By Pieter Bensch, Executive Vice-President at Sage Africa & Middle East

Now is an opportune moment for the government to take bold steps to grow the small and medium business (SMB) sector – as new finance and small business development ministers take their posts – and as South Africa counts the costs of the July unrest and the ongoing pandemic. SMBs hold the key to leading the country out of a prolonged economic slump into a new era of renewal and prosperity. 

By encouraging entrepreneurship and nurturing SMBs, South Africa can help to accelerate inclusive growth. As owner-driven and often community-based organisations, small businesses help to build wealth in a community. They also tend to absorb more labour than larger businesses, creating additional jobs. Once they’re thriving, they make significant contributions to the fiscus through the taxes they pay.  

Yet, this sector has been hit especially hard by the economic challenges of the past 18 months. In the first half of this year, Stats SA recorded nearly 1 000 liquidations of companies and close corporations. Other research shows that SMEs accounted for 89% of businesses impacted by the unrest – they provide about 70% of the jobs in South Africa and stand to lose R3.4 billion per month in revenue. 

No free rides

Sage research conducted before the unrest shows that most business owners are not expecting an easy ride in the months to come. As they find their footing in the new reality, their concerns include more COVID waves (27%); increased competition (23%); cash flow and liquidity problems (22%); significantly reduced demand from customers (20%); and a lack of financing (40%).

With this in mind, the government is to be commended for assisting SMBs affected through measures such as assistance for uninsured SMBs impacted by unrest, the extension of the Employment Tax Incentive, the temporary employer/employee relief scheme (TERS), and deferment of PAYE taxes for employers with revenue below R100 million. 

Yet, more can be done to help SMBs grow through and beyond the current crisis. In particular, we would be pleased to see the new Finance Minister, Enoch Godongwana, make good on the promises of his predecessor to review the preferential small business tax regime, the VAT registration threshold, and turnover tax. 

Driving growth of small businesses is not just about top-down interventions. In fact, there’s a case for more deregulation and less red tape in South Africa. During these times, we ask the government to rethink pending legislation such as the National Small Enterprise Amendment Bill, which may raise the costs and risks of doing business.

Choices to be made

As a partner to small businesses, we know owners are making choices about how their businesses recover and, in some cases, reinvent themselves. We’re right by their side, continually helping small businesses navigate what’s next – and we are engaging with them to learn more about how we can help. Our customers tell us that big business, like government, can be a valuable partner to them.

This is a time when favourable credit terms, quick payment of invoices, mentoring and other support can make a significant difference to small businesses. It’s in the interests of big businesses to help their smaller peers navigate the challenges we face because they, too, depend on a vibrant ecosystem of suppliers, customers and business partners. 

Finally, we commend the government on the growing momentum behind the country’s mass vaccination programme. We are encouraged to see that adults above 18 will soon be vaccinated, which could put the country on a path to widespread herd immunity and help reduce the need for severe lockdowns when the inevitable summer surge in COVID infections takes place. 

As we look beyond the unrest and the pandemic, South Africa’s small business owners are eager to help rebuild the economy. Yet, given the impact of COVID and the unrest on small businesses, we will have our work cut out for us in rebuilding confidence and inspiring investment. This is the time to reset our trajectory for growth through entrepreneurship.