Small business is identified as an imperative in the National Development Plan 2030 and as a primary job creator with plans for 90 percent of jobs to be in Small Medium Enterprises (SME).
“This has been the policy position in many of the previous seven economic policies South Africa have had in the last 25 years. Their importance as a job creator is evident throughout the world, up to 70 percent of jobs in Organisation for Economic Co-operation and Development are in small business and according to the World Bank in emerging markets they also provide the majority of jobs and four out of five new jobs,” says Pieter Faber, SAICA Senior Executive: Tax. “However, in South Africa, this may be different, especially in the formal employment sector. Though many claims of SME’s being a primary employer in SA have been made, a recent study by the Small Business Institute claims that only 28 percent of jobs are created by SME’s. Government and the top 1000 big companies provide 56 percent of formal sector employment. Do we have too much of a “culture of employment” where “others” must create the jobs?”
“One other area to look for solutions is how easy it is to do business in South Africa as an SME - a study that the World Bank has been doing for a number of years in its Doing Business Report. This study looks at ten different but practical aspects of starting and running a new business, including paying taxes and getting electricity, and South Africa has plummeted from being in the top 50 to 82 in the last few years,” adds Faber.
“This has not gone unnoticed and government in 2017 put together working groups for each of the areas in the doing business report that impact SME’s. These workgroups were tasked with identifying recommendations to improve the rankings and were composed of representatives from various governmental departments, the City of Johannesburg and business, including SAICA in the Paying Taxes Workgroup.
However, the urgency of the work of these workgroups took on a new dimension when the President in his 2019 SONA set a target for South Africa in returning to the top 50 ranking in the next 3 years. What was even more indicative of governments revised commitment of getting things done in an efficient and effective manner, was that the Office of the Presidency would now directly coordinate the project and its progress, putting to bed concerns that inter-ministerial politics and apathy would get in the way. On 15 Feb 2019, the President’s Economic Advisor Ms Trudi Makhaya met with the World Bank and the Workgroups to ensure that there was alignment and a clear common goal for all concerned from both government and the private sector.
This approach of collaboration across private and public sector and even across political lines to reach a defined goal in a set time with leadership from the top is in my mind a recipe for success. We just need to expand it to many other places that need to be fixed. Those other places include the Budget on both the income and expenditure side, whether it is increasing tax morality, fixing SARS or expanding the tax base to increasing accountability and reducing spending. Budget 2019 may hold some but not enough solutions, but we should be hopeful that at least some of the work of the Workgroups find their way into Budget 2020 so that it can be effected and measured to increase the actual ease of doing business for SME’s,” concludes Faber.