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B-BEE Verification Delays Continue

Dti minister gazettes changes to verification requirements and makes grave mistake.

Keith Levenstein

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The DTI minister has gazetted changes to B-BBEE verification procedures and rules that came into effect on 1 October 2011.

The changes allow IRBA (Independent Regulatory Body for Auditors) to approve registered auditors to issue B-BBEE certificates in addition to continuing to allow SANAS to accredit verification agencies, but with changes to the rules.

The gazette stated that SANAS may only accredit entities that have “completed training on B-BBEE Verification Services and Certification offered by Higher Education Institution as prescribed by the DTI.” It also stated that IRBA may only approve auditors that “have completed the Standardised B-BBEE Management Development Program and Certification offered by Higher Education Institutions as prescribed by the DTI.”

More work than agencies

This is aimed at ensuring consistency and improved quality of verification, but will have the effect of delaying any additional accreditation or approval for possibly a year. Previously SANAS was accrediting about 3 to 6 agencies per month. Now, they cannot do so until those agencies have completed the relevant short course offered by Wits, Unisa or other higher education institution. Applications for the first course only opened on 1 September 2011. According to Unisa, the first course starts on 7 October 2011 and will last one year. This means that despite there being an additional body able to approve verification agencies, the number of agencies in the next year is not likely to increase. With the imminent implementation of the PPPFA, due to take place on 7 December 2011, the current batch of verification agencies is not likely to be able to handle the pressure of work.

Verification delays

We consider this a grave mistake by the minister. The intention was to expand the verification industry by allowing more companies to offer verification services, but is likely to freeze accreditation of new agencies for possibly one year. We do support the concept of IRBA approving additional verification entities. We also support the introduction of education requirements for verification analysts. However there should have been a transitional or phase-in period so as not to hinder the process of accreditation.

At the same time we note that prospective verification agencies may no longer use a pre-assessment letter issued by SANAS. They previously could use their pre-assessment letter to perform verification without full accreditation. From 1st October 2011 those agencies with SANAS accreditation will only be allowed to issue valid certificates.

Keith Levenstein is the moderator of the B-BBEE forum on Business Masters. Keith has been involved in broad-based black economic empowerment since 2005. His business, EconoBEE, well known to all in the industry. Their aim in this forum is to assist you in becoming BEE compliant.

Entrepreneur Today

Government Injection To SMEs Cautiously Welcomed

Mboweni said the Jobs Fund is a vital complement to private sector job creation. “The Fund has disbursed R4.6bn in grant funding, and created well over 200,000 jobs since inception. The allocation to this Fund will rise over the next three years to R1.1bn,” said Mboweni.

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Riversands Incubation Hub has welcomed the allocation of R481.6m of the 2019 national budget to the Small Enterprise Development Agency (SEDA) to expand the small business incubation programme, saying this will strengthen co-ordination and partnership agreements with other SME agencies and incubation programmes.

“South Africa’s entrepreneurial economy is built on linkages and networks across industry sectors, and the stronger these are, the higher the chances of SMEs surviving and thriving, which is critical if the economy is to grow,” says Jenny Retief, CEO of Riversands Incubation Hub.

Finance Minister Tito Mboweni also undertook to free entrepreneurs from stifling regulations and complicated taxes, which Retief said would encourage and boost trade in this sector. “The frustrations that many entrepreneurs feel in the current business space, which is overburdened with tax red tape and obstructive labour regulations, will hopefully be alleviated. The sustainability of many early-stage SMEs is significantly dependent on ease of doing business,” says Retief.

Mboweni said the Jobs Fund is a vital complement to private sector job creation. “The Fund has disbursed R4.6bn in grant funding, and created well over 200,000 jobs since inception. The allocation to this Fund will rise over the next three years to R1.1bn,” said Mboweni.

The Government has also allocated R19.8bn for industrial business incentives, of which R600m has gone to the clothing and textile competitiveness programme. This will support 35 500 existing jobs and create about 25 000 new jobs over the next three years.

“It is particularly exciting to see this commitment, because the lack of locally produced textiles is a significant constraint for the local fashion industry. It also offers strong synergies for desperately needed rural development. A counterpart in the Department of Rural Development and Land Reform was recently telling me about South Africa’s capacity to produce a superb range of raw materials such as wool – not only from sheep but also alpacas and of course cotton. Building the local textile industry to beneficiate these raw materials offers benefits all round,” comments Retief.

Retief said these injections will stimulate entrepreneurship in sectors that are under-resourced, but that ongoing support is essential to ensuring that these jobs survive. “Business savvy and financial literacy is a road that requires solid guidance along the way. This is where incubation programmes such as ours provide critical value and sustainability,” says Retief.

Retief endorsed the recent call by the Small Business Institute for the Finance Ministry to request an audit of government’s overall financial support to small businesses, to gauge where targets are not being met and equally, where there are success stories. “This will provide a clearer picture of where fiscal priorities should lie going forward,” said Retief.

While the allocation of R69bn towards the plan to unbundle Eskom is laudable, Retief said it remains to be seen whether this will improve the prognosis for Eskom, and by extension, the viability of millions of entrepreneurs and SMEs dependent on consistent electricity flow. “Ongoing load-shedding would be nothing short of disastrous for countless small businesses across the country, so we will be watching the Eskom situation closely in the coming months. Our own business has also been set back by power cuts over the past month,” says Retief.

Mboweni’s emphasis on the private sector as the key engine for job creation was correctly placed, along with his policy actions aimed at ending the uncertainty that has undermined confidence and constrained private sector investment, Retief said. “The devil is in the detail, however, and the sooner entrepreneurs and SMEs feel these differences, the more growth we will see from this vital sector,” she says.

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#Budget2019: But What About Small Businesses?

Where is the focus on growing South Africa’s small business sector?

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That is the overriding question we are left with at the end of Finance Minister Tito Mboweni’s maiden budget speech. The few mentions the Minister made about Small & Medium Businesses were short on detail at a time when we desperately need to supercharge the growth of this segment.

A highlight of the speech from Sage’s perspective was the Minister’s acknowledgement that we must free small businesses from stifling regulations and complicated taxes because we desperately need them to boost employment and drive competition. This aligns with President Ramaphosa’s pledge to improve the ease of doing business in his State of the Nation Address this year.

However, these pronouncements need to be followed rapidly by concrete policies and regulation. We believe that there are many steps government could take to streamline red-tape for small businesses -from streamlining some SARS processes such as VAT refunds and issuing of tax clearance certificates to increasing the maximum thresholds for turnover tax and VAT registration.

We hope to hear more about such steps after the May general election and in the October Medium Term Budget Policy Statement.

One welcome announcement in the speech was the allocation of R481.6 million to the Small Enterprise Development Agency to expand the small business incubation programme. Such programmes can play an invaluable role in helping small businesses to survive the difficult start-up phase and then scale up into larger businesses.

As a software company, we were also pleased that the Minister spoke about using the budget to get our country ready for technology. His focus on the importance of technology in education, his commitment to working with the Minister of Communications to resolve the issue of spectrum licensing in order to drive down data costs, and his mention of FinTech innovation programmes at the Reserve Bank all point to a focus on creating a competitive, digital country that ready for the future.

However, I would have liked to have seen more of a specific focus on innovation as a vehicle for driving economic growth. The fourth industrial revolution and the rise of a digital economy has been a theme of recent government speeches and addresses, and it would be good to see the words matched with investments and policies.

On the whole, Minister Mboweni and the National Treasury have done a good job of negotiating a challenging economic climate. They are to be commended for balancing the books, keeping a lid on government spending, taking steps to put Eskom and other state-owned entities on a more sustainable footing, and committing towards investing in infrastructure.

Such steps could help boost business confidence and create an enabling environment for businesses of all sizes. As the Minister notes, the private sector is the key engine for job creation. Taking policy actions that offer more certainty to the business community will help to reinvigorate investment in the economy and unlock entrepreneurial activity.

Budget2019: Commentary by Rob Cooper

General comments

As expected, this was a conservative budget with no sweeping changes to most forms of taxation. The Finance Minister took advantage of some new revenue sources such as carbon taxes, but, for the most part, continued to stick to the script of limiting bracket creep adjustment, sin taxes and fuel levies to raise more money.

We can but hope that the decision for the government not to take on Eskom’s debt and a reduction of public expenditure by around R50 billion since the October mini-budget will be enough to convince Moody’s not to downgrade South Africa’s sovereign credit rating.

Personal income tax

The Minister and his team have raised income taxes by stealth by choosing not to adjust tax brackets to allow for inflation this year. Unlike previous years, even low- and middle-income earners are not getting much respite. Rebates and the tax threshold are being increased by small amounts to allow a bit of relief from inflation, but most people earning above the tax threshold (raised from R78,150 to R79,000) will feel some pain.  This measure will raise around R12.8 billion in revenue for the tax year. 

National Health Insurance

The Finance Minister decided not to apply an inflationary increase to the Medical Tax Credit, which will allow him to raise an extra R1 billion in revenue for the year. This is not surprising since government is phasing out this credit and gearing up for a wider rollout of the National Health Insurance (NHI) scheme.

What is surprising is that the funds will be allocated to general revenue rather than NHI, as was the case in previous years when below-inflation increase on medical scheme credits were used to fund NHI pilot projects. I am glad that the tax credit is still with us because it helps to make private medical cover affordable for millions of low-income South Africans. We heard no news about how the NHI will be funded and will need to wait for the government to table the bill that includes funding to find out more.

Employment tax incentive

It was heartening to hear that about 1.1 million young people have been employed under the Employment Tax Incentive scheme. The incentive of up to R1 000 can now be claimed for employees earning up to R4,500 per month, up from R4,000, and the remuneration threshold has been increased by R500 to R6,500. This is a necessary and welcome adjustment for inflation.

Bearing in mind that the ETI has been extend for 10 years, I was hoping for an indication in the budget that the policy-makers will be considering changes to simplify the ETI requirements, thereby increasing the take-up by employers.

Tax collection

We can expect to see tax reforms in the years to come, with Minister Mboweni recommitting to improving administration at SARS. Judge Dennis Davis will be assessing the tax gap — the difference between revenue SARS collects and what it should collect. Restoring SARS to a world-class administration machine and improving compliance could go a long way to cushioning compliant taxpayers from tax increases and new taxes in the year to come.

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2019 National Budget Speech: Five Positive, Key Take Outs For Local SMEs

Finance Minister Tito Mboweni today referenced the private sector as the key engine for job creation in his National Budget speech.

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Ben Bierman, MD of Business Partners Limited, fully supports this statement, and says that there are five key take outs that local small and medium enterprises (SMEs) will benefit from:

1. Falling data costs

Minister Mboweni was adamant that the cost of data must fall, and committed to work relentlessly with the necessary parties to ensure this happens. As data gets cheaper, there will be more opportunities for SMEs and entrepreneurs to build their business and for new technology businesses to emerge. Making data more affordable and accessible can go a long way in driving economic and SME growth.

2. The R30 billion allocated to build new schools and maintain school infrastructure spend

National infrastructure spend is likely to be a big contributor to SME growth, and will create positive knock-on effects for job creation in the sector. Not only will SMEs be included in the supply stream, but as infrastructure projects are rolled out, economic growth will be positively impacted, having a downstream effect on small business.

3. Relaxed visa requirements

Relaxed visa requirements provide an enhanced opportunity for SMEs operating in the tourism industry, driving growth and the creation of new jobs. As tourism is a substantial contributor to the country’s GDP, the increasing the number of visitors to South Africa is extremely beneficial to the macro environment as well as for businesses operating both directly and indirectly in the tourism sector.

4. Allocation of R3.2 billion to operationalise the small business and innovation fund over the MTEF

The R3.2 billion budget allocation for the small business and innovation fund is a definite positive development for the country’s entrepreneurial eco-system and is anticipated to contribute to the creation of more innovative businesses that can respond to the opportunities presented by the 4th Industrial Revolution.

Also noteworthy is the R481.6 million allocated to the Small Enterprise Development Agency’s incubation programme expected to bolster the creation of new businesses and survival rate of existing businesses.

5. Industrial business incentives

The R19.8 billion allocated to industrial business incentives will not only benefit the national economy as a whole, but it will yield opportunities for local industrial SMEs and create job opportunities.

The R600 million assigned to the clothing and textile competitiveness programme is also a much needed boost to revitalise this struggling sector of our economy that has historically been a driver of economic growth.

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