By: Ben Bierman, Managing Director at Business Partners Limited
This time last year, following the election of President Cyril Ramaphosa, South Africa was on the cusp of a widespread optimistic rapture that has subsequently been coined “Ramaphoria”. While it is probably fair to say that not all expectations were met in the past year, it is also necessary to acknowledge that the country’s macroeconomic challenges, and especially the challenges to rectify and improve the institutional framework and ethos, were greater than expected.
This is according to Ben Bierman, Managing Director at Business Partners Limited (BUSINESS/PARTNERS), who frames the macroeconomic landscape of the upcoming 2019 State of the National Address and National Budget Speech as significantly more realistic than it was last year, but also better positioned for real regulatory action to have effect on the economic trajectory.
“While it has taken some time, the economy definitely seems to be gaining some traction now, specifically with regards to greater policy certainty within major sectors such as tourism and mining, as well as an increasingly clear direction of how Government plans will stimulate economic growth within the small and medium enterprise (SME) sector.”
This broader macroeconomic setting, Bierman says, has a direct impact on the outlook for the SME sector. “One has to remember that SMEs are supplying big corporates, as well as each other and general consumers; but they are also, to a certain extent, incorporated into government supply chains. As such, for SMEs to truly thrive, all four of these groupings need to prosper.
“Accordingly, as policy certainty and economic growth gets stimulated across the board, the spin-off effect for SMEs will be an increasingly conducive business environment,” he explains.
From a policy perspective in the budget, Bierman notes that tax relief has not proved to be the most effective method for stimulating the SME sector in the past. “Having observed little uptake of the small business turnover tax and other tax breaks within the sector, we would argue that Government’s commitment to initiatives such as procurement from and timely payment to SMEs, ensuring the availability of core resources such as electricity via Eskom and the reduction of red tape, remain constant fixtures on SMEs’ wish list for previous years and this year’s Budget Speech.”
In terms of a broader economic policy framework, Government needs to give further direction in the regulatory environment surrounding SMEs, he adds. “To do this, additional research must be conducted within the sector to get a better sense of how many SMEs are currently in South Africa, and what their actual contribution to Gross domestic product (GDP) is.
“Our wish list would therefore include that the Department of Small Business Development take a more coordinative and co-operative role in bringing the various stakeholders together to combine resources, generate quality data, and use this information to frame a new policy in terms of Government’s role in supporting the SME sector.”
This data would also serve to better direct Government in terms of where SMEs are requiring additional support, says Bierman. “For example, we know from experience that many entrepreneurs lack the technical skills required to run a business, but there is no concrete data to show that there are numbers to support the implementation of entrepreneurial educations centres or to establish a national mentorship programme to assist with technical and business skills.”
Furthermore, he adds that considering the current low levels of economic growth, it may be beneficial for the Department of Small Business Development to assist SMEs in achieving growth beyond South African borders, particularly in the rest of Africa. “This can be done through establishing support centres to assist entrepreneurs with navigating the regulatory and logistical process of exporting goods and services.”
Bierman concludes that while the broader macroeconomic environment appears to be moving in the right direction, he hopes to see this translate into tangible action in 2019. “This action is essentially what we hope will be laid out in the upcoming Budget Speech, in the sense that infrastructure spending, policy certainty and economic growth initiatives are set on a different trajectory – one that supports and fosters SMEs.”