Give us a break, Pravin!

#Budget2016 / Cape Town – Businesses are waiting with bated breath on whether today’s Budget speech will provide some relief in the difficult economic climate.

Business Partners Limited’s chief financial officer, Ben Bierman, said the main causes of financial distress for entrepreneurs in 2015 and 2016 was the weakening rand, load shedding, drought and water shedding.

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“With load shedding, while larger businesses may have the resources to install sophisticated generators to ensure continuous power when Eskom cannot deliver, SMEs often don’t have the financial resources available to obtain a generator and, as such, have to stop production or close shop while there is load shedding. The same would apply with water shedding,” said Bierman.

He added that the drought would have a huge impact on food inflation, making life more difficult for the overindebted consumer to afford goods, including those sold by SMEs.

“SMEs that provide support capacity services and products to the agricultural industry will also be affected, especially in smaller rural towns where the economic engine is driven by agriculture.”

Black Business Council’s chief executive, Mohale Ralebitso, said most people focused on servicing their debt and spending less of their money on buying at businesses. To free up more money for useful sectors, Ralebitso said they expected the Budget speech to focus on curbing government expenditure and money spent on public servants.

“With government focused on providing money for university fees and (social) grants, there will likely not be any further tax breaks announced in the Budget speech for small businesses,” said Ralebitso.

Bierman agreed that with the government’s fiscal deficit, it will need to cut down on its spending and collect more taxes to cover its expenditure commitments.

“Government needs to balance the need to provide tax breaks for small business (which would boost entrepreneurial growth) with the reality of its budget commitments.”

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However, he said the government could still assist small business by changing tax-clearance rules.

“Currently, the South African Revenue Services (Sars) only issues tax-clearance certificates provided payments are fully up to date.

“Sars could issue letters of good standing based on a business’s longer-term tax compliance rather than its up-to-the-minute status would go a long way to ease the burden,” said Bierman.

He added that Gordhan could provide the appropriate direction for business, labour and the government to unify and ensure much-needed relief by outlining the economic scenario that South Africa finds itself in tomorrow’s speech.

“This must be understood and accepted by both big business and labour in order for them to enter wage negotiations having a realistic assessment of the South African economy,” said Bierman.

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