What Business Owners of All Sizes Should Seek from Government in the Lead-Up to the Mini-Budget

Published: 2 November 2023

As South Africa approaches the upcoming mini-budget, the business landscape is under the spotlight, with entrepreneurs and business owners of varying sizes contemplating what they need from the government to thrive. The SME sector remains a cornerstone of economic growth and employment in the country, contributing 34% of the country’s total GDP and creating an estimated 50% to 60% of all jobs. However, businesses of different sizes have unique requirements when it comes to regulatory support and market access.

Understanding the Business Landscape

“When it comes to support for businesses, there is no ‘one size fits all’ solution,” says Miguel Da Silva, Managing Executive of Retail Capital, a division of TymeBank. “Government and the wider financial sector need to recognise the different sizes, structures and stages of SMEs in South Africa, and their unique needs when it comes to funding, business support and legislation. For these businesses, the right support can literally mean the difference between success and failure,” he explains.

According to Da Silva, the importance of recognising that “one size” does not fit all, is critical. And that is why business owners should be specifically demanding the support they need.

To set the stage, a small business typically employs fewer than 50 people, with an annual turnover ranging from R3 million to R20 million, depending on the sector. However, within this broad definition, there is a wide array of different types, each with its distinct characteristics.

Different Needs for Different Businesses

Micro-Businesses (Fewer than 10 Employees): These businesses require access to affordable and flexible funding options and simplified regulations to encourage their growth. They often face challenges in securing funding due to a lack of financial records.

Small Businesses (10 to 50 Employees): Small businesses need more sophisticated funding options, access to markets, and resources for business development. They typically have the potential to adopt better financial management practices but require guidance in doing so.

Medium-Sized Businesses (50 to 200 Employees): This category requires complex funding structures, support for scaling their operations, and access to global markets. They may possess the capacity to offer customers advanced payment options but need government assistance to expand further.

Large Businesses (Over 200 Employees): Large corporations require customised funding and expansion options tailored to their size and complexity.

Government Priorities in the spotlight ahead of Mini-Budget

As the country gears up for the Mini-Budget announcement Da Silva says a key area of focus for government needs to be around access to funding – in addition to funding sought from the private sector.

There is an almost overwhelming demand for business funding in South Africa, but according to the SME South Africa Landscape Report, the vast majority have not received any kind of funding from the government. This is where alternative funding organisations can help shorten the funding gap, but government needs to drive reform.

Here are some key areas where government intervention can make a difference:

Regulatory Reforms: Government should focus on erasing regulatory impediments that hamper entrepreneurs and small businesses. Amendments to the Businesses Act and the implementation of the Startup Act are steps in the right direction.

Funding Access: Ensuring that businesses at all levels have access to funding that aligns with their unique requirements is crucial. Micro-businesses and small enterprises may need more straightforward funding options, while larger businesses may require customised solutions.

Market Access: The government should facilitate market access for businesses of all sizes. Small businesses need assistance in entering markets, while medium-sized and large businesses may require support in expanding into global markets.

Business Incubators and Accelerators: Creating tailored incubators and accelerators that cater to the distinct growth stages of businesses is vital. Early-stage startups require seed funding and mentorship, while established businesses may need debt financing for expansion.

Big decisions ahead

Da Silva says that while it’s important for government to have robust policies that can adapt to different business needs, they can’t develop them in isolation.

“If business owners, and the wider market don’t let government know what they need and help shape policy, then we are all leaving the future of entrepreneurs in the balance. By taking positive, collaborative steps towards making South Africa a place where the entrepreneur and small business owner is celebrated and actively supported, the business and government sectors can create an environment that fosters growth, innovation, and prosperity for all.”