This week, South Africa witnessed the unprecedented third tabling of the national budget, a clear signal of how volatile and complex our political and economic landscape has become. After the GNU voted against the previous versions of the budget, the Treasury was forced into multiple rewrites, trying to stabilise our economic ship in turbulent waters.
Just hours after this crucial budget was presented, global headlines were overshadowed by the dramatic diplomatic exchanges in the Oval Office. Still, for South Africa’s small and medium-sized enterprise (SME) sector, Budget 3.0 cannot be ignored. It may not carry the drama of international politics, but its implications are arguably more consequential for the daily survival and long-term success of the country’s small business backbone.
When the first version of the 2025 budget was tabled in February, expectations were high that it would offer meaningful SME support in the face of sluggish growth, high youth unemployment, and a struggling post-pandemic recovery. But that budget left much to be desired. The second version in April brought a flicker of hope for SMEs, which generate more than 60% of South Africa’s employment and contribute about 34% to GDP.
Despite this, SMEs continue to be squeezed by rising input costs, restricted market access, delayed payments and an increasingly complex tax landscape. Budget 3.0 was meant to be a turning point, but did it deliver, or has it once again fallen short of expectations?
Let’s start with the good news. The shelving of the VAT increase, at least for now, is a welcome reprieve for SMEs operating on razor-thin margins. To plug the revenue gap left by the U-turn, the Treasury has instead proposed an increase in the general fuel levy by of 16c/l for petrol and 15c/l for diesel, effective June 4.
A rise in fuel prices has a cascading effect on the cost of doing business, and even though economists predicted this move, its impact will still be deeply felt
This translates into higher transport and distribution costs almost overnight. A rise in fuel prices has a cascading effect on the cost of doing business, and even though economists predicted this move, its impact will still be deeply felt. In many ways, fuel is the heartbeat of SME operations, and this hike could be especially devastating for rural businesses and township entrepreneurs, where fuel availability is already a challenge.
Where Budget 3.0 truly fell short, though, was in its lack of clear direction and concrete detail on funding allocations — something SMEs need urgently. There was no mention of how the much-hyped transformation fund, launched by the department of trade, industry & competition earlier this month, would be supported, scaled or accessed. Like me, many SMEs will be wondering whether this lifeline will ever fully materialise.
Similarly, infrastructure spending, another critical lever for SME growth, received scant attention. Roads, rail and water projects are not just nation-building exercises but also major opportunities for SMEs to plug into supply chains, secure contracts, and grow their businesses.
Perhaps the clearest message of Budget 3.0 is that compliance is non-negotiable. With the South African Revenue Service receiving an additional R7bn to ramp up systems and modernise collections, small businesses can expect increased scrutiny.
Sars is working to collect between R8bn and R10bn in outstanding revenue, and we’re already seeing intensified audits, not just on income tax but across the board, including VAT, customs and donations tax.
For SMEs, this means the age of flying under the radar is over. It’s essential that SMEs review internal financial controls, ensure all expenses are properly documented, submit outstanding returns and seek guidance from qualified tax practitioners when needed.
Budget 3.0 wasn’t a budget of bold promises. It was a budget of hard truths. The government is constrained, the economy is under pressure and South Africa’s future, especially its relationship with the US, is far from certain. But small businesses, by their very nature, are resilient, adaptable and resourceful.
Now is the time to double down on those traits. To innovate despite fuel hikes. To seek out opportunities beyond traditional channels. And above all, to build sound, compliant, and future-ready enterprises. Because, in this new fiscal reality, survival and success belong to the well-prepared.
• Mtwentwe is MD, Vantage Advisory, and host of the SAICA Biz Impact podcast
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