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What SMEs need for urgent economic reform

By Provided 16 min ago

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JOHANNESBURG – This is no ordinary year and this week will not be an ordinary budget speech.

Thinking back to the finance minister’s speech at the time last year, we could have been fooled to think that the worst was well and truly over. As we entered a technical recession, we had high hopes for economic growth, forecasting growth of 0.9% and average inflation of 4.5% in 2020. But of course we all know what’s going on. really happened once the pandemic landed locally. shores.

Twelve months later, we find ourselves in a precarious situation. Our economy has contracted by 7%, we have lost several million jobs, countless sectors have imploded due to weak demand and near impossible operating conditions, and many small businesses have closed their doors. It is not at all exaggerated, as usual.

“As Minister Tito Mboweni presents his 2021 budget, sustainable growth and job creation must be among his priorities if we are to attempt to emerge from this quagmire and resume the path of economic recovery,” says Karl Westvig, Retail Managing Director of the capital.

Joined by SME sector leaders – Colin Timmis of Xero, Jonathan Smit of PayFast, Idan Jaan of Fundrr – Westvig believes that the government must take into account 10 essential measures to unlock the opportunities that SMEs can create. Here he breaks down those points and highlights how SMEs can create jobs, contribute to the tax base, and play their part in rebuilding our economy after being ravaged by Covid-19. This is one of our only options.

1. Non-banks, another lifeline

Small Medium Enterprises (SMEs) contribute around 1.5 trillion rand to our gross domestic product, but the government is putting a fraction back into the stagnant sector. More needs to be done to enable SMEs to access life-saving finance, and that starts with improving access to non-bank lenders. Link funders and recipients more effectively. Once the funds are deployed, follow them. Drive this using technology and avoid manually uploading bank statements – it slows down the whole process.

2. Sit at the table

Beyond the big banks, there is an ecosystem of key players who are heavily invested in stimulating and supporting SMEs. These players – lenders, payment service providers, and cloud-based accounting and training platforms – must work with government to solve a myriad of issues facing SMEs. Use their data and technology to help them make evidence-based policy decisions and give them a seat at the table.

3. Billions unspent for millions of SMEs

Obtaining financing through access to the Department of Small Businesses loan program has been extremely difficult: out of 30,000 applications, only 1,497 obtained financing, leaving billions on the table. Providing SMEs with financial education on unlocking finance and getting to market is essential for future adoption. The government’s laborious manual process needs to be digitized to avoid bottlenecks; the intentions are good but the execution is not.

4. The Big Banks catch-22

The loan guarantee scheme was designed to help SMEs in distress, but banks will not fund struggling businesses – this is a fundamental trap and one of the reasons for its epic failure. In addition, applicants can only apply for funding through their own bank. Not a third party. They must provide a personal bond, sign their life and assume all the risks. The government must open the rules of the game and work with alternative lenders who finance SMEs with turnover of R50,000 to R10 million.

5. Remove the commercial hat

Only a handful of people in government are trying to run a country of 60 million people; the state cannot do everything on its own and must take advantage of its strengths and capacities. Undertake public-private partnerships with independent actors of the ecosystem of SMEs who wear the commercial hat; the government can then focus on the urgent social and political mandate.

6. Your 30 days are up

Cash flow is a serious obstacle to the sustainability and success of SMEs. The government – and big business – must commit to paying suppliers within 30 days. Although it has been on the table for decades, it remains a problem that hinders the growth of SMEs, job creation and tax contributions. We need less talk and more action.

7. Regulation respecting accelerated taxis

The taxi industry contributes R90 billion to the economy, but is not formalized and does not pay tax beyond fuel taxes. Regulation of this sector will make a significant difference in tax collection, especially when we are faced with a deficit of billions.

8. Payments 2.0: cash à la carte

Covid-19 triggered our need for contactless payments and unlocked the possibility for the government to generate more revenue. Every informal supplier should be equipped with a card payment device, to cross the chasm from the informal to the formal and to collect taxes.

9. It’s time to switch to technology, Gov

If Covid-19 has taught us anything, it’s that we can digitize overnight. From offline to e-commerce and pay-per-view cash, this shift has accelerated the opportunities for SMEs and propelled them into the future. Digitization is the new normal and the government must educate SMEs on how to make this crucial transition by providing training on cutting edge technology. Adopting it themselves will also go a long way. And lose the paper, it’s 2021 after all.

10. Too little and too late?

If the TERS relief fund is back on the table, it will only provide temporary relief for less than a month, and only to certain sectors. By the time all the details are sorted out, the new March 15 extension could be a few weeks or even days away. The government must review how this lifeline is deployed, to whom and for what period. Otherwise, it will be just another great initiative that wasn’t.

“While government and business must come together to address our economic malaise, we believe that the real opportunity and hope lies in our SMEs. We all know small businesses were slated to create 90% of all jobs by 2030 – in just nine years – but many are limping, having suffered multiple losses from Covid-19. Although much has been done to give our SMEs a head start and a fighting chance, it is not enough; our future really depends on them, ”said Westvig.

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What SMEs need for urgent economic reform

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