Small business proposal is in works to boost Covid-19 hit sector
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NATIONAL Treasury was working closely with the South African Reserve Bank, the Banking Association of South Africa and other stakeholders to finalise a proposal of new small business support measures to enable businesses affected by the Covid-19 pandemic to bounce back, Finance Minister Enoch Godongwana said yesterday during his Medium Term Budget Policy Statement.
The business support measures would come in place of the loan guarantee scheme that was introduced early last year to enable commercial banks to support firms in distress as a result of the Covid-19 crisis. This programme had since been concluded.
“This we will do by providing expanded funding options, broadening the types of financial institutions which can provide this funding to include DFIs (development finance institutions) and non-banks. Further details will be announced shortly,” Godongwana said.
Considering the economic outlook and the risks associated with it, it was critical that South Africa accelerated economic reforms for long-run growth. These reforms should focus on improving competitiveness, productivity, investment and employment, he said.
In addition to this, the country must remove the regulatory burden on SMMEs and co-operatives.
“In this regard, we will investigate different forms of support for township, inner city and rural enterprises,” said Godongwana.
Godongwana said it was also of great importance to strive for policy coherence and policy certainty across government. He said the country should also continue to strengthen the capacity of the state to implement policy and intervene in the economy in a manner that enhanced and did not inhibit growth.
In July, in the World Bank South Africa Economic Update the institution suggested South Africa address barriers to entry, relaxed constraints to entrepreneurship and self-employment and scale up programmes that provide both entrepreneurial training and start-up grants.
Reacting to Godongwana’s MTBPS, Bryan Turner, a partner at Spear Capital, a private equity firm that invests funds from Europe and the UK into businesses in Sub-Saharan Africa, said while it was promising that the minister acknowledged red tape as a problem in the small, medium and micro enterprise sector, the regulatory blockages did not lie with Treasury.
“It will be up to the relevant departments, including the Department of Trade and Industry and the Department of Small Business Development, to remove the regulatory hurdles faced by both the businesses themselves and the investors that are so crucial to their survival,” Turner said.
Old Mutual Investment Group chief economist Johann Els said while the business support programme like the one currently devised was likely to help in the margin, it was not going to be a game-changer.
"What will help significantly more will be higher sustained economic growth," Els said
In September , the South African Future Trust revealed in the “From Survival to Opportunity through Covid-19 and Beyond: SA Future Trust Baseline SMME Report” that local SMMEs had proven to be resilient through the Covid-19 crisis and that many remained optimistic about their financial future.
It said, however, they remained extremely vulnerable to external shocks, such as lockdown restrictions and civil unrest and required significant support if they were to survive and play a role in the country’s economic recovery and job creation.