Survival tip for SMEs after limited good news in budget speech

There was limited good news for SMEs in the budget speech, but small businesses still have to save wherever they can to ensure that they do not fail, especially since the economy’s medium-term growth outlook is deteriorating in a difficult domestic and global environment, while real GDP growth is projected to average only 1.4% from 2023 to 2025.

Small business therefore has to do what they can to navigate through the tough times, says Jason Mellow, head of MiWay Business Insurance.

“There were some highlights in the budget which SMEs can capitalise on in the new fiscal plan, such as no major tax hikes, as well as a new fiscal support package to support the use of renewable energy.”

Minister of Finance Enoch Godongwana said in the budget speech when he announced that businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewables, there will be no thresholds on the size of the projects that qualify and the incentive will be available for two years to stimulate investment in the short term.

He also said that changes to the Bounce Back Loan Guarantee Scheme are proposed to incentivise renewable energy, rooftop solar and address energy-related constraints experienced by small and medium enterprises and that government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.

In addition, he announced that to ease the impact of the electricity crisis on food prices, the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, will be extended to manufacturers of foodstuffs for the next two years.

Mellow says these measures offer limited relief to SMEs battling to survive load shedding and other challenges. He gives these tips to help businesses save.

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SME cost controls

Keeping costs as low as possible is one of the best ways to survive tough economic times. However, common measures, such as laying off staff and cutting overheads is not always the best way to achieve this.

“Working smarter and sourcing the best possible support can reduce costs and boost margins more effectively.”

He says for example, remaining compliant with tax laws, labour laws and data privacy laws, such as POPIA means you will avoid fines, penalties and other costly effects of non-compliance and with IT support, cyber security, labour consultants and tax experts, SMEs can ensure that you remain compliant and avoid unforeseen expenses.

While alternative power has become essential for SMEs to keep operating, running diesel generators every day is not the most cost-effective solution in the long-term.

“Now may be a good time for SMEs to take advantage of tax incentives announced in the budget speech to look into rooftop solar power. They can also use gas, backup batteries and inverters, or consider moving to premises that offer uninterrupted power supplies to tenants.”

Retrenching or terminating employees to cut costs can also be costly and counter-productive.

“There are direct costs associated with terminating an employee’s services, as well as in hiring and training a new employee in future.”

Mellow warns that for some businesses, termination can also result in costly labour action and downtime.

“The bottom line is that retaining good employees is almost always going to benefit businesses in the long run. Having a resource for strategic labour and HR advice can also save your business unnecessary costs.”

Smarter IT can take the administrative burden off the small business owner by automating mundane, time-consuming tasks that ultimately cost money. However, he says, SMEs do not need to build or grow their IT teams to achieve better IT, but simply need to take advantage of outsourced support services.

Mellow points out that marketing and advertising are invaluable in growing and retaining customer bases and should not be scaled down during a revenue crunch.

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Where can SMEs get support?

There are several initiatives in place to help and several major private sector organisations have stepped up to offer SMEs relief and support, including mobile networks offering competitive bundles and rates, major enterprises growing SMEs under their CSI and Enterprise Supplier Development (ESD) programmes and banks and insurers offering support services to help SMEs run their businesses more efficiently.

MiWay has the MiBusinessAssist business support service that offers support in partnership with Digicall, to help reduce unnecessary operational costs for small and medium-sized business. They offer specialised business support services can help reduce the burden on South Africa’s SMEs, offering benefits such as access to IT and marketing expertise, legal and labour advice, financial advice and office assistance.