Policy implementation crucial for SMEs

Though the latest National Budget has outlined numerous plans to stimulate the development of both the small and medium enterprise (SME) sector as well as entrepreneurs, there still remain significant challenges for job creation. The main challenge for government lies in implementing the policies over the next budget period. The implementation is crucial to allow for growth of SMEs.

Another precondition is a world class broadband infrastructure linked to a stable and consistent electricity supply grid. Unless these requirements are met, growth will remain subdued. The already implemented youth employment tax incentive also has its limitations on certain SMEs, and although it has during the first month benefitted 56 000 youths, it could have a far better reach if the incentive is adjusted somewhat. 

As the incentive is aimed towards lower salary brackets it is not particularly attractive to SMEs in knowledge industries, where the average wage for a young first time graduate is on average R10 000 per month. Employers in knowledge industries will, therefore, need to pay graduates more and could rather opt to employ fewer youths for a self-funded cadet or graduate internship programme. If a business’s turnover is below R335 000 no tax needs to be paid at all, and tax rates for businesses which generate turnover of between R335 000 and R1million has been reduced from 6% to 5%. Instead of two returns per year only one will now be required, which again supports the endeavours to reduce red tape.