By: Garth Rossiter, Chief Risk Officer, LULALEND

Comments on Mini budget

“Today’s budget review comes in an environment where small businesses are dealing with low economic growth, high inflation and rising interest rates. These reduce disposable income and their ability to invest and grow. In addition to these challenges, continuous load shedding by Eskom has created a perfect storm for these struggling businesses.

We’re in an ANC election year and with general elections coming up in a couple of years and Minister Godongwana needed to play a political game and do some juggling to keep all parties happy.  I think he has probably done the best he can with limited scope to move.

In an ideal world we would have seen more being done for SMEs, but the government does seem to be listening to us and talking about creating a more enabling environment which is what we need. The minister wasn’t clear though on exactly how they plan to do this, so some clarity here might have been beneficial, but he is saying the right things.

Using windfall taxes to reduce Debt to GDP is positive and is expected to be at 69% of GDP in 2024/25. This lower debt and servicing costs means SMEs will have extra to spend on the things that matter, like fixing Eskom, and investing in real growth. Our concern is that, until we see the government getting serious about creating an enabling environment for SMEs, we’re going to be facing an uphill battle in dealing with low economic growth and high unemployment.

Keeping the lights on is vital for all businesses, and for small businesses in particular, so we’re happy that power generation is at the top of the budget agenda. While we have seen some really great growth and recovery in the SME sector post COVID, it is critical that everything is done to create an enabling environment for this critical business segment.

The solution, as we’ve been saying consistently about previous budgets, is to stimulate the economy and drive GDP growth.  This will generate tax revenue as a by-product which is ultimately what the government wants. Given how bloated the public sector is at the moment, this growth will have to come from the private sector which contributes over 60% of our GDP, but it has to be driven by small businesses, which generate the vast majority of private sector jobs.

We are encouraged by the Minister’s comments on lowering the barriers to entry. This is key to making it easier to do business and thereby growing your economy. The more we can do that, the more we can create employment and grow our economy which ultimately grows the tax base.”