Mid-term budget: Nothing for small and medium enterprises but they fight on anyway

COMMENT

After much anticipation, Finance Minister Enoch Godongwana delivered a mid-term budget policy statement that did exactly what we have become accustomed to: more of the same with a few positive signs and nothing in the way of meaningful small and medium enterprise (SME) support. 

The minister called it a pro-poor budget, which, in a country such as ours, is right and just. Undoing injustices and inequality should be the priority. Surely no level-headed person would disagree with this. Where we do disagree, however, is the road to get there. The road less taken — in a South African context, but certainly not from a global perspective — is a growth-oriented budget and economy. Godongwana missed an opportunity to announce, or even allude to, meaningful stimulus for SMEs. 

We’re not preaching to the unconverted. The government’s own national development plan places SMEs front and centre of a grand plan to create jobs and grow the economy. The disconnect appears to happen when they’re asked to actually do something about it. Many in the private sector are ready and willing to sit at the table with the government and plot a meaningful plan. They just need a ticket to the table. 

To be fair, Godongwana came in and delivered a budget that was expected. He talked the talk regarding Eskom and other state-owned enterprises, saying they needed tough love. No one would disagree with this. Electricity security is one of the most pressing concerns for SMEs. Although private power generation and embedded power solutions will probably make a difference in the future, SMEs are still at the mercy of the public utility for the foreseeable future, and load-shedding presents a risk for proper economic recovery — despite the expected GDP growth rate adjusted to just over 5%.

He announced that there would be a mass drive for public employment. He told us that a portion of the tax windfall would go towards lowering public debt, which was eating into the critical services. While announcing an extension in grants, he also acknowledged that too wide an extension could not be considered if it undermines growth.

But, for those of us who long to see the SME sector thrive, it was more of the same. Instead of throwing our hands up, it is back to the grindstone. It’s business as usual.

Since before the start of the global pandemic, we have been calling on SMEs to remain resilient, adopt an opportunity mindset and look for support in their networks and to get funding from alternative, private players. This was borne from a frustration of almost-there budgets that just didn’t provide the support needed.

This hit a crescendo during the Covid-19 pandemic when much-publicised relief was announced, but which automatically excluded almost every sub-R10-million SME in the country because of the onerous conditions set by banks. The small players, by the very nature of their businesses, do not tick the boxes that mainstream banks need ticked before they release funds. 

A cynical observer may well have said at the time that the writing was on the wall. Fast forward to now. October was a record month on our books and November is set to surpass this. Here we are, a mere three months after the worst rioting in our democratic dispensation, in a lull between the third wave and expected fourth wave, disappointed that the new finance minister didn’t announce stimulus packages for the real economy. Yet despite all of this, SMEs are investing in their growth at a rate we’ve never seen before. That is resilience. It is also a sign of the pent-up growth just waiting to explode into our economy — if only the government would see it.

International airlines are landing at Cape Town International Airport again, tourism sites are at beyond 80% capacity for the December period, hospitality and retail are showing signs of rebounding — the green shoots are there for everyone to see. If the treasury is not going to provide direct stimulus for SMEs to grow, they are going to do it despite the government, not because of it.

This is not to say we should not continue to lobby the government for more SME support. If the green shoots are possible in the current situation, just imagine the potential if SMEs had access to government support, if the tax regime was tilted in their favour, if the labour law encouraged them to hire staff, if sectors hammered by the pandemic received special stimulus packages?

South Africans are resilient. They get things done. Perhaps the greatest irony is that as the SME sector gets on with its business and grows, and the tax base increases, and more people are employed, the finance minister will find it easier to draw up a good national budget.

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Miguel da Silva
Miguel da Silva is the managing director of Retail Capital

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