SMEs: Act now to speed up SME-friendly reform!

The establishment of a new ministry devoted to the establishment and growth of SMEs was greeted with scepticism in many quarters. But the budget speech by Finance Minister Nene held little good news for anyone except SMEs!

Last year the South African Institute of Chartered Accountants (SAICA) commissioned a survey to establish the things that would make SMEs want to grow, with the objective of influencing SME policy. The findings of the survey are incredibly reflective of changes government have made to SME policy. The new 2015 survey explores other challenges that SMEs have and things that government and big business could do to improve their likelihood of contributing to Growth and Employment.

Bridgitte Kriel, Project Director of Small Practices at SAICA says “…looking at the summary findings and changes to policy contained in the Budget speech, Government seems to be listening. This year we would like to conduct our research using a bigger sample, so that Government continues to listen and where possible, create conditions that will help small and medium businesses thrive.”

1. Finding:  SMEs and government business71.4% of SMEs do no government business at all – at national, provincial, municipal or parastatal level. One of the most important reasons to emerge from the research was late payment; government departments at all levels are seen to have a culture of slow payment, which is fatal to small-business cash-flow. This finding gives a strong indication of where government can overhaul its own operations to give small businesses a boost.Policy Action:  A new payment KPIGovernment is establishing a KPI (key performance indicator) for all financial officers around payment in 30 days. Presumably the treasury will monitor this policy. The proof of the pudding will be in the eating, but it’s a start.
2. Finding:  SMEs and employmentHalf of the respondents have been in business 10 years or longer; longer-lasting businesses were also the ones most likely to employ more people. A direct correlation between business size (judged on turnover) and number of employees suggests that government stimulus would be most effective at creating employment if it were focused on growing established, successful SMEs.Policy action:  A new mentoring fund Government has established a fund for mentoring and to provide advice to SMEs. This is a substantial fund, which is designed to assist SMEs in their early years. It is unclear through which agency this fund would become available, but it’s a significant step in the right direction.
3. Finding:  Incentives to expandAsked what incentives would encourage them to expand their businesses, most named a reduction in government red tape, tax incentives for growth, and tax incentives towards creating more jobs (over and above the youth wage subsidy).Policy action:  Red tape down, tax incentives upGovernment has announced a single portal to do business with government. SMEs no longer have to submit endless paperwork to tender on different departmental work. One registration will do it and will help to reduce the risk of government giving work to businesses where their own employees are involved.Add to this the reduction in the tax rate for Small businesses from 6% to 3% and things start to get interesting. Businesses that take advantage of the youth wage subsidy can really be competitive now.

What you need to do to help get the next raft of reforms considered

“We would like to encourage you to take part in our 2015 Survey, go to https://www.surveymonkey.com/r/SMERESEARCH2015 and spend just 20 minutes of your time. Details of each survey respondent are kept confidential by TerraNova, the survey company”. Do it now. Your bottom line will thank you for it.