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This week Johann Rupert’s R1billion Sukuma fund had to close doors on desperate small businesses wanting help to fight the impact of COVID-19 lockdowns.

Update on Rupert family’s R1bn COVID-19 fund

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Last week South Africa’s President, Cyril Ramaphosa revealed that the Rupert and Oppenheimer families had each contributed R1 billion to assist small businesses and their employees affected by the coronavirus pandemic and the country’s #21daylockdown. Yesterday more details were announced on the Rupert family funding. The fund will be administered by BUSINESS/PARTNERS of which Remgro owns 42.8 per cent stake. Ben Bierman, Managing Director at BUSINESS/PARTNERS joins CNBC Africa for more.

How Remgro’s one billion rand fund for SMEs will work

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CNBC Africa joined by Gugu Mjadu, Marketing Executive, Business Partners to bring to the fore, the youth of South Africa &#8211; full of potential but lacking the proper support.

Business Partners’ Gugu Mjadu on tackling youth unemployment in SA

Any measure that can boost the local economy beyond the projected 1.1% growth is at the top of the 2017 National Budget Speech wish-list for South Africa&#8217;s vital small and medium enterprise (SME) sector. Coupled with the hope that there is no further political turmoil, the ideal scenario for existing and aspirational SME owners would be long-term stability within the economic cluster.
This is according to Ben Bierman, Managing Director of Business Partners Limited (BUSINESS/PARTNERS), the leading local risk financier to SMEs, who says that with the promise of overall business growth that the year holds, the time to enhance specific support measures for South Africa&#8217;s small businesses in the budget is now.
“Provided South Africa can maintain a stable political environment this year, the Budget Speech is bound to contain some growth opportunities for entrepreneurs. And given the outlook for growth that can be achieved this year, South Africa&#8217;s entrepreneurs should be a major focus area for the government,” says Bierman.
Pro-SME initiatives that BUSINESS/PARTNERS would like to see in the 2017 National Budget Speech include:
1.    Increased tax relief and tax breaks for small businesses: Even though Finance Minister Gordhan is expected to raise taxes in order to balance the Budget, a strong pro-growth argument can be made to strengthen the main tax incentive for owner-managed businesses with a turnover of less than R20m. Known as tax relief for Small Business Corporations, the measure allows small businesses to pay a lower tax rate than the standard 28% Companies Tax on their first R550 000 of taxable income.
Business owners would also like to see the R20m turnover cut-off increased, as well as the size of the incentive itself. At the same time the Turnover Tax incentive can be strengthened by increasing the qualifying threshold of R1m turnover, and by lowering the tax rate that qualifying micro businesses pay on their turnover even further.
2.     Growth enhancing VAT exemptions: One of the heaviest compliance burdens on small businesses is the requirement that VAT must be paid on an invoice basis. Having to pay VAT over to the South African Revenue Service (SARS) for money that has not yet been received can be an enormous, sometimes fatal, drain on the cash flow of many small businesses, as some procurers are notorious for not paying invoices timeously.
In the nineties, small businesses below a certain size were allowed to pay VAT only when they received payment, but this was scrapped after syndicates used the exemption to create false VAT claims against SARS. Restoring the exemption, coupled with the necessary policing measures, could do more for the cash flow of small businesses than any number of tax incentives.
The time is also ripe to increase the R1m-turnover threshold for VAT registration, which has remained the same for many years. While SMEs are generally responsible corporate citizens, paying VAT is not only a cash-flow burden, but also requires intensive paperwork and time, which growing businesses should be able to do without &#8211; for as long as possible.
3.    Further relief of red tape impacting SME growth:  Apart from the VAT suggestions, South Africa&#8217;s entrepreneurs will welcome more measures in the Budget that will decrease the administrative compliance burden for SMEs. Despite the calls for austerity, investing in process improvements and administrative efficiency is a long term benefit, although the chances are that they will be limited as austerity continues to bite.
4.    Funding for SME support: Funding for the programmes of the Department of Small Business Development, the Small Enterprise Development Agency, the Small Enterprise Finance Agency and the Industrial Development Corporation can be increased, provided these departments have a coordinated and effective strategy targeting meaningful changes to the SME ecosystem to improve business formation and growth.
5.    Commitment to working more closely with the private sector:Without costing anything, Treasury can enhance the impact of existing funds aimed at developing and supporting entrepreneurs through closer cooperation with private-sector players.
BUSINESS/PARTNERS has identified three sectors in which support for entrepreneurs is likely to yield the most return in the form of jobs and economic growth: tourism, private education and information technology and communications (ICT). Dedicated funds for technical assistance and finance to SMEs is one sure way to boost these growth sectors. Another is to further ease regulations that threaten to stifle the industries, where possible &#8211; for example the strict visa requirements that were recently imposed on tourists to South Africa.
Bierman concludes: “The necessary tweaks and incentives aimed at SMEs within the budget can also work to provide the needed stimulus to grow the economy, however, the impact of these schemes are only really effective when they are made at scale and changes at scale is what we are hoping for.”﻿

S.A needs a pro-SME Budget

From a small and medium enterprises (SME) perspective, the current economic environment is more conducive to growth and opportunity than it was a year ago. This is according to Ben Bierman, Managing Director of Business Partners, a specialist risk finance company for formal SMEs.
2016 saw a shift in terms of global politics and economic issues, specifically in South Africa, which brought about stronger cooperation between the private sector, government and civil society to better foster and increase the success of SMEs in 2017.
In the year ahead SMEs can expect better economic growth, inflation that will not be as severely impacted by rising food costs and an interest rate environment that will at worst not show dramatic increases in the prime rate, says Bierman. These improved conditions should provide a more solid platform for local SMEs to grow and pursue their objectives in their respective sectors.
Economic growth on both a global and local level is forecast to accelerate moderately this year. The International Monetary Fund (IMF) this month released its World Economic Outlook: January 2017 report which forecasts improvements in both global and Sub-Saharan African growth to 3.4% and 2.8% respectively. South Africa’s economic activity is expected to rise by 0.8% in 2017, up from 0.3% in 2016, while locally, the South African Reserve Bank and National Treasury predicts growth of more than 1% for South Africa this year.
The higher rainfall expectancy is one of the contributing factors behind a more optimistic growth rate forecast for South Africa. Coming out of a devastating drought, the agricultural sector is set for a better harvesting season in 2017. This should positively contribute to the revival of the rural economy and economic growth in general and lessen South Africa’s reliance on food imports. Even though the sector contributes less than 3% to the GDP directly, it remains important as a growth stimulus due to its forward and backwards linkages with other economic sectors.
The commodities cycle is also picking up, continuing on from the recovery experienced in 2016. Apart from indicating increased demand, the higher prices should bode well for our current account deficit and the mining sector. 
Business confidence levels are also up from last year, according to the December 2016 Business Confidence Index (BCI) released by the South African Chamber of Commerce and Industry. December saw a reverse of the severe year-on-year decline of 10 index points in 2015, with a year-on-year increase of 1.6 index points in December 2016. This is the first time since February 2015 that this BCI has improved on a year-on-year basis, which means local businesses are more bullish about their prospects.
Confidence levels are an essential pre-requisite for growth in investment. With 13 out of 19 indices showing improvement on the broader confidence indices being published, we can look forward to improved levels of investment and growth.
There are still some dark clouds on the horizon. The sustainability of South Africa’s social grant system is dependent on accelerated economic growth, increased job creation and the resultant broadening of the tax base. Without a concerted effort to grow our economy, the ability of Government to sustain the current levels are questionable. Other threats lurk in the prospect of a downgrade, which has not completely disappeared.
However, the South African consumer has the capacity and the financial wellbeing to increase consumption and support growth through increased demand. Levels of indebtedness have remained manageable and the consumer’s good performance in servicing the debt obligations are signs that there is capacity for demand-led growth. The South African consumer, despite all the headwinds of 2016, continues to be well positioned to stimulate economic growth through increased consumption and, in turn, stimulate small business growth.
Despite the challenges that face the local economy, the fundamentals are in place for local SMEs to have a much better year in 2017, provided that all stakeholders in our economy also play their part.
We need to continue with the initiatives to improve the framework within which SMEs operate, namely business-friendly policies and improved access to markets from both the public and private sectors. The reduction of unnecessary red tape must also continue in order for the SME ecosystem to be conducive for business formation and growth.
Furthermore, all stakeholders need to believe in a positive future for South Africa and take a leap of faith by investing in South Africa’s growth as this will be the first step in ensuring a positive virtuous cycle that will lead to further local growth and improved confidence. We have the capacity and the potential to turn things around in 2017, we just need to take appropriate action. ﻿

Op-Ed: SMMEs can expect light at the end of the tunnel in 2017

As 2016 nears an end many begin to re-evaluate the year that was, both personally and professionally. As a result this is typically the time of the year new life and professional goals are developed. This is also characteristically a time when hopeful entrepreneurs consider whether the approaching year is the correct time to pursue their business idea.
This is according to Gugu Mjadu, spokesperson for the 2016 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, who says that many aspiring entrepreneurs spend the festive season break considering possible business ventures, and questioning whether the risk of leaving their steady nine-to-five job to start an entrepreneurial business will be worth it.
Mjadu says that this is a valid contemplation given the current economic and market landscape, which may create more hesitation than inspiration where entrepreneurship is concerned. “In an economy awash with threats of investment ratings downgrades and political instability, small businesses have struggled this year.”
She also points to the recently released Statistics SA unemployment rate for South Africa, which has now risen to 27.1% of the labour force – the highest rate in 13 years. She says that this sharp decline is a clear indication that big businesses are struggling to survive, and are therefore shedding jobs to stay afloat in a tough market. “If big businesses are struggling to expand and create jobs, the conditions are that much more strenuous for smaller businesses,” says Mjadu.
In addition, various local business confidence surveys highlight that business owners are influenced by economic conditions. Mjadu points to the results of the third quarter 2016 Business Partners SME Index, which revealed that 75% of respondents believe that the current landscape is impacting their business’ profit margins. “The reality is that entrepreneurship is no easy ride, and the economic environment in which a business has to operate directly impacts the success of a business,” says Mjadu.
She adds however that a bumpy economic setting isn’t reason to put off a business venture, as these challenging conditions may actually bring about business opportunities. However, Mjadu stresses that there should always be a balance between risk evaluation and opportunities when making the decision to start a business. “While starting a business might always be considered a leap of faith in your own ability, most times the difference between a successful venture and a failed one is having a thorough knowledge of the industry in which you want to operate and being passionate about the business opportunity you have identified.
Mjadu adds: “Also important is for entrepreneurs to be extra vigilant in their due diligence processes, seek the guidance of a business expert to assist with the process as this will inform their decision on the level of risk that can safely be taken for their business.”
While there will never be a ‘perfect time’ to start a business, Mjadu says that 2017 is likely to paint a slightly better economic picture. “The recent decision by Standard &amp; Poor’s to not drop South Africa’s investment rating to junk status is a positive indication of imminent change. The country is working hard to put measures in place to recover economic growth and meet growth objectives in the New Year, and these are positive signs for aspirant entrepreneurs.”
Regardless of macro-conditions, Mjadu reiterates that risk will always be involved when making the decision to start a business, and should remain top of mind. “Entrepreneurs should expect the business environment to constantly fluctuate in terms of the risk it presents to small businesses. However, if entrepreneurs focus on strategically analysing this risk and ideas to mitigate the risk involved, paying extra attention to their business plan and cash flow forecast, there is no better time than the present to take the leap into entrepreneurship,” concludes Mjadu.﻿

Business Partners

Update on Rupert family’s R1bn COVID-19 fund

How Remgro’s one billion rand fund for SMEs will work

Business Partners’ Gugu Mjadu on tackling youth unemployment in SA

S.A needs a pro-SME Budget

Op-Ed: SMMEs can expect light at the end of the tunnel in 2017

Is it riskier than ever to start a business in S.A?

News Tips

Advertise With Us

Business Partners

Update on Rupert family’s R1bn COVID-19 fund

How Remgro’s one billion rand fund for SMEs will work

Business Partners’ Gugu Mjadu on tackling youth unemployment in SA

S.A needs a pro-SME Budget

Op-Ed: SMMEs can expect light at the end of the tunnel in 2017

Is it riskier than ever to start a business in S.A?

News Tips

Advertise With Us

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