SMEs may score from budget
Feb 11 2009 18:12
Marc Ashton
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Johannesburg - A change in the value-added tax (VAT) threshold and promises of increased government spending are the main benefits in the 2009 budget for small- to medium-sized enterprises (SMEs).
"The increase of the VAT threshold from R300 000 to R1m is likely to remove a huge number of hassles for SME owners," said André Diedrichs, the market development manager for Old Mutual.
This means SMEs will only need to register for VAT when their turnover exceeds R1m, which should remove administrative red tape. This could potentially remove a barrier to entry for aspirant small business owners.
The South African government has previously described the SME and informal business sectors as key in tackling unemployment. In today's environment, with job cuts being announced by a number of large firms, this may force people to turn to self-employment. Fewer administrative barriers to entry could make this transition easier.
Diedrichs also felt that SMEs could benefit from the increase in government spending, irrespective of where the resources were allocated.
"There is a relationship between small and big business," he said, pointing out that even if large businesses were on the receiving end of the lion's share of government spending, SMEs would benefit as major firms outsourced excess capacity to smaller ones.
Small business is also expected to benefit from limited tax breaks and a R12bn increase in social spending, which should put more money in the consumer's pocket.
Chris Hamman, a fixed interest strategist for Sanlam Investment Management, said the budget "confronts the current economic reality, but also one that will stretch government's resources" as far as its implementation is concerned".
Nedbank economist Dennis Dykes told I-Net Bridge: "Revenue estimates are pretty realistic. Expenditure rises very, very strongly. There will be a big injection into the economy to support low-income earners and unemployment."
Diedrichs said there could be some opportunities for SMEs operating in and around the energy sector in South Africa.
He said government had indicated it would be increasing its focus on the energy sector in both traditional and green energy projects as the country attempts to manage its limited supply, while power utility Eskom looks at expanding its capital expenditure projects.
- Fin24.com
