Mid-term budget: urgent action plan required to stimulate economic growth

30 October 2019 | Web Article Number: ME201916986

Commerce & Trade
Finance & Investment
SMME Development & Support

DESPITE a challenging economic landscape, South African small and medium enterprise (SME) owners remain positive about the potential for achieving future business growth.

High levels of uncertainty about the fiscal framework and a lack of clarity around economic policies contribute to a general lack of confidence in the role of government. These concerns are expected to be addressed by Finance Minister Tito Mboweni in his medium-term budget policy statement (MTBPS) today, which should also provide an update on the progress with many SME-friendly initiatives announced in the last Budget Speech.

That’s according to Ben Bierman, Managing Director of Business Partners, who was commenting on the company’s latest SME Index results – a quarterly measure of the attitudes and confidence levels of South African SME owners.

The second quarter 2019 Business Partners Limited SME Index revealed that 74% of respondents are confident that their business will grow in the next 12 months – one percentage point higher than the previous quarter and 4 percentage points higher when compared to the second quarter of 2018.

“While SMEs are characteristically optimistic, the slight increase in business confidence observed across most indicators may signify the green shoots of a confidence recovery,” said Bierman. “Our policies are good and we are beginning to see improvements in the institutional capacity at many of the government agencies. What is urgently needed is the improved and accelerated execution of policy implementation and turnaround plans from government.

“A decisive plan of action to establish a more conducive business environment and concerted execution is therefore critical to improve confidence, stimulate investment and drive accelerated economic growth.”

Bierman’s call to action echoes the general sentiment revealed in the latest index results, where only 31% of respondents feel confident that government is doing enough to foster this business growth, and 65% indicated that the uncertainty around future GDP growth has had an effect on their business confidence.

Furthermore, SMEs are divided with regards to whether the ease of doing business in South Africa can improve. Almost half (49%) of respondents do not believe that President Cyril Ramaphosa will achieve his goal to be ranked amongst the Top 50 countries on the World Bank’s Ease of Doing Business Index (South Africa is currently ranked 82nd).

With the MTBPS, Bierman believes that government has the opportunity to restore confidence in the government’s ability to stimulate economic growth. “Many business owners will be eager to see what government plans to do and action to shape the environment to be more conducive to business growth.”

According to the latest index results, business owners believe that less red tape, better access to funding, and the implementation of existing policy for economic growth will benefit them the most in this regard. “With the burden of red tape felt disproportionately by SMEs, reducing red tape by 25% over the next five years by revisiting the Red Tape Impact Assessment Bill will definitely be a step in the right direction.

“In addition to this, we’ve got to start looking to create a more labour-friendly environment for SMEs, as there are simply too many examples of labour laws that filter down from big business negotiating with bargaining councils which then negatively impact SMEs and their sustainability.”

Given the country’s recent dismal unemployment statistics, he added that minimising existing constraints for local businesses should already be top priority for Treasury.

“SMEs will undoubtedly play a crucial role in the economic turnaround and can have a meaningful impact on decreasing unemployment. Government owes it to business owners to ensure that the eco-system for SMEs improves, resulting in growth for established businesses and increased business formation. SMEs will in turn create more employment and further stimulate economic activity. This will be an important element in unlocking broader economic growth,” Bierman said.

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