One of the best pieces of news to come out of last week’s medium-term budget was the revelation by SA Revenue Service commissioner Edward Kieswetter that small and medium-sized businesses (SMEs) were responsible for much of the surprise R11.7bn overshoot in corporate income tax collections that the National Treasury is now budgeting for.
Kieswetter said SMEs tend to react much more quickly than larger ones when conditions start to turn. Their productivity and profitability have jumped thanks to the fact that SA has had no load-shedding since March 26.
Small though it is in the context of the government’s R1.8-trillion tax take, the good news demonstrates how much of a difference it makes when we just keep the lights on.
But it demonstrates, too, just how big the role of smaller businesses could be if SA just made it easier for them to do business. SMEs should be engines of job creation and innovation in the economy.
Elsewhere, in emerging markets, they account for an outsize share of employment. Here their contribution is well below par. The morass of regulatory red tape and regulatory dysfunction that strangles entrepreneurs is a big part of the explanation.
Despite repeated promises by President Cyril Ramaphosa to cut red tape to improve the business environment, nothing has changed. If anything, the state has become more regulatory and, certainly at local government level, more dysfunctional.
The tax take numbers should be a wake-up call. It costs the government nothing to get rid of red tape, but the returns could be huge.
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