Budget sounds optimistic note for SME’s

Hope for small business, says Standard Bank


The national budget announced yesterday sounds a note of optimism for small businesses that are likely to not only profit from tangible benefits regarding tax, but also from government initiatives that will create opportunities along value chains that entrepreneurs will be able to exploit, says Standard Bank.

“The budget’s note of optimism for small business was sounded in what is currently a difficult market,” says Ravi Govender, Head of Small Enterprises at Standard Bank.

The promises of increased infrastructure spend, and the broad base of activities from which these projects will be drawn, will spur increased activity in the sector and also encourage the creation of employment opportunities.

“There is no doubt that an expanded investment in our national infrastructure will be a decisive element in creating ‘pockets of opportunity’ along value chains through which small businesses, because of their ability to focus on niche activities, could benefit,” says Mr Govender.

Amongst the prospects that would undoubtedly encourage growth within the SME sector was the announcement that government intends constructing an additional 433 schools, the growth in power station and renewable energy infrastructure, and increased implementation of government community and national work programmes.

It stands to reason that small businesses operating within the traditional areas of construction, supply of materials and transport will benefit from this, in addition to other non-traditional business areas.

“There is no doubt that the drive to identify and exploit business breaks will be bolstered by the fact that government, through the announced changes to taxation of small business, will be providing tangible relief that will make it easier for the SME sector to operate more efficiently than it has before.

“By making more money available to start-up and existing small business owners, a new savings culture could emerge in the SME sector.  The spin-off will be investment strategies that could be instrumental in creating additional employment. Simultaneously, entrepreneurs could use cash freed up by these changes to broaden and expand their businesses.  

“From within Standard Bank, we look forward to the implementation of government’s pledge for assistance with equity funding for the SME sector, which will be set at R6.5 billion over the next three years.

“If this funding is deployed in an appropriate manner and is optimally structured, banks will be able to effectively position themselves as lenders.”

“Structuring of future equity funding for SMEs is a crucial issue from a banking point of view. If equity lending is undertaken from an ‘angel investor’ perspective, it will help to graduate small business into the lending continuum - an arena in which banks operate more effectively. It is, therefore, from a lending perspective that banks will be able to work in partnership with small business to promote their growth and development.”

Ultimately, says Mr Govender, the government, financial institutions, grant-makers and other providers of financial assistance all recognise the important role that small business plays in the South African economy.

“The primary objective of all involved in promoting small business growth is to encourage a move away from South Africa’s two-tiered economy that consists of formal business operating in a first-world environment, and the informal business sector that delivers services without often having access to the systems, financial options and advantages of mainstream business.

“Moving more small businesses into the mainstream economy is made more achievable by the recent budget announcements. If all stakeholders within the public, private and NGO sectors play their parts, significant progress will be made in growing the economy and creating jobs,” says Mr Govender.

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Issue 72