The annual budget speech always has a significant impact on business owners, but this year, the underlying message was one of hope and opportunity as government focussed significant funds on growing the small business sector.
Faced with political pressure, Minister Gordhan looked to correct an estimated R30 billion shortfall, and serious challenges around government spending, while still supporting entrepreneurs.
He was undoubtedly successful in achieving this balancing act, but here at Merchant Capital we understand that what you’re most interested in is the way the budget affects your business.
Here’s what you can expect for 2017/18.
Support for small businesses
A core focus of the budget is to inspire and facilitate the growth of smaller businesses. Empowered entrepreneurship – driven by significant investment in education – is aimed at kick-starting our slowing economy.
With almost R4 billion designated to support 2 000 businesses in the category, and plans to support an additional 5 000 informal organisations and co-ops, the message from the government is clear – go for it!
Despite this optimism, it’s worth mentioning that relying on government support can be a lengthy process. Qualification criteria are stringent and although the funds are available, they shouldn’t be your only hope.
Thought-starter: You’ll never know if your business qualifies for government support unless you apply. Contact the DTI (Department of Trade and Industry) to find out how you can benefit.
Additional consumer expenses
Even though VAT wasn’t raised, your consumers are in for another tough year as so-called sin taxes, income tax and the fuel levy all rose significantly.
The impact of these changes is two-fold. Firstly, your average consumer is going to have less cash to spend. It doesn’t matter if you’re selling cigarettes or suits – price points are going to become critical in the purchase decision.
The second is that your costs are going to rise. Apart from higher delivery costs across the entire value chain, you can expect your team to be asking for an increase to cover their growing expenses.
With less disposable income available, consumers are going to be cutting costs wherever they can. While this might seem like added pressure, it’s an opportunity for you to optimise your business spending and think of creative ways to increase sales on the cheap.
Thought-starter: Have a look at your pricing structure – where can you save? Negotiate with suppliers, reduce your electricity bill, and think about moving your marketing spend to the digital arena.
Changes to the budget are always accompanied by legal shifts and it’s essential that you stay on top of these compliance rules.
Amendments to the Employment Tax Incentive and tax brackets can have a massive impact on the lives of your staff and the way you file your taxes, so stay updated!
Thought-starter: Try to automate as many processes as possible. eFiling and payroll programmes are the easiest way to make sure you play by the rules.
As much as people are debating the sugar tax and the new tax on the super-rich, the underlying message of the budget speech is one of hope.
Minister Gordhan has more than likely done enough to keep rating agencies satisfied and is putting his money where his mouth is – backing education and entrepreneurs.
His focus remains fixed on growth, and despite a difficult financial future facing all of us, business owners can take some peace from the fact that the government seems to be on your side. Coupled with capital guidance and support from us here at Merchant Capital, it’s time to embrace new opportunities.