{"id":12666,"date":"2025-03-13T18:57:02","date_gmt":"2025-03-13T19:57:02","guid":{"rendered":"https:\/\/www.premium-partners.net\/?p=12666"},"modified":"2025-03-16T12:36:43","modified_gmt":"2025-03-16T12:36:43","slug":"sa-budget-2025-smes-left-in-the-cold-as-vat-hikes-loom","status":"publish","type":"post","link":"https:\/\/www.premium-partners.net\/fr\/builder\/sa-budget-2025-smes-left-in-the-cold-as-vat-hikes-loom\/","title":{"rendered":"SA Budget 2025: SMEs left in the cold as VAT hikes loom"},"content":{"rendered":"

This post<\/a> was originally published on this site<\/a><\/p>

<\/p>\n

Tawanda Korombo<\/p>\n

Small-scale to medium enterprises play a pivotal role in South Africa\u2019s economy but they may well have been forgotten when Finance Minister Enoch Godongwana delivered his 2025 Budget Speech this week.<\/span><\/p>\n

Shawn Theunissen, the <\/span>f<\/span>ounder of Property Point and eTTP, s<\/span>aid the 2025 budget statement \u201c<\/span>was a missed opportunity to leverage SMEs as a catalyst for economic growth and job<\/span>\u201d<\/span> creation<\/span>.<\/span><\/p>\n

\u201cInstead of bold action, we saw vague commitments and a lack of urgency on the issues that matter most to small businesses<\/span>,<\/span>\u201d<\/span> he said.<\/span><\/p>\n

The <\/span>0.5% VAT increase <\/span>proposed for <\/span>2025\/26, rising by another 0.5% the following year<\/span> was expected to add an additional <\/span>direct financial strain on SMEs.<\/span> The hike in the <\/span>VAT<\/span> rate <\/span>will increase operational costs for small businesses<\/span> and f<\/span>urther squeez<\/span>e <\/span>profit margins at a time when consumer spending is already weak.<\/span><\/p>\n

Worse still, said Garth Rossiter, the chief risk officer for SME services provider, Lula, \u201ct<\/span>here was not one single mention of small business or SMEs<\/span>\u201d during the Finance Minister\u2019s Budget Speech. This was despite the importance of SMEs within the economy as <\/span>small business owners make up the biggest employer segment in the country.<\/span><\/p>\n

\u201c<\/span>They are forced to make job cuts to keep the doors open while public sector wages are increased. This is hard to stomach and particularly tone-deaf,\u201d says Rossiter.<\/span><\/p>\n

Although no formal tax increases were announced, the adjustment of t<\/span>ax brackets for inflation<\/span> <\/span>means that individuals will end up paying more<\/span>. <\/span><\/p>\n

Budget 2025<\/figcaption><\/figure>\n

South Africa\u2019s economic environment continued to pose significant challenges for small and medium enterprises<\/span>, said <\/span>Rossiter<\/span>, highlighting that liquidations of SMEs sharply rose last year. <\/span> <\/span><\/p>\n

\u201cL<\/span>iquidations<\/span> <\/span>have jumped quite significantly<\/span> <\/span>towards the end of last year<\/span>. W<\/span>e are seeing a lot more businesses<\/span> applying f<\/span>or business rescue<\/span>,\u201d explained Rossiter.<\/span><\/p>\n

With the <\/span>past year marked by stagnant growth, high interest rates, and mounting financial pressures<\/span>, turnover for small businesses had <\/span>fallen by more than 50% in the past 12 months.<\/span><\/p>\n

\u201c<\/span>The past year has been one of survival for many South African SMEs. Economic stagnation, high interest rates, and declining consumer spending have created an unforgiving business landscape. Yet with resilience and strategic financial management, SMEs can position themselves for recovery and future success,\u201d says Rossiter.<\/span><\/p>\n

There were, however, some positives for SMEs in the budget statement. The <\/span>increased spending on infrastructure<\/span> was <\/span>something the SME sector has been pleading for as it contributes to its ability to create jobs and create employment opportunities for <\/span>South Africa.<\/span><\/p>\n

Others expected the <\/span>R100 billion Transformation Fund and R20 billion in SME funding initiatives <\/span>touted in the past few months <\/span>to be fast-tracked, yet <\/span>there was no clarity from <\/span>Treasury on the timelines and accessibility of these funds.<\/span><\/p>\n

Similarly,<\/span> said Theunissen, <\/span>the Public Procurement Act (2024), which mandates that 40% of state contracts be awarded to SMEs, was barely addressed. This raise<\/span>d c<\/span>oncerns that SMEs will continue to be excluded from <\/span>g<\/span>overnment procurement opportunities, with large corporations dominating the bidding process<\/span> and corruption continuing<\/span>.<\/span><\/p>\n

\u201cGovernment procurement should be a growth driver for SMEs, but without clear implementation measures and strict enforcement of payment timelines, it remains a broken system,\u201d said Theunissen.<\/span><\/p>\n

Delays in government payments to SMEs remain a major challenge, despite past promises to enforce the 30-day payment rule. This issue has been raised repeatedly in previous Budgets, yet many small businesses continue to experience long waits for payments, leading to severe cash flow constraints.<\/span><\/p>\n

SME White Paper<\/strong><\/p>\n

A new white paper released this week by Lula, titled SME Survival in a Harsh Economic Climate: The State of South African SMEs in 2025<\/em>, says these enterprises face a persistent credit crunch, with SMEs grappling with high borrowing costs stemming from elevated interest rates earlier in 2024.<\/p>\n

Despite the South African Reserve Bank (SARB) initiating rate cuts later in the year, the relief comes too late for many businesses already saddled with debt, the paper shows.<\/p>\n

High levels of gearing have left SMEs vulnerable to interest rate swings, forcing them to pay a premium on loans taken to cover stock, materials, or operational expenses. This financial strain has been compounded by a low-inflation environment, pushing businesses to slash prices or write off debts, further eroding their margins.<\/p>\n

The white paper also flags a troubling rise in debtor days, now at their highest since quarter two 2022, signaling delayed cash flows that stifle SMEs\u2019 ability to reinvest in growth or innovation. Unlike larger corporates with the leverage to enforce quicker payments, SMEs lack the clout to expedite collections, leaving them in a precarious double bind.<\/p>\n

The report also says SMEs have a unique economic cycle, where recovery tends to lag behind that of consumers, a dynamic worsened by the prolonged financial stress of 2024. While the SARB\u2019s rate cuts offer a glimmer of hope, the depth and speed of these reductions will determine whether SMEs can claw back stability in an economy still reeling from structural challenges.<\/p>\n

Looking ahead, the paper says the formation of a Government of National Unity following last year\u2019s elections has bolstered investor sentiment, while planned infrastructure investments could unlock opportunities in sectors like construction and manufacturing.<\/p>\n

Yet, uncertainty looms large, reflected in divergent GDP growth forecasts for 2025: the IMF projects 1.5%, Investec sees around 2.0%, and PwC offers a range of 0.5% to 1.3%.<\/p>\n

This points to modest growth ahead, which is a potential lifeline for SMEs. However, the path to recovery hinges on deeper rate cuts and sustained policy support to ease the credit squeeze and restore cash flow confidence, the white paper notes.<\/p>\n

BUSINESS REPORT<\/strong><\/p>","protected":false},"excerpt":{"rendered":"

Tawanda KoromboSmall-scale to medium enterprises play a pivotal role in South Africa\u2019s economy but they may well have been forgotten when Finance Minister Enoch Godongwana delivered his 2025 Budget Speech this week.Shawn Theunissen, the founder of Property Point and eTTP, said the 2025 budget statement \u201cwas a missed opportunity to leverage SMEs as a catalyst for economic growth and job\u201d\u00a0creation.\u201cInstead of bold action, we saw vague commitments and a lack of urgency on the issues that matter most to small businesses,\u201d\u00a0he said.The\u00a00.5% VAT increase\u00a0proposed for\u00a02025\/26, rising by another 0.5% the following year\u00a0was expected to add an additional\u00a0direct financial strain on SMEs.\u00a0The hike in the\u00a0VAT\u00a0rate\u00a0will increase operational costs for small businesses\u00a0and further squeeze\u00a0profit margins at a time when consumer spending is already weak.Worse still, said Garth Rossiter, the chief risk officer for SME services provider, Lula, \u201cthere was not one single mention of small business or SMEs\u201d during the Finance Minister\u2019s Budget Speech. This was despite the importance of SMEs within the economy as\u00a0small business owners make up the biggest employer segment in the country.\u201cThey are forced to make job cuts to keep the doors open while public sector wages are increased. This is hard to stomach and particularly tone-deaf,\u201d says Rossiter.Although no formal tax increases were announced, the adjustment of tax brackets for inflation\u00a0means that individuals will end up paying more. Budget 2025South Africa\u2019s economic environment continued\u00a0to pose significant challenges for small and medium enterprises, said\u00a0Rossiter, highlighting that liquidations of SMEs sharply rose last year.\u00a0\u00a0\u201cLiquidations\u00a0have jumped quite significantly\u00a0towards the end of last year. We are seeing a lot more businesses\u00a0applying for business rescue,\u201d explained Rossiter.With the\u00a0past year marked by stagnant growth, high interest rates, and mounting financial pressures, turnover for small businesses had\u00a0fallen by more than 50% in the past 12 months.\u201cThe past year has been one of survival for many South African SMEs. Economic stagnation, high interest rates, and declining consumer spending have created an unforgiving business landscape. Yet with resilience and strategic financial management, SMEs can position themselves for recovery and future success,\u201d says Rossiter.There were, however, some positives for SMEs in the budget statement. The\u00a0increased spending on infrastructure\u00a0was\u00a0something the SME sector has been pleading for as it contributes to its ability to create jobs and create employment opportunities for\u00a0South Africa.Others expected the\u00a0R100 billion Transformation Fund and R20 billion in SME funding initiatives\u00a0touted in the past few months\u00a0to be fast-tracked, yet there was no clarity from\u00a0Treasury on the timelines and accessibility of these funds.Similarly,\u00a0said Theunissen,\u00a0the Public Procurement Act (2024), which mandates that 40% of state contracts be awarded to SMEs, was barely addressed. This raised concerns that SMEs will continue to be excluded from\u00a0government procurement opportunities, with large corporations dominating the bidding process\u00a0and corruption continuing.\u201cGovernment procurement should be a growth driver for SMEs, but without clear implementation measures and strict enforcement of payment timelines, it remains a broken system,\u201d said Theunissen.Delays in government payments to SMEs remain a major challenge, despite past promises to enforce the 30-day payment rule. This issue has been raised repeatedly in previous Budgets, yet many small businesses continue to experience long waits for payments, leading to severe cash flow constraints.SME White PaperA new white paper released this week by Lula, titled SME Survival in a Harsh Economic Climate: The State of South African SMEs in 2025, says these enterprises face a persistent credit crunch, with SMEs grappling with high borrowing costs stemming from elevated interest rates earlier in 2024.Despite the South African Reserve Bank (SARB) initiating rate cuts later in the year, the relief comes too late for many businesses already saddled with debt, the paper shows.High levels of gearing have left SMEs vulnerable to interest rate swings, forcing them to pay a premium on loans taken to cover stock, materials, or operational expenses. This financial strain has been compounded by a low-inflation environment, pushing businesses to slash prices or write off debts, further eroding their margins.The white paper also flags a troubling rise in debtor days, now at their highest since quarter two 2022, signaling delayed cash flows that stifle SMEs\u2019 ability to reinvest in growth or innovation. Unlike larger corporates with the leverage to enforce quicker payments, SMEs lack the clout to expedite collections, leaving them in a precarious double bind.The report also says SMEs have a unique economic cycle, where recovery tends to lag behind that of consumers, a dynamic worsened by the prolonged financial stress of 2024. While the SARB\u2019s rate cuts offer a glimmer of hope, the depth and speed of these reductions will determine whether SMEs can claw back stability in an economy still reeling from structural challenges.Looking ahead, the paper says the formation of a Government of National Unity following last year\u2019s elections has bolstered investor sentiment, while planned infrastructure investments could unlock opportunities in sectors like construction and manufacturing.Yet, uncertainty looms large, reflected in divergent GDP growth forecasts for 2025: the IMF projects 1.5%, Investec sees around 2.0%, and PwC offers a range of 0.5% to 1.3%.This points to modest growth ahead, which is a potential lifeline for SMEs. However, the path to recovery hinges on deeper rate cuts and sustained policy support to ease the credit squeeze and restore cash flow confidence, the white paper notes.BUSINESS REPORT<\/p>","protected":false},"author":1,"featured_media":12668,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-12666","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-builder"],"_links":{"self":[{"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/posts\/12666","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/comments?post=12666"}],"version-history":[{"count":2,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/posts\/12666\/revisions"}],"predecessor-version":[{"id":12669,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/posts\/12666\/revisions\/12669"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/media\/12668"}],"wp:attachment":[{"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/media?parent=12666"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/categories?post=12666"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.premium-partners.net\/fr\/wp-json\/wp\/v2\/tags?post=12666"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}