Will the budget bring better results, or 'fritter away'? | News | Small Business Connect

Peter Delmar

Did finance minister Pravin Gordhan deliver a good budget speech last month?

You bet he did. By common consent and almost every conceivable measure, the finance minister positively shot the lights out.

With very few goodies to hand out, and knowing that he dared not dip much further into the addictive but ultimately ruinous cookie jar that is government borrowing, Gordhan delivered a masterful, even mesmerizing performance, keeping almost everyone happy.

But, was the actual budget that Gordhan tabled last month really as good for small business and entrepreneurs as the media painted it to be?

Remember, the budget and the budget speech are two very different animals.

First, there was that very big, very impressive number that the press latched onto after last month’s speech: the R6.5 billion Gordhan told Parliament that government would allocate over three years to “support small and medium enterprises”.

Many MPs applauded and stamped their feet while the media and various commentators nodded approvingly at the largess the beneficent finance minister was throwing the way of struggling entrepreneurs.

But, in the broader scheme of things, R6.5 billion out of an annual national budget of over R1.1 trillion, divided by three years, amounts to a bit less than 0.2% of overall spend. It’s the loose change that governments collect from under the fiscus’s sofa cushions.

There is no doubt that, in the hands of a very clever group of very committed officials, R6.5 billion could be used to make a very substantial difference to small business.

But, whether the R6.5 billion allocation will turn out to be good money well spent remains to be seen.

How will the money be sliced and diced? And how exactly will it be spent, and by whom?

Tucked away in Vote 36 to the Estimates of National Expenditure are numbers that indicate the minister isn’t entirely convinced that the Small Enterprise Development Agency is the agency best equipped to, well, deliver the development of small enterprises, since its handouts from the national kitty were cut by 4.5% or so.

In this or any other country, national budget speeches are more smoke and mirrors than substance – and numbers can be made to tell almost any story desired, especially by a dab political hand such as the current finance minister.

But, the one number that Gordhan did surprise with was his announcement that, in its very first month, the youth wage subsidy had benefited 56 000 individuals.

By any yardstick, this was a startling number.

A startlingly good number.

The immediate undoubted success of a scheme upon which such scorn had previously been heaped should give all small business owners cause to consider whether it might not be worth their while to take on a few talented (and subsidised) youngsters.

Perhaps most significant in Gordhan’s pronouncements for small businesses – and he must get a big tick for doing more this year than merely ticking the small business box in passing – was his declaration that his department had accepted two proposals from Judge Dennis Davis’s committee investigating the country’s tax regime, proposals the minister said would “ease the compliance burden of small businesses”.

The compliance burden, as any self-employed person will tell you, is not just any old burden, it’s a downright millstone.

In other words, the easing of compliance burdens is music to any entrepreneur’s ears.

Gordhan explained that what he meant by easing this burden was that the turnover tax regime would be amended to further reduce the tax burden on micro-enterprises. Splendid! Big tick, minister.

But what exactly did he mean by this: “Consideration is being given to replacing the graduated tax structure for small business corporations with a refundable tax compliance credit”?

As far as I am aware, the Treasury has not yet let us plebs in on what exactly Judge Davis recommended in his report on tax and its impact on small business. He submitted his report in January.

Tax credits have been talked about for the longest time, but will government only “consider” them or will they be enacted? We wait to see.

There was some good news in the budget for those entrepreneurs with bakkies and cement mixers – reassurance that there really is still R847 billion sloshing around in the national kitty for bridges, roads and sewage plants; that plus Gordhan’s statement that he would make it easier for venture capitalists to invest in local start-ups.

One little bit of the speech that did not quite get the attention it deserved was the announcement that enterprise development grants would attract more tax relief, and that all grants to small businesses will be tax-exempt, regardless of where they come from.

Another big tick – enterprise development needs and deserves all the help it can get.

Was the 2014 budget speech a good one? Of course it was; it was brilliant, reassuring, even optimistic. But is Budget 2014 any good, especially for small businesses?

Very possibly, but we will only get an inkling this time next year.

Only then will we begin to get an idea of whether this government has not just considered Davis’s tax credit suggestions or acted on them, whether the first tranche of the R6.5 billion has been spent wisely and effectively, or frittered away on bosberaad strategy sessions, sausage rolls and meatballs, and whether entrepreneurs are really employing young job-seekers in large numbers – and turning these into profit and sustainable, value-adding jobs.

  • Peter Delmar is a small business writer and commentator. The views expressed in this article are not necessarily shared by Small Business Connect.

Also read: Gordhan unveils small biz friendly budget