Cape Town – Using Budget 2016 to stimulate the small to medium-sized enterprise (SME) sector not only makes good economic sense, it is also in line with government policy, said Ettiene Retief of the South African Institute of Professional Accountants (Saipa).
The latest increases to the public-sector wage bill have reduced the amount government can spend on services and infrastructure by R100bn over the next three years and without notable improvements in service delivery, according to Retief, chair of Saipa’s national tax and SA Revenue Service (Sars) stakeholders committees.
“Aside from being unaffordable, increasing the state’s wage bill is not really effective in creating large numbers of jobs – only entrepreneurs in a growing economy can do that,” according to Retief.
Saipa urged Minister of Finance Pravin Gordhan on Thursday to use the National Budget to stimulate the SME sector as it has the potential to generate much needed jobs at the speed needed.
It pointed out that the unemployment rate in SA is 25.5%, rising to 50% among young people. It, therefore, regards joblessness as a national issue as well as a political hot potato.
Economist Ulrich Joubert urged Gordan to extend the Employment Tax Incentive (ETI) programme, with its focus on youth employment, for at least another five years.
“One of the most serious problems facing South Africa is the unacceptably high and rising unemployment rate, especially under the youth,” Joubert said on Thursday.
Joubert recently met with Bazingaworx, which assists employers to claim their ETI, and according to CEO Brian Verwey, some of the challenges include a lack of ETI awareness among employers. That ETI is underutilised and could have an ever bigger impact on much needed job creation in various sectors of the economy.
According to Joubert, ETI has only been implemented for three years, and that is far too a short time to judge its effectiveness.
“Government must resist the temptation to attempt to solve the problem on its own by employing more people,” according to Retief.
He added that government has long recognised the role that SMEs can and must play in job creation. The National Development Plan (NDP), for instance, targets 11 million new jobs by 2030 – largely dependent on the SME sector.
Methodologies to achieve this goal include strategic infrastructure spending that favours the awarding of contracts to SMEs, as well as tax and other incentives to SMEs.
“Excessive red tape and onerous compliance should be further eased for SMEs, areas in which government has already made some headway. Our tax and labour legislations and the initiatives by the Department of Trade and Industry still fail to recognise services with regards SMEs,” Retief argued.
In addition, Saipa suggested that Gordhan gives serious thought to providing special allowances for SMEs providing professional services.
“Such businesses are quick to set up, require little capital and are much less risky than other types of business, with great potential for skills development and transfer – an important consideration given the high proportion of SMEs that fail in the first three years,” explained Retief.
“We are really urging the minister to apply his considerable creativity to spend taxpayers’ money more smartly, in line with the government’s own plan to grow the economy.”