Budget Speech 2022 - the highlights and setbacks for SMEs

Although South African economists have deemed the latest budget speech as “safe”, there are still key takeaways that will directly affect SMEs. After a crippling year financially, the budget speech 2022 aimed to set our country on the right path post-pandemic. Let’s take a deeper look at the main outcomes that will either enable SMEs or hinder them further.  

The highlights and setbacks for SMEs:

General budget

The government’s proposed consolidated expenditure is calculated at a whopping R2.16 trillion.

SARS miscalculated the tax revenue for 2021 by R182 billion, with the revenue service claiming this wasn’t just a windfall and about a third of the surplus comes from the economy. This is due in part to the mining and manufacturing industries doing significantly better than the previous year. The surplus revenue will be used to ease our R5.43 trillion national debt issue, and in addition to that, the surplus will also go towards job creation programmes and small business loan schemes across the country.

Income Tax

Probably one of the biggest positives from the budget speech was the decrease in corporate income tax, from 28% to 27%. This was in part because of the tax revenue surplus, but also to assist the economy after a tough financial year.  

Following on from that great news, you will only need to pay personal income tax if you earn more than R91 250 annually. Middle-income taxpayers will also only receive a 4,5% increase which is in line with inflation.  

However, the highest-earning bracket will have the biggest tax hit, where they will need to start declaring specified assets and liabilities.  

Fuel levy

With a 40% increase in fuel prices last year, the government needed to take action in elevating some of this pressure on motorists, public transport groups and logistics companies. The fuel and road accident fund levy will see a 0% increase for the first time in over 20 years.  

Job creation programmes

In an effort to combat joblessness nationally, the government will allocate R76 billion to job creation programmes, both private and government-run. From this budget, an additional R18,4billion will form part of the Presidential Employment Initiative. The aim here is to increase the growth economy, which is currently sitting below 2 percent.

SOEs get the boot

With Eskom taking up a large portion of government funding, and the power utility’s debt being an issue since 2008, the government is taking steps to cut off other state-owned companies. The finance minister insisted that SOEs which are underperforming will no longer be receiving “blanket support”.  

Sugar tax

The sugar industry is a large contributor to the South African economy, and with an increase in sugar tax, this sector is facing catastrophic financial losses. The health promotion levy increased to R2.31 per gram, which is 21c more per gram than the previous year. Canegrowers saw a devasting year in 2021, and with the proposed tax the industry could further see a loss of 16 000 jobs.  

Sin tax

The alcohol and tobacco industry will see an increase of between 4,5% and 6,5% on sin tax and although this aligns with inflation, and is considered a partial win by the government, the industry will still take a knock. The biggest hit will be felt by smaller micro-breweries, distilleries and boutique wine farms, which have suffered major losses after alcohol bans throughout 2020 and 2021.  

The vaping industry which has exploded over the last two years nationally will see one of the biggest increases in tax, at R2.90 per millilitre from 1 January 2023.

Added bonus for SMEs specifically…  

Small business loan scheme

It’s about time SMEs got some good news! The budget speech and SONA 2022 both saw a major focus on small businesses, particularly the introduction of a small business loan scheme. This will exist in two parts, the small business loan scheme will offer R15 billion towards funding, which will be facilitated by participating banks and financial institutions. The other part of the scheme is that the government will underwrite the first 20% of loan losses. The criteria for these small business loans will also be loosened.  

Side note - We also happen to be in the business of helping small businesses to get access to the best business finance that is within their budget. So if you have been operating for longer than six months and are needing a financial nudge we can be of assistance.  

Small businesses in South Africa, are the lifeline of the country, and with a tough year in 2021, the government, banks and alternative lenders will all need to make a concerted effort to support this sector.  

For the full transcript of the Budget Speech 2022, read here for more.