SMEs are waiting with bated breath for the budget speech announcement. They are collectively hoping to see the government address their burning questions. What is happening with B20? And what on earth is going on with the tax situation?
Many issues are affecting SMEs so early this year, from the return of loadshedding, the increase in fuel prices, tension in the relationship between the USA and RSA, and the last minute postponement of the budget speech to March 12.
Miguel da Silva, Group Executive of Business Banking at TymeBank, shared some of the things that SMEs are hoping to hear in the budget speech and where their focus needs to be.
Budget Speech Announcement Coming Up
“While South Africa needs to raise more money to finance its long list of urgent needs, it has already been made clear that increased borrowing is not an option,” Da Silva states. “Now that the controversial 2% VAT increase is no longer on the table, there is talk of a 0,75% increase instead. Regardless, the finance minister will have to find other ways to fund the revenue shortfall.”
However, VAT rates is not the only tax concern for SMEs – increasing personal and company taxes might be on the cards too. “The issue, however, is that South African taxpayers are already taxed to the hilt. According to South African Revenue Services’ 2024 tax statistics report, 2,6% of South Africa’s citizens pay 76,2% of all personal tax. When it comes to company tax, approximately 1 000 companies pay 72,3% of all the tax collected.”
Da Silva adds that the pressure the government has to balance its books remains. “Some analysts expect this to come from an increase in so-called “sin taxes” as well as additional taxes on luxury items, and it is understood that a wealth tax is also being considered.
“Cutting back on expenditure is a likely scenario. Let us hope that whatever budget cuts are being considered, there will be some money allocated to SME support – after all, SMEs’ increased participation in the economy will boost tax revenue while creating much needed jobs.”
He also adds that an increased allocation of the national budget towards infrastructure development would also be a welcome development for SMEs, given the opportunities that could emerge in the sub-contracting space.
B20 and What it Means for SMEs
Business 20 (B20) serves as the official G20 dialogue forum with the global business community. The B20 kicked off in Cape Town on 24 February, marking the start of a year of global business engagement to set priorities for business in conjunction with the G20. The B20 platform consists of eight task forces, each focusing on a critical area of economic and social importance.
“The Finance and Infrastructure Task Force is to SME’s interest. According to B20 literature, the task force’s focus is on driving innovation in financing models, ensuring greater inclusivity in financial systems, and addressing infrastructure gaps critical to economic growth.
“It has been indicated that particular attention will be given to empowering small and medium-sized enterprises by removing financial barriers, expanding access to affordable credit, and fostering their integration into global markets – music to every small business’s ears.”
SMEs’ Scalability Through Technology
Another point that Da Silva highlights is that SMEs’ shouldn’t solely rely on the changes from government to grow their business. In fact, scalability is possible through technology.
“In recent years, the use of cloud-computing technology among SMEs globally has sky-rocketed to 80%, according to a recent report by Gartner. Once the domain of large corporates, it is attractive for SMEs in that it reduces the need for expensive hardware and software licenses – since Cloud providers manage software updates, this reduces the cost of IT maintenance,” he explains.
“SMEs are also recognising the benefits of data analytics as a tool to help them make more informed decisions regarding operations, market trends, customer engagement and strategy development, ultimately enhancing their competitiveness and efficiency,” Da Silva says. “As with all technologies, there are also some challenges. Apart from data quality and privacy issues, implementation can be complex and requires the upskilling of staff. Still, for more established SMEs, both technologies are worth exploring to see if they align with their specific requirements.”
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