By Anton van Heerden, Managing Director and Executive Vice-President, Africa & Middle East at Sage
President Jacob Zuma will set the political and economic pace for 2017 when he presents his annual State of the Nation Address (SONA) this week. He and his cabinet have their work cut out this year as they focus on reigniting growth and on socio-economic transformation. As always, we at Sage hope that he’ll have a few words for the country’s Small & Medium Businesses.
SONA traditionally outlines the grand vision for South African policy for the year, with the Finance Minister’s Budget Speech later in the month filling in the details about funding and implementation. Nonetheless, we’ll hopefully get some hints about how President Zuma hopes to address the challenges of accelerating economic growth while addressing inequality.
Here are a few areas that might be of interest to business builders:
Small business strategy
We have a diverse community of 2,8 million Small & Medium Businesses in South Africa. According to estimates from the Ministry of Trade and Industry, they account for a contribution to GDP of 52-57% and 60% of employment. As such, they should be in the centre of any government strategy to catalyse growth and address unemployment.
Last year, the SONA mentioned that government would set aside 30% of appropriate categories of State procurement for purchasing from small businesses, co-operatives as well as township and rural enterprises. It also promoted funding for youth-owned enterprises through the National Youth Development Agency. With Small Business Development Minister Lindiwe Zulu seeking a raise in her annual budget (from R1.4 billion to R5 billion) from the Treasury, President Zuma might talk about new initiatives to boost small, and particularly black-owned, businesses.
Business and the National Development Plan
The SONA might touch on the role of business in creating a more prosperous and equal South Africa. President Zuma might allude to the National Development Plan (NDP), which envisages an important role for small business in job creation and economic growth. Big business and government have worked closely together in recent months, but small business should ideally also have a seat at the policymaking table. The NDP envisages 90% of new employment by 2030 will be generated by SMMEs – critical in a country where more than 50% of the youth are unemployed.
Implementation of a minimum wage
President Zuma’s SONA 2016 mentioned the importance of implementing a minimum wage for South Africa, and it would not be surprising to get more detail this year. A commission appointed to investigate recommended that the government implement a minimum wage of R3,500 per month and R20 an hour. We might get some hints about how a minimum wage will be phased in as well as about any special arrangements for vulnerable industries where companies are shedding jobs.
National Health Insurance
Government is currently piloting a National Health Insurance scheme, but this year we might get information about how a wider rollout will be funded and implemented. The cost of implementing the National Health Insurance is projected to be R225 billion by 2025. The impact on small businesses could be significant – they might need to be ready to administer a payroll levy. Alternatively, government might choose to lift VAT or income tax, which will hit consumers in their pockets.
A well-managed and sustainable infrastructure investment programme could help boost our competitiveness as a country – businesses of all sizes will benefit from better broadband connections, a more reliable power supply and world-class rail, road and port links. Some businesses might also be well positioned to win government business if it steps up spending.
Despite uncertainty triggered by local and global political and economic events, more than half (54%) of South African Small & Medium Businesses in a recent Sage survey reported that they were confident about their prospects in the next six months. Our customers in small business sectors make life-sacrifices on which prosperity is built. They could be the catalyst to job creation and growth, if government heeds their voices.