From April South Africa’s Department of Small Business Development will have a further R475 million ($30.4m) to spend helping small businesses, the Minister of Finance Pravin Gordhan (pictured above) announced in his Budget speech yesterday.
This is good news. While many still question the impact the department has made, the additional allocation - which amounts to an 18% increase in 2016/17 alone over 2015/16 - will help test whether more money will really help the department to deliver or not
Its allocation for 2016/17 now comes to R1.3 billion, up from almost R1.15 billion in 2015/16. This is double the about 8% increase in total budgeted spend for all its programmes and departments for 2016/17.
It's a small victory for the department which last year had its requested allocation cut by a third by the National Treasury (see this earlier post).
Where it's all going
The Estimates of National Expenditure for the Department of Small Business Development reveal that part of the new allocations will go to help fund market support (R65m) and competitiveness support (R110m) for small firms and help develop co-operatives (R8m).
About R50m a year will go to cover the cost of administration of corporate services, communication and financial management. This, while an additional about R10m a year has been allocated to carry out monitoring of programmes and policy research.
The National Treasury says in its 2016 Budget review that over the next three years the Small business department aims to spend among other things:
Less for Seda
The department’s Small Enterprise Development Agency (Seda), which assists business owners with business support and incubation, will however see its allocation decline to R676m in 2016/17, down from R769m in 2015/16 (it will rise to R760m in 2017/18).
Calculations (*see below) by Small Business Insight reveal that Seda’s decreased allocation (falling by 12%), is in step with smaller allocations for small business agencies in Brazil (down 21%) and Malaysia (down 13%).
However in Chile, the country’s micro business support agency Sercotec saw its allocation grow by 39% this year (the government's total budget grew at 8% - by about the same as in South Africa, while Malaysia and Brazil's both grew at about just over 2%).
Small business appears to be getting a bigger focus from the government, perhaps a tacit acknowledgement that growing the sector is an important way to reduce unemployment.
The government's other planned measures, contained in the 2016 Budget Review include:
In addition the SA Revenue Service (Sars) has designed a mobile tool to help small firms register at their own premises, and implemented a single registration process, avoiding the need to re-register for different taxes
E-portal a boon
Yet among all these perhaps most welcoming is that from April it will be mandatory for all government departments (provincial and national) to use a new e-tender portal to advertise tenders.
Suppliers will need to be registered on the central supplier database from 1 April 2016 for transactions with national and provincial government and their entities, and from 1 July 2016 for municipalities
Gordhan said in his Budget Speech yesterday that the portal is expected to save the government R25 billion a year by 2018/19, out of a government procurement budget of about R500 billion a year. This is significant
“Since the inception of the eTenders portal in 2015, for example, the site has published 2,500 tenders worth about R35 billion. Transparency has improved, and advertising and administrative costs have come down significantly,” the National Treasury said.
A Public Procurement Bill is also being finalised and will be released for comment in the first half of this year. The National Treasury will also review contracts above R10 million to ensure value for money.
An e-procurement portal is a major victory. It could provide small firms with greater access to state procurement. Those officials that don't pay on time can be punished, as Chile now plans to do, through its e-procurement portal (see this previous post).
The government it seems, is finally waking up to the fact that small businesses have a vital role to play in creating jobs. The tricky thing will be to try to ensure that the support counts. Roping in more private-sector organisations and big business might just help.
Timm is a South African who writes on small business. Follow him on Twitter at @Smallbinsight and on Facebook.
*Calculations for allocations to SME agencies:
Chile's micro business support agency Sercotec was allocated 46,892 million pesos in the 2016 budget. This is up from 33,632 million pesos in 2015, or 39%. The 2016 budget of 37,642,525 million pesos is up X% over the 2015 budget of 34,788,062 million pesos.
Brazil's small business agency Sebrae (which draws its allocation from a tax on company payrolls, rather than from an allocation from the main budget) will have a budget of 3,9 billion reals available in 2016, down from 4,95 billion in 2015. Much of the decrease is owing to the pool of tax that is carried over from previous years having shrunk from over 1,1 billion reals in 2015 to 673 million reals this year. Brazil's total budget meanwhile increased by 2,2% to 3 trillion reals or $767 billion in 2016, up slightly from 2.98 trillion reals or $750bn in 2015
In Malaysia's for 2016 it's small business agency SME Corp saw its contribution fall to 55,2 million ringgits (from 64m ringgits in 2015). This while the total budget of 267.2 billion ringgits was up from 260.7 billion ringgits in 2015.
Stephen Timm is a