town - While no tax relief was announced, it was encouraging to note the establishment of a R1.5bn SME fund by Finance Minister Malusi Gigaba in his mini budget, says Viresh Harduth, vice president: new customer acquisition at Sage Africa & Middle East.

The fund will focus specifically on start-ups.

"While we don’t yet know what support it will provide to new businesses, we’re hopeful that it will make it easier to start and run a business through reduced red tape, a supportive business ecosystem, and including small business representatives in policy discussions," said Harduth.

In the light of the worrying picture of the economy painted by Gigaba in his mini budget, Harduth said it is worth reflecting on the role that business builders and small business owners play in job creation and economic development.

"As the biggest provider of jobs in SA, small businesses are well-positioned to equip more youth with the skills, confidence and tools they need to start their own businesses," said Harduth.

"Small businesses are already under pressure from higher energy prices, which have forced some companies out of business."

Survive and thrive

Harduth said if the sector is to survive and thrive in tight economic conditions, it’s crucial that the public sector considers the combined impact of higher taxes, higher energy and water tariffs, spending on nuclear, social security and the National Health Insurance (NHI) on the cost of doing business in the country.

Christo Botes, executive director at Business Partners Limited, it is positive to see commitment from government on another initiatives encouraging innovation among small businesses.

In his view, however, it would be much more cost effective - from a national rollout perspective – to combine the funding for the SME fund with the CEO Fund, as pooling this would assist in ensuring effective management by the private sector.

"We would like to see the implementation matched with the intent to target deserving beneficiaries and accurately allocate the funding to start and expand sustainable small businesses,” said Botes.

He would like to see a balance between the money borrowed from the fund by small businesses and sustainability measures.

“To purely provide entrepreneurs with start-up funding, without it being supplemented with technical skills and business acumen, can be counterproductive as research shows that funding alone won’t necessary improve the success rate of small businesses,” cautioned Botes.

Karl Westvig, CEO of Retail Capital, said while he welcomes the instruction that SMEs are to receive payment of legitimate invoices within the prescribed 30 days and failure to do so will result in accounting officers being charged for financial misconduct, the Gigaba appears to have missed the point.

"As such a critical sector, employing 60% of SA’s workforce and contributing 57% of SA’s GDP, SMEs need a concrete plan with a single-minded objective to ease the burden of doing business so they can employ more people and contribute to economic growth," said Westvig.

"There is also a crisis in credibility, which is leading to a general negative sentiment in the economy. Small business owners need to be confident of the environment before they invest in capital equipment and hire more staff. This budget speech does little to improve this sentiment. We expect business owners will adopt a wait and see approach before investing further.

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