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Mr Minister, Give Us An Entrepreneur’s Budget

And we will give you jobs and fiscal revenues.

Pavlo Phitidis

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The 2013 budget delivered by the Finance Ministry was disappointing for us as entrepreneurs and small business owners.

Every day that goes by without creating vibrant and exciting tax policy to boost entrepreneurship is a day lost and a great number of jobs not being created.

Many small business investment and growth policy opportunities have been missed in the last 4 years since the global recession took hold and bold moves to boost investment in start-up’s and growing businesses remain amiss. Bold, yes, since 68% of private sector jobs are created by businesses employing fewer than 50 people. We need bold moves!

Having worked and continuing to work with business owners in SA, I created a shadow budget, one specifically focusing on the business development process as undertaken by entrepreneurs. This has been done to promote, influence and motivate what we, SA entrepreneurs need to continue investing and building SA and is targeted at businesses with annual revenues up to R100m.

Policy 1

Small businesses do not possess the resources, certain opportunities, momentum and balance sheets of big businesses with the result that risk profiles of small businesses differ dramatically. With this risk, incentives and rewards need to match entrepreneurial investment for the establishment of new business. Risk is a pricing measure and the reward for the risk should be enhanced through the company tax rate.

We call for no tax for the first 2 years of new business establishment followed on by a progressive tax system. The three tiers of the progressive tax system should be matched to other voluntary legislation such as the BEE codes to simplify the plethora of red tape facing entrepreneurs in SA.

Annual turnover Budget

This will allow the entrepreneur to approach new ventures with a reduced risk profile and allow the small profits generated in the early stages of growth to be redirected back into business growth.

Policy 2

It takes at least 5 years for an entrepreneur to find market from start-up and in so doing to learn what the business model his/her business should be building. All this while, the entrepreneur is occupying at least 5 key positioning of CEO, FD, HR, Marketing and Operations.

The busyness that results over this period prevents the entrepreneur focusing on strategic objectives to build the business. Should profits emerge during the early stage period and taxes be paid, the lost opportunity of rather investing in the right strategic actions to build the business is material in the businesses life.

We call for the establishment of an Entrepreneurs Government Bond that will see taxes that should be paid within the first 5 years of a business life being invested into such government bond. The option would be in place for the entrepreneur to draw the taxes out for investment into the business within the 5 year period. Should the option not be taken up, the tax investment will be liquidated into treasuries coffers.

This will allow the entrepreneur to invest cash generated sensibly into building their businesses further. Over a 5 year period, some of the 5 posts filled by the entrepreneur can be taken up by staff creating the time for such investments to made with more deliberate consideration.

Policy 3

Cash flow is the lifeblood of small business. Invoicing big business or government for work done is key to getting paid. In many instances, payment is stretched well beyond reasonable payment periods and in some cases for months. The Vat impact generated by the invoice in one month and the delayed payment of the invoice months later generates cash flow crises for small businesses.

We call for the replacement of the accrual Vat system by a cash receipts Vat system to match the generation and payment of Vat with payment of the invoice by the customer.

This will allow an entrepreneur to self-fund their own growth and not be distracted by the often futile pursuit of seeking outside funding to support growth.

Policy 4

Small businesses are unable to compete with big businesses in terms of employment packages. As a result most school leavers find their first employment in small businesses where they secure experience and skills.

This deep investment made by an entrepreneur is seldom rewarded since the employee moves onto softer, easier options offered by big businesses and government.

The loss of this employee has a profound impact on small business owners who seldom recoup their investment thus discouraging further employment.

We call for a first-time employment subsidy made up of R15 000 cumulative tax credit for any business owner employing a first time employee remaining in their employ for 12 months or more.

This will allow the entrepreneur to offset taxes that remove cashflow from the business against the cost of training.

Policy 5

Banks do not lend to small businesses. Yet funding is a vital resource to mobilise and support the development of a business through its lifecycle from start-up to growth. This inability in SA to seek and secure funding sees many a good business develop at a snail’s pace or eventually fail, something that SA cannot afford.

We call for a further revision of S12J to motivate and mobilise the creation of private sector funding through the establishment of Angel funders; private funders who are motivated through tax policy to invest their funds during the formative stages of the business development process.

This will allow the entrepreneur to access a broader and more empathetic funding source.

Policy 6

The limited resources of an entrepreneur need to be focused on the business development process.

The plethora of red tape costs a small business significantly more than a big business and this cost increases the risk of failure dramatically since it is compounded by the businesses owner not investing the red tape time demand on business growth but compliance adherence.

Tax certificates

We call for a reduction in the red tape through the establishment of a single point of web-based access with form-fill capability to enable a single entry of information for all compliance documents related to doing business within specified sectors as well tax and labour compliance. This should be supported by electronic submissions and tracking reports.

Don’t set tax policy for small business without consulting. The plethora of associations that claim to represent small business including Business Unity South Africa, Business Leadership South Africa and the National African Federated Chamber of Commerce and Industry are not spokes people for SMEs; they guard the interests of big business alone.

I was recently invited to make a contribution to the Davis Commission established by The Department of Treasury to review tax policy. These ideas have been shared and passionately presented.

Whilst challenges present themselves in all policy directives, bold moves are needed in an economy that underperforms the required growth rates a prosperous South Africa demands. Minister Gordhan, no challenge is insurmountable in the face of bold leadership.

We look forward to hearing the South African 2014 Tax budget – let it indicate the value of our contribution as the entrepreneurs and small business owners to building the future of the South African economy for the prosperity of all.

 

Pavlo Phitidis is the CEO of Aurik Business Incubator, an organisation that works with entrepreneurs to build their businesses into valuable assets. Pavlo is a regular commentator on entrepreneurship on 702 Talk Radio and 567 Cape Talk Radio. He can be contacted at www.aurik.co.za

Entrepreneur Today

The Sky Is The Limit For South Africa’s Top Women Achievers

High-powered women achievers from across the private and public sectors, academia and diplomatic spheres gathered for a charged two-day conference in Johannesburg this week to share experiences about empowerment, achievement and the role that women are destined to play in a competitive global environment.

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Several hundred women attended the 15th Annual Standard Bank Top Women Conference which, with the Top Women Awards, has become one of the premier events for women on the national calendar. The objective of the gathering at the Maslow Hotel on the 17th and 18th of October, was to showcase the achievements of South African women and reignite their passion as they have major roles to play in all arenas of endeavour, says Ethel Nyembe, head of Card Issuing at Standard Bank.

“The delegates to the Top Women Conference were inspired by speakers such as Yvonne Chaka Chaka, singer, songwriter and an entrepreneur in her own right; Phuti Mahanyele, executive chair of Sigma Capital, a black-owned investment group, and political and academic stalwart Geraldine Fraser-Moleketi, now Chancellor of Nelson Mandela University and other women who are playing leading roles in many of the nation’s listed blue-chip corporations.”

“The overall message is that women are playing a central role in growing all facets of our economy and are helping to build a future from which other women can benefit and, in turn, inspire others. Women, regardless of whether they are entertainment icons, professionals engaged in helping shape the minds of future generations, businesswomen or scientists are part of building a new global reality.”

Related: 13 Female Entrepreneurs Rising To The Top In SA

To inspire delegates about the breadth and depth of the future for women, the conference examined all facets of economic life from the impact that IT and scientific research is having on building businesses, through to the development of entrepreneurs and leadership skills. Insights were offered through the contributions of speakers and roundtable panel discussions in which leading women offered observations and advice gathered from their vast experience.

“Standard Bank is proud of the role it has played in enabling women achievers to reach their full potential within its ranks. The bank also recognises that women across society have a broad role to play in the future of South Africa. It is through support for events like the Top Women Awards and the Top Women Conference that this approach is made visible and tangible.”

“We expect this year’s conference deliberations to deliver insights and inspiration that will not only spur established women to new heights of achievement, but also stimulate young women starting new careers,” says Ms Nyembe.

More information on the Top Women Conference can be found at https://topwomen.co.za/ and it can be followed on the #SBTWConference conversation on Facebook and Twitter  

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Entrepreneur Today

The Ins And Outs Of A Good Exit Strategy

The thought of parting with a business you’ve grown from the ground up may be unsettling, but Gugu Mjadu, spokesperson for the 2018 Entrepreneur of the Year® competition sponsored by Sanlam and BUSINESS/PARTNERS, says that it is better for both your business and yourself to plan for this as early as possible.

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“The challenge that business owners often face in this respect is comparable to the difficulty that many new parents have with imagining their children grown up and leaving for university. Imagine, however, if parents did not plan ahead for the cost of their education – that would be detrimental to the future of their children. The same could be the case for your business.”

Mjadu says that a good exit strategy is about sustainability and being able to measure your business performance against the goals you have set for it. “It’s really about being able to say, ‘this is when the work is done and I can exit the business or take on a different role – this is what success looks like in terms of monetary return on investment and other business growth indicators’.

“The lack of an exit strategy could be telling of a fundamental lack of measurable business goals and this needs to be addressed,” she says.

From immediate liquidation to liquidation over time; family succession; selling to staff or external investors; the open market or another business; or the gruelling but profitable exercise of taking your company public – there are many different ways in which an entrepreneur can exit their business, but Mjadu says that whatever the process, a strong and solid strategy is essential.

She shares five key points of a good exit strategy:

1. It tells you when you are done

Mjadu says that a good exit strategy should reflect a core understanding of all the intricacies of your business and should be able to tell you when the lifecycle of your business (or of your involvement in the business) should come to an end. This is usually done by including a set of tangible measurables or objectives so that it is easy to ascertain when these have been achieved.

Related: When Do You Know It’s Time To Sell Your Business

2. It sets out the right environment within which to exit

A good exit strategy considers the economic, social and political environment at the time of your exit. Mjadu says that this is important in order to plan for a secure financial future.

“Failure to think about this could result in short-changing yourself by exiting during a tough economic climate when the risk to buyers reduces the value of your business.”

She references the case of Victoria’s Secret when founder, Roy Raymond, sold the failing business for $1m unknowing that it would later grow into the multi-billion dollar empire it is now. “While Raymond’s exit was ultimately necessary for Victoria’s Secret’s growth, he sold it in 1982 during the global recession of the early eighties – one of the world’s biggest financial crises and this influenced the selling price at his exit”.

3. It compensates those who have contributed to the life of your business

It is important to consider the impact your exit could have on investors and staff, says Mjadu. “Closing shop for example, means that your staff no longer have employment at your business. Selling could mean the same.” She adds that it is important to consider ways in which your exit could also benefit these stakeholders – for example, selling to a bigger business could mean more career opportunities for your staff, as well as continued job security.

4. It compensates you

Mjadu says that entrepreneurs often struggle to recognise their own true worth, especially when this involves attaching a monetary value to what has been achieved. “The time of exiting a business is no place to short-change yourself. You need to get out the full worth of what you put in,” she says, explaining that this means ensuring that you are financially secure before and while you go into your next venture.

“Your needs for retirement and medical insurance, as well as the maintenance of your living standard, should be met at your exit.”

Related: Want to Exit the Company? Here’s Your Shareholder Exit Strategy

5. It sustains your entrepreneurial drive

Mjadu says that while you may be nearing the end of one journey, your exit should enable and encourage you to continue to be an entrepreneur – and to look forward to the next journey. “Your entrepreneurial skills and capacity do not end when you exit your business and whatever your strategy, it should egg you on to more entrepreneurial activity including becoming a mentor to aspiring entrepreneurs.”

Mjadu says that exiting your business should allow you a good retrospective look at what you have done over the years – and so planning the strategy early on in your business lifecycle will set you up in regards to what you hope to achieve. “Upon exit, you should be able to say that you have done what you set out to do, financially and socially, and you have some energy left to do more elsewhere.”

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Entrepreneur Today

Search Is On For SA’S Online Retailer Of The Year

World Wide Worx in partnership with Platinum Seed, Visa, Heavy Chef and the Ecommerce Forum of Africa, launch new awards to recognise online stores that promote shopper trust.

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World Wide Worx today announced that it was launching a new awards programme — called the Online Retailer of the Year — to honour online stores in South Africa that grow trust amongst digital shoppers. The awards are part of a broader project to boost online shopping by World Wide Worx in partnership with Visa, Platinum Seed, the Ecommerce Forum of Africa and Heavy Chef.

“Online retail in South Africa has consistently grown above 20% since the turn of the century but only passed 1% of overall retail in 2016. Research shows that trust is a big factor in ecommerce growth, which is why we want to recognise online retailers who help to grow the entire sector by ensuring the kind of ecommerce standards that engender trust with online shoppers,” Goldstuck says.

“But once online retail passes two per cent it crosses an essential psychological barrier and this often leads to a tipping point in emerging economies. That’s when we see online retail snowballing. It gathers real momentum and everyone in the sector benefits,” Goldstuck explains.

To be eligible for entry to the Online Retailer of the Year, owners of digital stores are urged to participate in an essential survey of local online shopping being run by Goldstuck’s World Wide Worx, together with Visa and digital growth agency Platinum Seed.

To participate in the research, local online retailers can go to www.surveymonkey.com/r/OnlineRetailSA

All online retailers who participate will be entered into the award. However, participation in the survey is not a precondition for entry to the awards. However, only online retailers who operate from within South Africa’s borders are eligible for this local award.

The awards will be made at a Heavy Chef event in Cape Town on Thursday, October 01 2018. At the same event, World Wide Worx’s Arthur Goldstuck will lay bare the state of local retail, with Brad Elliott, CEO of Platinum Seed, and Visa.

Related: Up To R1 Million In Funding For Tech Solutions To Early Childhood Challenges

Goldstuck, who is judging the awards, will present the following awards:

  • Online Retailer of The Year
  • 1st runner-up – Online Retailer of the Year
  • 2nd runner-up – Online Retailer of the Year
  • Best New SA Online Retailer of the Year.

The winners of the Online Retailer of the Year awards will be given a digital badge that the online store can display online. The winners will have bragging rights for a year — until the next award is made in 2019.

Judging criteria for the awards include trust, innovation, customer service, digital excellence, customer engagement, product excellence, and the online reputation of the digital store. Visa, Heavy Chef, and Platinum Seed will oversee the judging of the awards. The Ecommerce Forum of Africa will audit the results.

Retailers or entrepreneurs who want to attend the awards and presentation of the research results by Goldstuck can purchase tickets from Heavy Chef.

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