Why Budget 3.0 isn't the boon for small businesses South Africa needs?

Zawya

23-05-2025

While South Africa's revised 2025 Budget brought political stability and fiscal consistency, it missed a crucial opportunity to drive inclusive economic transformation through bold support for small and medium enterprises (SMEs).
That's the view of Shawn Theunissen, founder of Entrepreneurship To The Point (eTTP) and Property Point, two of the country's well-known small business development organisations.
'Budget 3.0 offers fiscal discipline, but not bold economic inclusion,' said Theunissen. 'Small businesses remain on the sidelines, waiting for support to reach them. The continued absence of direct, scalable SME-focused policies risks deepening inequality, slowing recovery, and failing to unlock entrepreneurial potential.'
While the abandonment of the VAT hike is welcomed, the Budget introduced no new tax relief, grants, or enterprise funding mechanisms specifically targeting SMEs. At the same time, a fuel levy increase will raise input and logistics costs, particularly for township, rural, and informal businesses, without any corresponding support.
Promises without delivery
'This was an opportunity to fast-track real SME recovery through targeted tax breaks, working capital relief, and formalised access to state-backed funding. Instead, we saw continuity with little urgency,' Theunissen said.
The revised GDP growth forecast of just 1.4% for 2025 reflects a subdued economic outlook, which offers little stimulus to small enterprises. Despite years of commitments, no new mechanisms were introduced to address persistent credit and working capital gaps, and previously announced SME funding remains largely undisbursed.
'It's not just about what's missing in the new budget, it's also about what hasn't been delivered from the last three,' said Theunissen. 'Funding delays, unclear disbursement channels, and inaccessible application processes continue to undermine the government's promises.'
Despite growing calls for inclusion, Budget 3.0 introduces no focused measures to support women- or youth-led enterprises, both of which are disproportionately excluded from procurement, finance, and formal supply chains.
'Budget 3.0 failed to introduce or revitalise entrepreneurship training, innovation incentives, or enterprise support, especially for youth and women. This oversight is short-sighted, as these sectors offer high impact for job creation and inclusive economic growth,' he said.
SMEs drive growth
He pointed out that SMEs account for 98.5% of all formal businesses in South Africa, provide over 60% of private-sector employment and contribute more than a third of the country's GDP.
'Undermining SMEs is not a technical adjustment—it's an economic risk,' Theunissen noted. 'We talk about resilience, but we're not equipping entrepreneurs to survive.'
Theunissen acknowledged several promising developments, including:
- The cancellation of the proposed VAT increase.
- A renewed R1tn commitment to infrastructure and digital investment.
- Reforms in local government procurement and service delivery.
- Enhanced Sars enforcement, which could reduce illicit competition.
However, these long-term commitments lack clarity on implementation, timelines, and inclusion of SMEs as direct beneficiaries.
'We've seen bold announcements before. Without delivery, they don't reach the businesses that matter most, especially in underserved communities,' said Theunissen.
From relief to reform
He said to shift from symbolic relief to systemic change. He called for an urgent pro-SME fiscal strategy, including:
- Targeted tax relief for small businesses on essential inputs: With rising input costs and shrinking margins, SMEs urgently need targeted tax relief on basic goods and services to remain viable in low-growth conditions.
- Fast-tracked disbursement of existing SME funding commitments: Billions committed to SME support remain undisbursed; this budget should have prioritised fast-tracking delivery to entrepreneurs who can't wait another year.
- Legal enforcement of the 30-day payment rule in public procurement: Late payments from the government remain a chronic problem; legally enforcing a 30-day payment rule is essential to protect SME cash flow and survival.
- Clear SME inclusion in Operation Vulindlela and structural reforms: Without transparent SME procurement targets and timelines in Operation Vulindlela, reform efforts will bypass entrepreneurs.
- Dedicated enterprise development for women and youth entrepreneurs: The absence of tailored programmes for women and youth-led enterprises is a missed opportunity to tackle unemployment where it hits hardest.
- Incentivised formalisation of the informal economy through tax credits and simplified registration: Formalisation must be driven by incentives, not penalties, giving informal entrepreneurs tax breaks and easy registration pathways to enter the mainstream economy.'
'This is not just about budgets – it's about credibility,' Theunissen said. 'If SMEs are the future of work and wealth in South Africa, then we need a budget that treats them as central to recovery, not peripheral to macroeconomic stability.'
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