Despite the funding made available for small to medium-sized enterprises (SMEs) in Finance Minister Trevor Manuel’s 2009 Budget speech, SME developer Business Partners executive director Christo Botes says that the SME budget for the year ahead is inadequate when one takes into account the small percentage of the overall Budget allocated to the SME sector, which is deemed by many as a fundamental area for economic development and job creation.
Nonetheless, he comments: “The challenge is to obtain maximum benefit from the funds allocated. Responsible use of the money would ensure the development of SMEs that are sustainable over the long term.”
Two issues discussed in the Budget speech, which affect SMEs, were sustainable job creation, as well as the building of infra-structure capacity in the economy and promoting investment.
Botes commends the R1-billion allocation of the Umsobomvu Youth Fund (UYF), although he says that more detail as to how this will be spent is needed. Government created the UYF in January 2001, and gave it the task of promoting entrepreneurship, job creation, skills development and skills transfer among South Africans between the ages of 18 and 35.
Botes says that the youth need the money, as well as technical assistance through mentoring and the transferring of skills. He says it would be beneficial to the economy if most of that R1-billion can find its way to sustainable SMEs, as they will create sustainable jobs.
A further R1,6-billion was allocated to industrial development and small enterprise support programmes. Botes says that this is positive but that the details of the vast sum’s application need to be established.
Of the R1,6-billion, R311,6-million will go to the National Empowerment Fund (NEF) as a further capital allocation. This amount will be for black-owned businesses requiring finance in the different programmes that the NEF offers. The NEF’s focus includes preferential procurement, broadening the reach of black equity ownership, trans- formation in management and staff, and preventing the dilution of black shareholding.
Another R490-million was made available to the Small Enterprise Development Agency (Seda) and its technology programme. Seda’s mandate is to design and implement a standard national delivery network that must uniformly apply throughout the country. Its role includes the support and promotion of cooperative enterprises, particularly those located in rural areas.
The Industrial Development Corporation (IDC) is also set to receive financing for the Isivande Women’s Fund, which provides financial support to women entrepreneurs to grow their businesses.
Meanwhile, Khula Enterprise Finance will receive allocated funds for its South African Women Entrepreneurs Network, which supports and helps grow women entrepreneurship through networking facilities.
The Budget speech allocated a further R1,8-billion for rural development and small farmer support. “It is essential to revive farming activities in those areas where fertile land has not been worked to produce much-needed crops,” says Botes. “The country must again become a net producer of food rather than a net importer of food.”
He adds that it is imperative that the programmes rolled out will be for sustainable projects and that smaller farmers be equipped with farmland and implements, as well as much-needed skills.
Further, the administrative burden on SME’s will be relieved somewhat through the value-added tax (Vat) threshold increase from R300 000 a year to R1-million a year, which came into effect on March 1, 2009. This effectively frees businesses earning less than R1-million a year from their Vat obligations.
The effects will especially be felt by SMEs that mainly buy from unregistered vendors, although it should be noted that a R1-million turnover is still considered to be very small when compared with most formal businesses, indicating that many businesses will still be above the threshold.
Continued infrastructure spend will also benefit SMEs which can obtain subcontracting work from the main contractors on these projects.
Botes says this infrastructure spend will help somewhat in providing employment opportunities, but that the current job losses reported in the mining, financial and manufacturing sectors of the economy will not be countered enough by it.
“SMEs will remain under strain for most of the year until such time as big business activities pick up, as big business remains one of the drivers of the economy,” Botes concludes.