26 February 2014

South Africa: New Incentive to Support Small Business

Photo: South African Govt
Finance Minister Pravin Gordhan presenting budget speech.

Cape Town — With increased calls to bolster entrepreneurship, which is identified as a crucial job driver in the economy, Finance Minister Pravin Gordhan has dug deep to support Small and Medium Enterprises (SMEs) over the next three years.

Tabling the 2014 Budget in Parliament, Minister Gordhan said businessmen had raised concerns recently that they were not receiving enough support in order to sustain their enterprises to levels at which they can contribute to growth.

During his speech, the minister also acknowledged a budget tip from Pretoria resident Sharon Bosii, who suggested that government offer incentives to help small businesses.

"This budget allocates R6.5 billion over three years to support small and medium enterprises," Minister Gordhan said.

Last year, the minister appointed a Tax Review Committee, headed by Judge Dennis Davis, to review the tax system so that it can support government's programmes and promote inclusive growth.

On Wednesday, Minister Gordhan said he had accepted two recommendations from the Judge Davis tax committee aimed at easing the compliance burden of small businesses.

"The turnover tax regime will be amended to further reduce the tax burden on micro-enterprises.

"Consideration is being given to replacing the graduated tax structure for small business corporations with a refundable tax compliance credit.

"Amendments will be made to the venture capital company tax regime, and the rules related to access foreign capital will be eased to enhance support for entrepreneurial development," he said.

Investment in infrastructure

Minister Gordhan said the National Development Plan required government to invest in infrastructure to achieve social and economic transformation.

This, he said, was aimed at ensuring that the economy grows at levels of 5% per year to create jobs and reduce poverty quicker.

To this end, Minister Gordhan said the Presidential Infrastructure Coordination Committee - aimed at rolling out massive infrastructure construction and upgrades across all spheres of government and priority sectors of the economy - was making progress in overcoming backlogs.

He said R847 billion would be spent on infrastructure over the next three years.

Minister Gordhan said investment in the electricity and transport infrastructure was key. He noted that the first unit of the Medupi power station is expected to be completed towards the end of the year.

"Transnet has increased capacity on its coal line. Plans are in place to further expand the coal, iron ore and manganese lines.

"The Passenger Rail Agency of South Africa refurbished 500 Metrorail coaches last year, and its new rolling stock procurement programme will get underway this year," he said.

He said expenditure on social infrastructure - which includes health, education and community facilities - will increase from R30 billion to R43 billion over the next three years.

Minister Gordhan said priority would be given to programmes aimed at eradicating school infrastructure backlogs and to refurbish clinics and hospitals.

A plan to rehabilitate 35 dams has been completed, he said.

"In 2014/15, a total of R40 billion in infrastructure grants will be transferred to local governments for their water, sanitation, energy and environmental functions.

"The private sector is also making an increasing contribution to infrastructure investment.

"Contracts for 47 renewable energy projects were concluded in 2012 and 2013, many of which are already under construction.

"These will add 2 460 MW of power capacity, and an investment of R70 billion.

"A further R45 billion investment will be contracted this year," he said.

- SAnews.gov.za

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