Small business owners breathed a sigh of relief after Finance Minister Tito Mboweni’s Budget Speech last week. No major tax increases for 2020 were announced and there was a renewed focus on small businesses and their pivotal role in driving South Africa’s economy.
Here are the top five things you need to know out of the 2020 Budget Speech as well as a few Yoco pro tips for making the most of this tax year.
There are no major tax increases for this year to support growth.
Finance Minister Tito Mboweni’s announcement of marginal tax relief from tax increases is good news for small businesses. Previous years’ VAT and personal income tax increases negatively impacted consumer confidence – a burden carried by small businesses as spending declined.
Yoco pro tip: If you are sole proprietor, personal income tax brackets are relevant to you. Instead of spending the money you will save in tax this year, why not open a savings account to have a small rainy day fund.
There is a focus on lowering the cost of doing business in South Africa.
In his Budget Speech, Minister Mboweni shared his vision of an economic strategy for South Africa that would benefit small businesses, and a large part of that will be ensuring that new small business owners can quickly, and cost-effectively register their venture.
Steps are being taken to address South Africa’s lag in productivity, growth and to reduce the cost of doing business. For example, the business portal will provide a streamlined way to register a new business with the CIPC, UIF, SARS, and the competition fund in one day.
Yoco pro tip: Registering your business is one of the lessons covered in our free short course How To Start Your Business. The course is simple and easy to understand.
Municipalities have been empowered to use independent power providers to alleviate the impact of loadshedding on businesses.
One of the key announcements from the Budget Speech was an exciting change to the electricity regulatory framework. Consistent power is a key factor in running a profitable, sustainable business. The impact of loadshedding on businesses, especially small businesses without the means to access solar solutions or generators, is significant. Changes to the electricity regulations will provide small business owners with tangible solutions to the energy crisis.
Yoco pro tip: Take a look at our guide to keeping your business running during loadshedding for tips on how to prepare for if and when the lights go off.
The Small Enterprise Finance Agency (SEFA) will continue providing support to smaller businesses through grants.
Finance and funding remains a hurdle for small businesses, not because there aren’t funds available but because the flow of funds is often restricted by restrictive funding models. Traditional lenders like commercial banks operate on asset-backed lending. SEFA announced late in 2019 that small business will no longer be required to have 10 – 15% upfront cash or collateral to obtain financial support. The focus is shifted simply to small business owners who are operationally involved in the business.
Yoco pro tip: Yoco merchants are eligible for a cash advance called Yoco Capital which business owners can use for stock, renovations, or expansions. The application amount is pre-approved based on the merchant’s trading history and the application process is done entirely online. If you’re a merchant, check your Business Portal to see if you have an offer waiting!
The Small Enterprise Development Agency (SEDA) responsible for providing non-financial support to small businesses was allocated R2.2 billion, from a total of R6.5 billion allocated for small business incentive programs.
How these funds will be used to support small businesses wasn’t explained but the pro-small business stance of the Budget Speech means that entrepreneurs can be cautiously optimistic about the future.
Yoco pro tip: The number one thing for merchants to keep in mind is that access to these opportunities for support is only available to you if your business is tax compliant. Using a partner like TaxTim or a private accountant can help to keep your business compliant as well as help you make sense of possibilities
There were a number of other proposals out of the Budget Speech that will benefit small businesses as they are put into place over the coming months and years. One of them being a long-term goal of broadening the corporate income tax base to source additional revenue. This will aid in reducing the corporate tax rate in the near future to help South African businesses grow.
If there’s one thing small business owners can take away from this, it’s that there is light at the end of the tunnel and that optimistic perseverance is an important tool in any entrepreneur’s kit.
Do you have any finance or funding questions? Post them in the comments below and we’ll provide expert answers.