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Eskom Supports Economic Growth In South Africa

Through its various programmes and strategic partnerships, the Foundation has been working to enhance the quality of life for South Africans. Under one of its focus areas, enterprise development, the Foundation has been supporting black-owned small and medium enterprises (SMEs) to become sustainable and create jobs.

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As we conclude Heritage Month (September), we should remind ourselves of just how special South Africa is as a country that is rich in cultural diversity. With our progressive constitution and so much political and socio-economic advancement in the last 24 years, we have come a long way. We should pause, take stock and pat ourselves on the back for having made it this far.

We are not without our problems as a country however, and coming from a terrible past such as ours, it will take a long time before we reach our “Canaan”. Some of our historical problems have unfortunately latched onto our heritage as a new people, which has left many unable to work and provide for themselves and their families. What is abundantly clear is that solutions to our problems will come from ourselves.

One of the biggest problems to address is the economic marginalisation of many of our countrymen. Getting this right will have a ripple effect and contribute towards solving other socio-economic challenges we are faced with. Seemingly, we will not be able to make a dent in the reduction of crime, for instance, unless people are able to earn a living and feed their families.

When Eskom started getting involved in community development back in 1988, it began with a project that gave bursaries to talented black students who excelled in mathematics and science to study engineering. The focus grew to include early childhood development and school gardens, which all culminated in Eduplant, a competition run in partnership with Food & Trees for Africa, aimed to promote permaculture gardens and the role of food security in schools across the country.

Eskom continued its work in similar and other projects until 1998, when the Eskom Development Foundation was officially established, with a mandate of implementing the organisation’s corporate social investment (CSI) strategy in sectors including enterprise development, education, healthcare, social and community development. Through its various programmes and strategic partnerships, the Foundation has been working to enhance the quality of life for South Africans.

Under one of its focus areas, enterprise development, the Foundation has been supporting black-owned small and medium enterprises (SMEs) to become sustainable and create jobs. At the centre of the government’s latest stimulus package is the revival of township economies and small businesses. These businesses, which are based and operated in these townships, should be the drivers of this stimulus, if it is to make a difference and help grow these local economies.

Related: Ten Rules for Economic Growth

It is a known fact that many small businesses fail to survive or realise their full potential when the only thing possibly standing in their way is getting some guidance. Help in the business world exists in many different forms and in some cases, it doesn’t even cost anything. The reality is that acquiring the basic skills of running a business is something that cannot be replaced or bypassed, and can too often mean the difference between survival and failure.

At Eskom we believe that there is nothing small about small businesses. And this is within the context of their contribution to the economy. Many economists and business experts agree that SMEs are the backbone of any economy. Our programmes support enterprise development and are geared at helping small businesses become sustainable, achieve success and uplift their local economies.

Contractor Academy

The Eskom Contractor Academy equips small business owners with the necessary skills they need to build successful and sustainable businesses. The academy combines theoretical and practical work, where students attend a residential study school for a week every month over eight months. By using the academy to empower entrepreneurs, Eskom is contributing to boosting much-needed economic activity around the country. The academy boasts a 97% pass rate with a 60/40% male and female representation and 51% youth. 

Simama Ranta

The Simama Ranta Entrepreneurship Education Competition is run in collaboration with Education with Enterprise Trust (EWET) and aims to stimulate entrepreneurship education in high schools across the country. It identifies and celebrates schools that are excelling in teaching their learners how to become entrepreneurs using practical enterprise clubs within their schools.

The Foundation believes that one of the best ways to fight underdevelopment in our communities is to teach and encourage the youth, at school level, to consider entrepreneurship as a viable career choice. To qualify for the competition, schools must run an enterprise club that teaches learners the basics of business through practical application while responding to their respective communities’ socio-economic needs. The competition rewards the winning schools with various cash prizes that they can use to grow their projects.

Related: Solutions To Get Your Business Through Tough Times

Business Investment Competition (BIC)

The annual Business Investment Competition (BIC) recognises and rewards SMEs that are significantly contributing to the fight against unemployment and poverty. These are businesses that are spearheading the country’s economic development by creating jobs in their local economies.

The competition is open to local, black-owned and registered enterprises that have been operating for more than 24 months in the manufacturing, engineering and construction, trade and services as well as agriculture and agri-processing sectors. The competition helps SMEs move to the next level with not only the financial rewards, but also the business skills, training and networking opportunities provided as part of the prizes. The competition winners receive cash prizes that they can reinvest into growing their businesses.

Small Business Expo (SBE)

The Foundation, in partnership with Thebe Reed Exhibitions, runs the Small Business Expo (SBE), a key calendar event in the small enterprise development space. The annual three-day SBE is a fitting conclusion to the Foundation’s other enterprise development initiatives as it is where finalists from the BIC and Simama Ranta competition get an opportunity to exhibit their enterprises and projects.

The expo gives entrepreneurs a unique platform to showcase their small businesses, build brand awareness, generate leads and interact with potential customers and investors. It also aims to stimulate entrepreneurship and contribute to the development of SMEs with a view to enhancing the country’s future economic growth and employment opportunities.

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3 Stealthy Tax Hikes Payroll Managers And Employees Need To Take Note Of

By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa

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“Dammed if you do and dammed if you don’t.” 

The adage summarises the difficult decisions government and the Finance Minister faced when balancing the country’s books, rescuing state-owned enterprises, and reviving the growth of our economy. Given the economic pressure that most taxpayers are facing, government ideally needed to achieve all of that without direct increases to personal income tax in the most recent Budget Speech.

Personal income tax has comprised at least a third of South Africa’s total tax revenue in recent tax years, despite growing unemployment. The 2019 Budget, presented in February, forecasts that personal income tax will account for nearly 39% of tax collected during the upcoming (2019/20) tax year. Given that we are in an election year and that the tax base is fragile, it’s not surprising that the Finance Minister and the National Treasury avoided direct increases to the statutory tax tables used to calculate PAYE for employees in the budget.

Nonetheless, government has made inflation work in its favour to impose some tax increases by stealth. Here are three ways government is raising more revenue without direct tax increases:

1. Bracket creep

The statutory tax tables used by payrolls and employers have not been changed for 2019/20, nor have the brackets been adjusted for inflation. This effectively amounts to an indirect tax increase that will yield a revenue saving of approximately R12.8 billion for government’s coffers.

It is not unusual for government to use ‘bracket creep’ to effectively raise more revenue. But unlike previous tax years, even low- and middle-income earners are not getting much relief. Rebates and the tax threshold are being increased by small amounts to allow some relief, but many people this year will feel the pain as inflationary salary increases push them into a higher tax bracket.

2. Medical aid credit not adjusted for inflation 

As proposed in the 2018 Budget, the Finance Minister did not apply an inflationary increase to the Medical Tax Credit, which allowed him to raise an extra R1 billion in revenue for the year. Surprisingly, these funds will be allocated to general tax revenue rather than ring-fenced for healthcare. In previous tax years, revenue generated from below-inflation increases on medical scheme credits was used to fund National Health Insurance (NHI) pilot projects.

There is still no clarity on how the NHI is going to be funded except for a general statement that the funding model is a problem for the National Treasury to solve, and that the principles of cross-subsidisation will apply. One wonders if any real progress will be made soon, given the fiscal constraints government faces.

3. Business travel deduction left untouched

The Budget leaves the per-kilometre cost rates used to determine tax deductions for business travel untouched. By not increasing travel rates to account for inflation, government effectively increases income tax collection at the cost of the taxpayer. This will be a blow for people who need to claim from their employers for business travel in their personal vehicles. This change has slipped through largely unnoticed and the budget does not provide numbers for the expected increase in tax revenue.

Closing words

Amid political turmoil and uncertainty, the Finance Minister presented a balanced budget for 2019/20 that offers hope for the future along with some tough love. With government taking steps to accelerate economic growth and improve revenue collection, we should hopefully see a steady improvement in government finances, which will translate into less pressure on the taxpayer in future years.

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Entrepreneur Today

SMEs: Staying On The Right Side Of The Taxman

Remaining SARS compliant can be a constant challenge for small- to medium-enterprises (SMEs), especially when they are trying to focus on growing their businesses and streamlining their operations.

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EasyBiz Managing Director, Gary Epstein, says submitting taxes can be a seamless process that does not have to take up more time than is necessary. “If business owners understand what is required of them and they put a few processes into place to deal with their tax submissions properly, their lives will be so much easier.”

What are the top three considerations for SMEs when submitting tax returns?

“Firstly,” says Epstein, “SARS returns must be accurate and submitted in terms of the relevant Act. Secondly, returns should be submitted and paid on time to avoid unnecessary penalties and interest, and thirdly, business owners must follow up on queries issued by SARS. “Do not ignore these queries, act on them as soon as possible”.

What are the major SARS submission deadlines for SMEs?

Epstein points out that small business owners need to adhere to various tax deadlines, each with their own particular dates for submission. “It is important that business owners diarise the dates (and set advance reminders for themselves) and/or enlist the services of an accountant or financial adviser to help them keep abreast of requirements.”

Value-added tax (VAT)

VAT payments need to be submitted in the VAT period allocated to the business, according to various categories and ending on the last day of a calendar month. This may mean making payments once a month, once every two months, once every six months or annually, depending on the category.

Provisional taxes

Provisional tax should be submitted at the end of August (first provisional) and at the end of February (second provisional) – for February year-end companies.

Employee taxes

In addition to submitting an annual reconciliation (EMP501) for the period 1 March to end of February for Pay-As-You-Earn (PAYE), Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF), employee tax, in the form of an EMP201 return, needs to be submitted by the seventh of every month.

When can SMEs get extensions and is it worth it?

Epstein says SMEs can apply for various extensions, but these are subject to the Income Tax Act and Tax Administration Act.

“It is best for SMEs to consult their tax professionals to get advice regarding extensions for their businesses.”

What is SARS not flexible about?

SARS is not flexible when it comes to late returns and late payments.

“I cannot stress enough how important it is for SME owners to ensure their tax returns are submitted on time. In this way, they will avoid the inconvenience and expense of additional fines and interest,” notes Epstein.

What skills do SMEs need in their organisations to be able to submit to SARS efficiently?

Business owners often don’t have the time or expertise to deal with tax submissions throughout the year. If the business cannot afford to employ a full-time accountant or financial services expert, it would do well to outsource its tax requirements to a registered tax practitioner.

“I would recommend that even if they are not submitting the tax returns themselves, business owners should have a broad understanding of the tax regulations and what is expected of them. There is a lot of helpful information on the various Acts and tax requirements on SARS’ website,” says Epstein.

How does the right software help SMEs remain SARS compliant?

SME’s (and their accountants’) jobs can be made easier by using reliable accounting software to calculate accurate VAT reports. These reports are only as accurate as the data entered into them, which means care needs to be taken when inputting data into the accounting programme. Epstein says a good accounting software package must be reliable, easy to use and functional.

“SMEs need to check that the software has thorough reporting capabilities and can interface with other software solutions. Of course, it is also important to find out whether the software is locally supported by the vendor or not.”

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4 Dangers Of Business Under-insurance

A common short-term insurance peril that many SMEs face when submitting a claim following an insured event is the risk of being underinsured.

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Malesela Maupa, Head of Products and Insurer Relationships at FNB Insurance Brokers says, many small business owners mistakenly believe that by merely having a short-term insurance policy in place they are adequately protected against unforeseen events.

“This is technically correct provided that the business is covered for the full replacement value of the items insured. However, in circumstances where the sum insured does not cover the full replacement value or material loss of the item insured, the business is underinsured,” explains Maupa, as he unpacks the dangers of business underinsurance:

1. Financial loss

The most common risk is financial loss on the part of the business. If the business is underinsured or the indemnity period understated, the short-term insurance policy will only pay out the sum insured for the stated indemnity period as stated in the schedule, with the business owner having to provide for the shortfall. This often leads to cash flow challenges, impacting profit margins or rendering it difficult for the business to recover following the financial loss.

2. Reputational damage

Should an underinsured business not have sufficient funds to replace a key business activity or critical component following a loss, this may impact its ability to fulfil its contractual obligations, leading to a loss of business or market share, and irreparable reputational damage in the worst-case scenario.

3. Legal action

A small business also faces the risk of customers or clients taking legal action against it, should it fail to deliver on goods and services following a loss or be unable to honour its financial commitments that they committed to prior to the loss.

4. Survival of the business

A catastrophic event such as fire, which could result in the loss of stock or company equipment and documentation, could threaten the survival of a small business that is not yet fully established, if the business assets are not adequately insured.

Working with an experienced short-term insurance broker or insurer is essential when taking up short-term insurance to ensure that business contents are covered for their full replacement value.

Furthermore, depending on the nature of the business or item insured, the policy should be reviewed on a regular basis to avoid underinsurance as the value of items often change overtime due to fluctuations in economic activity. Where it’s necessary, evaluation certificates need to be kept up to date.

“Lastly, SMEs should ensure that the sum insured does not exceed the replacement value, which would lead to over insurance. Should a business submit a claim following a loss, the insurer would only pay out the replacement value, regardless of the higher sum insured,” concludes Maupa.

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