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Daily Maverick
a day ago
- Business
- Daily Maverick
South Africa's SMMEs are flying blind in a changing global order
Small businesses are yet again expected to absorb the shocks of stalling growth, economic policy and diplomacy. Small businesses are expected to keep the lights on, even as South Africa stumbles through an increasingly volatile global and domestic economic environment. While a 25 basis point rate cut at month end offered some respite, it's hardly the lifeline small, medium and micro enterprises (SMMEs) need, said Miguel da Silva, executive of business banking at TymeBank in the bank's SMME forecast for June. 'Some diminishing pressure on the cost of credit' followed the South African Reserve Bank's cut, Da Silva said. Yet, he said 'the economy needs every bit of help it can get'. VAT relief with a fuel levy sting The National Treasury's decision to hold VAT steady at 15% provided some short-term relief to cash-strapped SMMEs. But the olive branch came with a thorn. As of 4 June, petrol and diesel prices jumped by 16c and 15c per litre respectively. 'With many small businesses already operating on razor-thin margins, this 16c increase will likely be passed on to consumers, potentially dampening demand in an already constrained market,' Da Silva said. This adaptation to the Budget showcases the government's strained fiscal position. In a podcast discussion on Budget 3.0, Stanlib chief economist Kevin Lings pointed out that until South Africa lifts GDP growth above 3%, pressure on public finances will persist. 'The negative revenue impact from backtracking on the VAT increases proposed in the previous version of the Budget, as well as the weaker economic growth trajectory, is counteracted… by a combination of revenue and spending adjustments,' explained Dr Elna Moolman, Standard Bank Group head of South African macroeconomic research. 'The expenditure changes are dominated by scaling back some of the new spending proposed in the previous versions of the Budget, while the revenue adjustments include both the reversal of some of the tax relief previously proposed… and unspecified future tax hikes.' The Budget foreshadows a pivot to removing the regulatory burden on businesses. Though, as Da Silva noted, no specific SME-support programmes, funding initiatives or targeted relief measures have emerged. Q1 data highlights on the scale of struggle The economic scoreboard from Q1 depicts an economy in stagnation: GDP grew by just 0.1% in Q1 2025, with agriculture (+15.8%) the only area showing growth. The National Treasury revised 2025 growth expectations downward from 1.6%, from 1.8%. Official unemployment rose to 32.9%, from 31.9%, which translates to a decrease of 54,000 in the labour force. Youth unemployment increased to 46.1% from 44.6% in the first quarter of 2024. While the SME SA Funding Summit 2025 on Thursday, 12 June is expected to explore access to finance, Da Silva stressed that a functioning, reliable environment matters more. How does this affect you? No real relief for entrepreneurs: if you're running a small business, don't hold your breath for targeted funding or tax breaks. Government promises of support remain vague. Price volatility on imports and exports: If Agoa collapses or BRICS moves away from the dollar, expect price changes in imported goods and export delays. Policy fog = business risk: If you're a customer, supplier or entrepreneur, inconsistent policy and mixed messages from government and diplomats create risk, which translates into cautious spending, higher borrowing costs and business hesitancy. Agoa and the diplomatic see-saw South Africa's trade diplomacy with the US remains complicated, but functional for now. Trade Minister Parks Tau and Agriculture Minister John Steenhuisen delivered a new framework to US Trade Representative Jamieson Greer on 19 May, laying out a new bilateral trade proposal. 'We met and had a very cordial and constructive meeting with Ambassador Greer… We had a very open and frank exchange about how we can ensure mutually beneficial trade between South Africa and the United States of America,' said Steenhuisen. He further noted that 'the importance of both markets for each other, and obviously a lot of emphasis from the American side [on] wanting to rebalance some of the trade… and from our side, wanting to retain market access'. With Agoa set to expire in September 2025, a renewal is looking uncertain. Da Silva said that 'the complex challenge of either finding alternative markets or restructuring their operations' looms large for SMME suppliers in US markets. 'While the US is not our largest trading partner, it is an important one, with 8% of our exports destined for its shores,' said Maarten Ackerman, chief economist at Citadel. 'Of that 8%, a third is excluded from tariffs, but citrus exporters are likely to be hardest hit.' BRICS Summit brings new questions Then there's the BRICS Summit in Brazil in early July, where stakeholders are expected to discuss mechanisms to alleviate dependency on the dollar. 'For SMEs, particularly those in export-oriented sectors, this diplomatic tightrope walk translates into very real business planning challenges,' Da Silva explained. Navigating dual allegiances between BRICS and the West 'requires SMEs to develop strategies that can withstand diplomatic volatility while capitalising on emerging opportunities', Da Silva said. DM
The Citizen
5 days ago
- Business
- The Citizen
Political events happening in June expected to affect South African SMEs
'The fuel levy increases will compound existing cost pressures for SMEs, particularly those in logistics, manufacturing, and retail sectors that rely heavily on transportation.' June will provide some relief for Small and medium enterprises (SMEs) following the South African Reserve Bank's (SARB) Monetary Policy Committee's (MPC) decision to cut interest rates by 25 basis points. Another relief is that inflation is largely stable, and the exchange rate is trending favourably, giving the MPC some room for monetary easing. The economy needs every bit of help it can get, and this cut will no doubt be reflected in business confidence. Miguel da Silva, group executive for business banking at TymeBank noted how upcoming events will impact South Africa's position in a rapidly evolving global landscape and the effect of this reconfiguration on SMEs. ALSO READ: Reserve Bank cuts repo rate thanks to lower inflation, stronger rand Budget treads tricky course without cutting expenditure 'The national budget outlined a programme of continued expenditure propped up by less contentious funding mechanisms than previously tabled,' said Da Silva. After much debate, the Value Added Tax (VAT) rate will remain at 15%, providing certainty for SME pricing and cash flow planning following the proposed increase's withdrawal. To make up the shortfall, the general fuel levy has increased by 16 cents per litre for petrol and by 15 cents per litre for diesel. 'The fuel levy increases will compound existing cost pressures for SMEs, particularly those in logistics, manufacturing, and retail sectors that rely heavily on transportation.' With many small businesses already operating on razor-thin margins, this 16-cent increase represents an additional burden that will likely be passed on to consumers, potentially dampening demand in an already constrained market. ALSO READ: GDP grew marginally in first quarter – agriculture helped keep economy afloat First quarter GDP figures 'The Minister also revised his predictions for our economic growth to 1.4% in 2025, down from 1.9%. With the official unemployment rate now at 32.9%, the disconnect between our economic ambitions and the harsh reality that only 16.8 million South Africans are in active employment highlights the urgent need for policy innovation,' he added. Da Silva said what seems clear is that under these constrained market conditions, there is no way for established businesses to incorporate the millions of South Africans seeking employment. There is far greater potential for entrepreneurs to create new jobs, and a focus on small business support and development must be prioritised. 'SME funding will remain an important area of discussion and entrepreneurs; funders and public-sector representatives will meet to discuss the state of small business funding in South Africa at the SME SA Funding Summit 2025 on 12 June – but even more important is the creation of an environment which is conducive to entrepreneurship: less red tape and dependable infrastructure.' ALSO READ: Tariffs and Agoa: How Parks Tau summarised US-SA trade talks Agoa forum in DRC The relationship between SA and the US remains fraught, but at least there is dialogue. 'Apart from the Presidential meeting in the Oval Office, trade, industry and competition minister Parks Tau and agriculture minister John Steenhuisen have submitted a new trade framework to US trade representative Jamieson Greer. 'There are key areas where US investment might help us unlock value at home, and which might appeal to the deal-centric nature of the US administration. Developing a domestic source of natural gas would bolster SA's regional competitiveness and energy security, and we remain a key source of scarce minerals,' he added. The annual conference on the African Growth and Opportunity Act (Agoa) between trade ministers of Agoa-eligible countries and the US is scheduled to take place in the Democratic Republic of the Congo (DRC) in June. This will be an important indicator of what the US will do when Agoa expires in September 2025, though it seems unlikely at this stage that SA's Agoa benefits will be extended. While the overall impact of losing Agoa would not be immense for SA, some sectors – particularly the automotive and agricultural sectors – would be significantly affected. Both sectors have extensive value chains, and SME suppliers are rapidly adjusting their operations. 'The potential loss of Agoa benefits creates particular uncertainty for SME suppliers in the automotive value chain, many of whom have built their business models around preferential access to US markets. 'These companies now face the complex challenge of either finding alternative markets or restructuring their operations to remain competitive under standard trade terms.' ALSO READ: Analysts say Trump's bid to weaken Brics will fail as US influence declines Brics summit in Brazil Da Silva added that the Brics Summit, scheduled to take place in Brazil in early July, will again put SA in the US crosshairs, as provocative issues (such as an alternative to the dollar as the world's reserve currency) will be raised and debated by Brics countries. 'The timing could not be more delicate. For SMEs, particularly those in export-oriented sectors, this diplomatic tightrope walk translates into very real business planning challenges. 'Where do allegiances lie in a rapidly shifting global order? This geopolitical balancing act requires SMEs to develop strategies that can withstand diplomatic volatility while capitalising on emerging opportunities within both Western and Brics markets.' NOW READ: Political uncertainties that will impact SMEs in the coming months
Zawya
10-04-2025
- Business
- Zawya
South Africa: VAT hikes and fuel price cuts, a mixed bag for small businesses
Although the minister emphasised that the budget would continue to prioritise social grant recipients and public-sector workers, small businesses weren't left out. The Department of Small Business Development has set aside R2.1bn over the medium term to support around 120,000 competitive SMEs—especially those owned by women, youth, and people with disabilities in townships and rural areas. Additionally, the government allocated R313.7m to the establishment of SMME hubs to support business expansion, while the R1tn allocated to infrastructure will be a positive for SMEs due to its impact on the infrastructure supply chain and because all businesses will benefit from investment in roads, water management and railways. There was a significant 51% reduction in the cost of a 1.5GB data bundle, which is good news for small businesses and individuals. Let's hope that all these commitments remain intact when the budget finally makes it through the legislative process. Miguel da Silva, group executive: business banking at TymeBank, takes a closer look at what will affect SMEs most in April and beyond. Transformation Fund proposed President Ramaphosa, in his 2025 State of the Nation Address on 6 February, announced the much-discussed R100bn Transformation Fund. The aim: Over the next five years, black-owned small businesses will be able to access financial support through this fund, which is expected to be largely financed by the private sector. The reality: There are significant, valid concerns raised about this proposed fund. There is heavy critique that the fund is mainly focussed on the contributions from big business rather than the desired outcomes, which leads to worries about it being yet another fund ripe for looting. The Minister of Trade, Industry and Competition, Parks Tau, published the Draft Transformation Fund concept document on 19 March, with a deadline for public commentary of 7 May. While fuel prices are down, load-shedding returns and VAT increase looms The latest fuel price decrease is good news for SMEs that rely on vehicles for deliveries and logistics. Effective 2 April, the price of 95 unleaded petrol decreased by 72c/l and 93 unleaded petrol decreased by 58c/l, while diesel prices dropped by between 84c and 86c/l. Unfortunately, after months of no load-shedding, the dreaded power outages have returned. To add insult to injury, as of 1 April, Eskom direct customers are now paying an extra 12.7% – well above the inflation rate – while municipal customers will see prices go up by at least 11.32% from 1 July. The impact of these cost increases on SMEs will be substantial. Businesses may try and absorb them initially but will eventually need to either up their prices or find innovative ways to reduce them. It's clear that exploring energy alternatives is not just a matter of ensuring a stable supply – renewables in particular look more and more appealing from a cost-saving perspective as grid electricity continues to get more expensive. SMEs will take another knock when the 0.5% VAT hike tabled for 1 May 2025 comes into effect. The proposed 2025 increase, which at this stage can only be stopped by a legislative intervention, will take VAT up to 15.5%. Unless an SME is VAT-registered and works only with other businesses that are VAT-registered, it will have to pay more for its supplies. Consumers will have to shoulder the burden of the higher tax, although the government is planning on expanding the basket of zero-VAT-rated food items, among other measures. The SARB firm on the repo rate – for now At least it did not go up! But by holding the repo rate firm at 7.5% on 30 March, the South African Reserve Bank has ensured there will be no relief for those who use credit. This decision makes the prime lending rate 11%. The SARB cited rising inflation risks, global economic uncertainty, and the effect of fiscal policy changes as reasons for its cautious approach. What is certain is that continued high rates will keep the screws on households and SMEs alike. Spaza shops face onerous registration effort According to research by Trade Intelligence, there are approximately 150,000 spaza shop owners across the country, collectively valued at around R197bn in 2023. Recently government has sought to make shop owners register their businesses to ensure better safety, compliance and regulation. The registration is onero,us to say the least. Shop owners need to assemble a mass of supporting documents, and the process is laborious and expensive. Tens of thousands of spaza shops have already been found non-compliant, and hundreds have been closed. Consider the effects on a sector estimated by the 2021 South African Township Marketing Report to employ 2.6 million people and contribute 5.6% to GDP if these closures continue. April's SME environment is anything but a joke. While government departments profess their desire to help SMEs, we must still contend with regulations, red tape and a repo rate that keeps SMEs and citizens from gaining even the slightest financial relief. Add in the depressive effects of a looming VAT hike and turning our sluggish GDP growth around becomes a really tall order. All rights reserved. © 2022. Provided by SyndiGate Media Inc. (
