By Xero South Africa Country Manager, Colin Timmis

One critical area we need to see action from the Government and Finance Minister in this year’s Mid-term Budget and the formal budget next year is in relation to small businesses. If they aren’t given the right support and attention, then the government’s ability to encourage economic growth in our country and deliver on its plans will be seriously undermined. 

Small businesses employ over half of our workforce and contribute 34% of GDP. By lifting them up we can grow taxes and employment and create an attractive environment for new businesses to start-up. But this won’t happen without meaningful, tangible support. 

Recent research we conducted amongst small businesses owners in the tourism industry - a critical sector as we enter our summer season - found that 35% want more support from Government to develop digital skills and innovation. And 25% want tax cuts and less red tape to access funding. 

Some of the areas we need to see action in are:

Simplifying taxes 

Expanding the taxpayer base is a vital step in the short-term recovery and long-term development of our economy. Filing taxes is one of the most significant pain points and we need to make the process of paying taxes easier and clearer for SMEs. SARS is moving in the right direction by introducing eFiling options and integrations with tech companies to reduce the time burden. But there is still a big gap between the number of SMEs and those paying taxes. We believe technology and education can help to reduce this gap.  

Driving digital adoption

Using technologies like cloud tools and automation will help level the playing field for SMEs - helping them to sell and operate online, prepare for disruption and adjust to changing customer patterns. The appointment of a presidential commission to oversee fourth industrial revolution (4IR) initiatives made little progress and now its mandate has expired. This leaves room for greater action and focus from the government. Our business community is at risk of being left behind if it doesn’t go digital in future. 

Cashflow and late payments

Our research shows that 47% of South African small businesses cite cash flow issues and late payments as two of the biggest obstacles to their growth. We can’t expect small businesses to pay staff, increase headcount and cover rising costs if they aren’t being paid on time by big businesses. We need to see the government putting in place bolder and more enforceable policies to break the impasse on late payment.

Every business needs to commit to paying suppliers in 30 days and the government should introduce a Bill that compels big companies to report their payment data annually to encourage faster payments. 

Access to capital

The government has committed to removing red tape, but this hasn’t led to a breaking down of the barriers that prevent small businesses from getting the funding they need to grow. Our research shows that nearly half (47%) of SMEs have been rejected for a loan by traditional providers and 74% said they would be more likely to apply for finance if there were more options available. We welcomed the introduction of the “bounce-back loan scheme” which is aimed at giving a lifeline to businesses that have suffered due to the July 2021 riots and KZN floods.

But it needs to be simple for small businesses to apply for. The government needs a blended approach of using traditional banks alongside fintech or alternative lending platforms to help simplify the process of applying for affordable funding. 

Innovation and digital adoption

Technology can help join the dots between the government, small businesses, accountants, banks, funders, and technology companies - the key enablers of the small business community. At the moment there isn’t enough collaboration happening between all these stakeholders. 

Our country desperately needs to promote the benefits of technology and work together to create a more connected SME support system. Especially as 41% of small businesses feel they are only just keeping up with technology.