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South African Women Want To Own A Business – But Crave Financial Stability And Lack Support Structures

New research from Sage Foundation, ‘The Hidden Factors: SA Women in Business’ offers insight into the motivations and aspirations of South African women in the business world.

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Jennifer Warawa
Jennifer Warawa

Left: Jennifer Warawa: executive vice president of partners, accountants and alliance at Sage, at the breakfast on 25 July
Middle: Guest speaker, Basetsana Kumalo – spoke about her journey to entrepreneurship
Right: MC for the morning, Redi Tlhabi

If you’re a South African woman who is thinking of going into business for yourself, yet fear the financial risks of doing so, you are not alone.

New research conducted by Livingfacts commissioned by Sage Foundation, reveals that more than 50% of women believe corporate jobs are ‘a safer option’. And, only 20% of those who don’t own a business felt they have the necessary network to support their family responsibilities.

The study pinpoints a need for financial stability and a low tolerance for risk-taking and failure are among the most significant factors holding back female entrepreneurship in South Africa.

Undertaken in partnership with the International Women’s Forum South Africa (IWFSA), the research highlights the obstacles that women face, including:

  • a lack of exposure to entrepreneurial role models in their families and communities;
  • poor access to funding; and
  • the challenge of juggling personal and work responsibilities.

Related: How Ramona Kasavan Built An Organisation That Helps Women Empower Themselves

Nonetheless, the research also shows that South African women admire entrepreneurs and increasingly see entrepreneurship as a viable pathway to personal growth and wealth creation.

Sage Foundation and IWFSA unveiled the study at a breakfast for IWFSA members, business partners, customers and entrepreneurs at The Park House of Events on 7th in Hyde Park, Johannesburg on 25 July.

Sage Foundation and IWFSA conducted the research to fill the gap for data about the motivations and aspirations of South African women in the formal business sector. Sage Foundation has made a global commitment to women as part of its effort to build sustainable social, economic and entrepreneurial opportunities in Sage’s local communities around the world – but helping starts with having the right information at hand.

The study provides fresh insight into what drives South African women to establish businesses of their own, why they succeed and why they fail.

The hidden Factors sage

The research highlights how critical it is for NGOs, government policymakers and other stakeholders to position entrepreneurship as a viable career path for young women and to provide them with mentoring and support as they build their businesses.

1Family role models needed to encourage girls from an early age

Only 20% of women in the survey and a mere 16% of respondents who do not have their own business agreed that having your own business was seen as a viable career choice when they were growing up.

Most women saw corporate jobs as a safer option, with more than half (51%) saying “it is definitely important to me to have financial security and a stable salary”. Nearly a quarter of women saw losing these benefits as a deterrent to starting their own businesses. 

The research indicates that few women get exposure to entrepreneurial role models in their formative years, with only 15% saying that they definitely had family and friends who often talked about business when they were young and only 29% who said that there definitely was a successful business owner in the family and extended family.

The lack of a role model carries through into women’s careers and later lives, too: Only 14% of women reported that they have a business mentor or role model.

“Young women need to be exposed to the possibilities and the benefits of having their own business at home, in their communities and schools, and in the media”, says Joanne van der Walt, Sage Foundation Programme Manager for Africa.

family-role-models

2The flexibility paradox

Some 59% of respondents who quit corporate jobs to set up a business said a key reason for doing so was that they wanted flexibility around how they managed family and work commitments. Yet 19% who gave up their entrepreneurial ventures to return to the corporate world cited a need for flexibility as the reason they went back to full-time employment.

Only 20% of those who currently don’t have a business felt they definitely had the necessary network of family and friends that can support their family responsibilities. What’s more, a higher percentage (70%) of women running their own businesses were married or living with someone who provides support, financially and in other ways.

Says Van der Walt: “Starting and running a business is far more time intensive than many women realise. Often, for women, a nine-to-five corporate job allows for more time with one’s family, and would-be entrepreneurs struggle to maintain balance between work and their personal lives – especially in the first few critical years of building a business. Changing gender stereotypes of who does what in a family and women overcoming their own reluctance to ask for help are key changes that could encourage female entrepreneurship.”

The flexibility paradox

Related: Why Donna Rachelson Believes The Secret To Your Business Success Lies With Women

3The risk-factor

Female entrepreneurs show more appetite for risk than women who have not gone into business. The research found that 26% of women who did not have a business said they were not afraid to take risks, compared to 43% who had their own business. Meanwhile, 37% of those that never had a business thought it was scary to be in business for yourself.

“Many families encourage young women to look for government or corporate employment, seeing this as a lower risk route for their future careers,” comments Van der Walt.

“Yet with youth joblessness at above 50%, many of our young women may never have a corporate job. We need to help young women see the risks and potential failures of entrepreneurship as learning experiences on the road to growth and prosperity.”

risk-factor

4Capital and funding remains a primary necessity

Female entrepreneurs are finding access to capital and funding to be as much of an obstacle to starting their own businesses as their male counterparts in South Africa – if not more. Most (84%) women started a business using their own savings to do so; very few obtained funding from traditional banks and even less knew about venture capital, angel or seed funding, grants, or crowdsourcing.

Some 61% of women who have never had a business cited not having access to money or capital to start their own business, as a barrier, while 33% of those who went back to corporate jobs after starting a business said it was a key stumbling block.

Capital and funding remains a primary necessity

5The rewards of being your own boss

The study confirmed that women are attracted to the benefits of being rewarded for their own efforts and the freedom to be their own boss when it comes to entrepreneurship.

They also saw entrepreneurship as a way to find personal growth and meaning, make a difference, achieve financial independence, give women a voice and control of their own futures, and create and innovate.

Among those that do not own a business:

  • 58% admire entrepreneurs
  • 42% want to work for themselves rather than someone else
  • 36% envisage having their own business (even higher among young black women)
  • 36% believe you can make a significant amount of money.

The rewards of being your own boss

“The emergence of a growing community of female entrepreneurs is one of the most significant economic and social developments in the world. It is not merely redefining women’s economic roles; it is reshaping the modern global economy,” says Van der Walt. “Our research shows that this trend is also unfolding in South Africa – but it also highlights how much more we need to do to unleash the full potential of our country’s female entrepreneurs.”

Says Mpho Letlape, deputy president at IWFSA: “It’s a privilege to partner with Sage Foundation for this initiative. Research is vital for understanding how women are moving forward in the South African business world.  With more insight into the challenges facing businesswomen and female entrepreneurs, we can focus on the areas where intervention is most needed.  Right now, women leaders have an opportunity to make a difference in society, and help heal our nation.”

Sage Foundation will use the findings of this research to engage with policymakers and social NGOs about ways to encourage and support female entrepreneurs – starting from their school years. Sage Foundation already works with NGOs that support financial literacy programmes at primary and high school level. It will look for more NGO partners that it can work with to help remove some of the barriers that women face when they go into business for themselves.

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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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