Budget can stimulate small business to deliver on jobs promise

18 February 2016 - 13:30 By TMG Digital
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The South African Institute of Professional Accountants (SAIPA) urged Finance Minister Pravin Gordhan to use the budget to stimulate the small to medium-sized enterprise (SME) sector "as it has the potential to generate the jobs we need at the speed we need".

Unemployed painters, plumbers and tilers wait outside Builder's Warehouse in Johannesburg, South Africa, for job opportunities on June 6, 2012.
Unemployed painters, plumbers and tilers wait outside Builder's Warehouse in Johannesburg, South Africa, for job opportunities on June 6, 2012.
Image: Gallo Images / City Press / Herman Verwey

With an unemployment rate of 25.5 percent‚ rising to 50 percent among young people‚ joblessness is rightly seen as a national issue - and a political hot potato.

Government must resist the temptation to attempt to solve the problem by itself employing more people‚ said Ettiene Retief‚ chairperson of the National Tax and SARS Stakeholders Committees at SAIPA.

“The hard truth is that the public-sector wage bill is already too large. The latest increases have reduced the amount government can spend on services and infrastructure by R100 billion over the next three years‚ as [former] Minister Nene pointed out in the mid-term budget—all of this without notable improvements in service delivery‚” Retief said. “Aside from being unaffordable‚ increasing the state’s wage bill is not really effective in creating large numbers of jobs—only entrepreneurs in a growing economy can do that.”

Retief noted that government has long recognised the role that SMEs can and must play in job creation—the National Development Plan’s target of 11 million new jobs by 2030 is dependent on this sector to a great extent. Using the budget to stimulate this sector not only makes good economic sense‚ it is in line with government policy.

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SAIPA recommends ways to achieve this goal include:

- Strategic infrastructure spending that favours the awarding of contracts to SMEs‚ - Tax and other incentives to SMEs‚ - Easing excessive red tape and onerous compliance

“In addition‚ we would suggest that the Minister give serious thought to providing special allowances for SMEs that provide professional services. Such businesses are quick to set up‚ require little capital and are much less risky than other types of business‚ with great potential for skills development and transfer - an important consideration given the high proportion of SMEs that fail in the first three years‚” he said.

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