/ 10 November 2021

Godongwana must deliver a stimulus-led mid-term budget

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Tough case: All eyes will be on Finance Minister Enoch Godongwana when he delivers his first medium-term budget speech, which comes amid Covid-19 and after the devastating July riots, and whether he will dish out additional revenue. (Madelene Cronje)

Finance Minister Enoch Godongwana has an opportunity to announce his influence and deliver a growth budget in this year’s mid-term budget policy statement after years of austerity, and this should ideally include new stimulus packages for small and medium enterprises (SMEs). 

The government’s revenue collection went better than many people expected thanks to solid performance from mines and banks, among others, and so there’s an opportunity to turn things around, starting with a new SME stimulus package that works.

The first prize would be for the minister to deliver a stimulus-led or growth statement. Previous stimulus plans triggered by the Covid-19 pandemic failed most SMEs because they were geared more towards larger medium enterprises, so there’s an opportunity to try again and bring in alternative lenders who don’t bring the same burdensome conditions as banks.

Banks, by their nature, are forced to set the bar too high for most SMEs, especially those with turnovers of less than R10-million, leaving money unspent. By bringing in alternative lenders — who have stepped up and have been finding the smaller SMEs — there’s far more chance of getting broad stimulus to the businesses that need it most. Businesses are eager to recapitalise to take advantage of a potential post-pandemic rebound.

I am cautiously optimistic, given comments made by Godongwana just before he became finance minister. In an opinion piece written two weeks before he took over the hot seat, he wrote: “Key elements of such a growth strategy will include, among other things, structural reforms, public investment, particularly in infrastructure and SMME support, including access to finance.” These are encouraging words.

SMEs need to see that the government cares and hasn’t left them out in the cold. Although they have other funding options, the confidence generated would have a profound effect on the economy.

It is morally correct to support those who are languishing in poverty and unemployment but, for the economy to rebound, there needs to be a simultaneous shift towards sustainable, growth-inducing policies.

There are positive signs. Godongwana told Daily Maverick after becoming minister that the problem, as he saw it, with the debate about supporting the unemployed is “… there is little attention on the long-term issue of growth. If we manage to grow the economy and build the labour force that can be absorbed by that economic growth, then we can really grapple with the problems.”

There are practical ways Godongwana’s mid-term budget policy statement can have an effect on sustainable growth. SMEs all over the world hold the keys to job creation and long-term economic growth. Some industries have a substantial effect on SMEs. For instance, if Godongwana announced practical plans to stimulate infrastructure investment, from ports to other public projects, there would be a knock-on effect for high-employment potential SMEs in the construction supply chain. Of course, this requires plans being executed.

Tourism has been all but decimated by the pandemic. Although there has been an uptick in domestic tourism, the thousands of SMEs that depend on the sector need it to return to its previous strength and beyond. It would be a great tactical move by the government to announce plans to rejuvenate and grow a sector that has contributed up to 10% of the country’s GDP because it will help SMEs that feed off the sector to rebound, while triggering the birth of more small businesses.

Eskom and energy security must form part of the discussion. The country has been grappling with yet another bout of load-shedding. This has a crippling effect on the economy, especially SMEs. Johannesburg recently made its plans to source independent power known, and it will be interesting to see where the minister stands on building a sustainable plan to finally end energy insecurity.

Ultimately, hundreds, if not thousands, of businesses are holding back on investments — they need to feel confident in the economy and government’s commitment before they part with their money. A stimulus-led, growth-oriented bid-term budget statement would go a long way towards creating a fertile environment for these investments.