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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

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Africa’s Top 10 Tech Start-Ups Selected For #Africa4Future Accelerator Programme

Airbus and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) have announced the top 10 African tech start-ups that will take part in the latest Airbus Bizlab #Africa4Future accelerator programme. They were selected after an open public pitch event in front of experts, potential investors, the media and other stakeholders in Kenya’s capital city.

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#Africa4Future is a joint business accelerator initiative of Airbus and GIZ’s Make-IT in Africa initiative together with the Meltwater Entrepreneurial School of Technology (MEST), a non-profit seed fund and pan-African organisation that brings together startups, entrepreneurs and the tech community, and Innocircle, the South African-based innovation consultancy.

The top 10 start-ups were selected from 314 entries representing 19 African countries that were received when the challenge was opened last October. These were assessed by a panel of Airbus and other independent experts.

The programme aims to encourage and support entrepreneurship in Africa. The continent’s young and increasingly techno-savvy population is likely to be the driving force behind Africa’s socio-economic development. The competition identifies Africa’s own pool of talented entrepreneurs using innovative aerospace based solutions to tackle the continent’s most pressing challenges such as transportation, agriculture and healthcare.

As a global aerospace accelerator, Airbus BizLab is ideally suited to help African startups transform innovative ideas into viable and valuable businesses. In doing so, it increases the aerospace industry’s engagement with hardware and software innovators and entrepreneurs in Africa while helping to nurture the establishment of competitive entrepreneurial ecosystems on the continent.

The Nairobi event kicks off an intensive 6-month business incubation and accelerator programme involving technical, commercial and mentorship activities in France, Germany and South Africa. This includes workshops and coaching sessions with Airbus experts, GIZ’s Make-IT in Africa, MEST and Innocircle coaches.

The programme will culminate with Demo Day events at the biennial Paris International Airshow and a special event in Germany from 19-26 June, when finalists will launch their products, define their collaboration with Airbus and announce their investment commitments in front of representatives from across the aerospace industry.

Related: How To Start A Business With No Money

Finalists:

1. Astral Aerial (Kenya) – using drones for humanitarian cargo transport, surveillance and emergency response.

2. Cote d’Ivoire drone (Ivory Coast) – locally-manufactured drones for various applications.

3. Elemental Numerics (South Africa) – applies computational fluid dynamics techniques to the design of machines and components, ranging from aircraft to heart valves.

4. Lentera Limited (Kenya) – applying remote sensors to monitor and transmit environmental data to enable more efficient and smarter farming.

5. Maisha ICT Tech PLC (Ethiopia) – deploying locally built drones for delivering medicines, blood and healthcare items to remote and rural areas.

6. MamaBird (Malawi) – provides a platform to help Governments, NGOs and other organisations deliver vital life-saving supplies to remote communities.

7. Map Action (Mali) – a solution offering real-time online urban mapping to identify problems affecting water supplies, hygiene and sanitation.

8. MobiTech Water Solutions (Kenya) – an online real-time water monitoring solution that allows businesses, homes and water-service providers to manage their available water using an app-based dashboard and instant messaging.

9. Track Your Build (Nigeria) – a novel infrastructure management tool for construction and operations.

10.WiPo Wireless Power (South Africa) – offers reliable and convenient wireless power chargers for businesses, conference centres, airports, restaurants and other venues for the charging of mobile devices, laptops and drones.

Related: 21 Steps To Start-Up Success

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Top Sectors For SMEs In 2019

“As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”

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While the South African economy has been underperforming for a number of years, the first positive signs of turnaround started to become visible by the second quarter of 2018, and by the end of the third quarter, data supplied by Statistics South Africa showed that the economy had indeed grown by 2.2 percent, compared to the previous quarter. This uptick is expected to have a positive effect on business confidence in 2019.

This is according to Jeremy Lang, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), who says that certain business sectors have already seen an increase in opportunities for small businesses and start-ups.

“While these sectors will not be without challenges, the following four industries are likely to offer the best opportunities for small and medium enterprise (SME) owners to grow their enterprises in the coming year.”

Tourism

The World Travel and Tourism report 2018, revealed that the direct contribution of the travel and tourism sector to South Africa’s GDP has been projected to rise from R136bn in 2016 to R197.9bn by 2028 – set to make up a total of 3.3 percent of the country’s total GDP, says Lang.

“Although this sector experienced some setbacks in 2018, such as the drought in the Western Cape and stricter visa regulations for children entering the country, both the water restrictions and visa regulations  have been relaxed and the sector is once again poised for growth,” he says.

Related: Government Funding And Grants For Small Businesses

Manufacturing

Statistics South Africa has credited this industry with being the biggest driver of growth in the country’s GDP, having expanded by 7.5 percent in September 2018, says Lang. “To bolster this, Government has made a concerted effort to stimulate small business growth in this area with initiatives such as the Black Industrialist Programme and the SA Automotive Masterplan.”

He adds that businesses in the manufacturing sphere could therefore likely see significant opportunities in the form of outsourcing contracts and new partnerships with large corporates.

Agriculture

“The debate around land expropriation has occupied most of the discussions surrounding the agricultural sector in 2018, with some questioning growth prospects of this sector. However, this industry has a lot of growth ahead of it, as demonstrated by its 6.5 percent growth over the last three months of 2018,” explains Lang.

“Further to this, the industry is also already taking significant advantage of seven climatic regions in South Africa, with the export of a wide variety of high quality fruit and vegetables increasing substantially,” he points out. The recent outbreak of foot and mouth disease that has resulted in the suspension of the country’s FMD-free status will however significantly impact meat exporters.

In terms of opportunities for SMEs, he says that these may most likely be found in the rural and underdeveloped regions, where the need for resources like efficient transport, state-of-the-art cold storage, better irrigation and private power generation will be key to making agriculture projects more productive and competitive in the export market.

Data and information technology

Connectivity and information technology infrastructure are both crucial to business and employment growth in South Africa, says Lang.

“With many municipalities and the Western Cape government committing to providing all of its residents with free data as part of a plan to expand public Wi-Fi network access, it is clear that this is also becoming a high priority on a state level.” 

Related: 9 Ways To Elevate Your Small Business To The Next Level

It has also been reported that South Africa is awaiting the arrival of three international data centres, and large players in the communications sphere, including Vodacom, Telkom and Vumatel, are making huge strides in drastically growing the country’s fibre optic backbone, he adds. “As such, SMEs in the construction, communications and electrical fields are all likely to benefit from supply and sub-contracting agreements over the coming years.”

In conclusion, Lang says that as South Africa’s economic growth has started to turn around, business owners should keep their ears to the ground as 2019 is highly likely to be a year of opportunity.

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Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative

Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.

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Mayor of the City of Johannesburg, and one of South Africa’s most successful entrepreneurs, Herman Mashaba, will be one of the presenters at the 2019 Business Day TV SME Summit which will be taking place at The Empire Venue in Parktown on 7 March 2019.
Now in its third year, the Business Day TV SME Summit provides an opportunity for small business owners, entrepreneurs, incubators, franchisors, investors, as well as suppliers to the SME sector to come together and engage with experts in the business, technology, marketing and investment fields.
Having founded the now iconic hair-care brand, Black Like Me, more than thirty years ago during the apartheid era and on the back of a R30,000 loan from a friend, Mashaba’s experience in establishing an entrepreneurial enterprise holds great value for small and medium-sized business owners in South Africa. Mashaba will also be highlighting the City of Johannesburg’s innovative drive to stimulate inner city opportunities and job creation.
a-panel-discussion-from-the-2018-business-day-tv-sme-summit
Managing finances and obtaining funding and expansion capital are challenges many entrepreneurial businesses face as they look to grow their footprint in the market. Darren Segal, Personal and Business Banking Innovation executive at Standard Bank – one of the partners of the SME Summit – will present advice on negotiating funding and finance, to ensure effective cash flow management.
Complex tax issues will also be covered by a representative from the office of the Tax Ombudsman.
Taryn Westoby, Head of Tiso Blackstar Events which manages the SME Summit and curates the speaker line-up says: “We work alongside Business Day TV to meet the requirements of those engaged in the SME sector, so that the content of the Summit aligns to some of their most pressing concerns and needs. The line-up of speakers includes experts in the fields of business scaling, marketing strategy, intellectual property (IP) rights, and risk mitigation.”
As such, Graham Mitchell from GROW has been engaged to share insights into the leadership required to scale a winning management team.  Vishen Pillay, partner at Adams & Adams and an authority on copyright, patents, and trademarks, will provide guidance on protecting IP. Therusha Bhagarette of Credit Guarantee Insurance Corporation of Africa Ltd will expound further on the do’s and don’ts of risk management. The full line-up of expert speakers and topics will be published on www.smesummit.co.za.

International perspective

An international perspective to entrepreneurship will also be provided through Business Day TV’s The Big Small Business Show and a pre-recorded session with Uri Levine: renowned serial entrepreneur and founder of Waze.  Levine was recently in South Africa as a guest of Tiso Blackstar to deliver the keynote presentation at the prestigious Sunday Times Top 100 Companies Awards to an audience of CEOs from the top-performing companies on the JSE.

Leading organisations at the SME Summit

Once again, leading organisations have committed their participation at the Business Day TV SME Summit, recognising it as one of the most effective platforms for SMEs to engage professional insights and facilitate knowledge-sharing in support of much needed entrepreneurial development in SA.
This year’s headline partners are Credit Guarantee Insurance Corporation of Africa Limited, SAICA, and Standard Bank. Other partners include BDO, Adams & Adams, Liberty, Payfast, GROW, The Tax Ombudsman, W&R Seta, Telkom, Santam and The Little Green Number.
For sponsorship and exhibition opportunities:  Stephen Horszowski – stephen@tisoblackstar.co.za
Delegates who wish to purchase tickets for the full day event (07h00 – 15h00) at R995:  Lucy Johnson – johnsonl@tisoblackstar.co.za or visit  www.smesummit.co.za

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