JOHANNESBURG - The medium-term budget policy statement presented to parliament on Wednesday by finance minister Tito Mboweni largely overlooked the plight of small businesses, a company that funds the sector said.
Mboweni painted a rather bleak picture of the country's prospects, slashing the gross domestic product (GDP) growth forecast for 2019 to 0.5 percent from the 1.5 percent predicted in February, in a presentation made two days before Moody's will announce whether or not it will maintain South Africa's last investment-grade credit rating.
While some of the measures Mboweni announced to shore up the economy were welcome, "he seems to once again have ignored the productive part of the economy being the SME (small and medium enterprise) business owners who together account for over 50 percent of employment and over 50 percent of of GDP in South Africa," said Karl Westvig, CEO of Retail Capital which has provided over R3 billion to more than 15,000 SMEs.
Mboweni presented the medium term budget a day after Statistics South Africa said unemployment rose to 29.1 percent of the labour force in the third quarter of the year, the highest in more than 11 years.
"If job creation is a strategic imperative for South Africa and the SME sector is responsible for 60 percent of jobs, then surely we should be spending more to stimulate this part of the economy?" Westvig said.
"There isn’t enough being done by the government to stimulate the SME sector and in turn create jobs. Our unemployment crisis coupled with the total number of liquidations increasing by 10.5 percent in the first nine months of 2019 compared to last year, is a clear sign that it’s time for government to be bold and deliver."
He said while much fanfare had surrounded a CEO SME fund initiative, the total value was "a paltry R1.24 billion in a R5 trillion economy, and where government has a budget of R1.4 trillion".
"That represents 0.1 percent of the annual budget,” said Westvig.
He noted that while the private sector, through banks and non-bank financial services companies, lent an estimated R500 billion to SMEs, most of this was skewed towards existing businesses that already had a strong balance sheet and assets that could be used as security, with a recent study showing an SME funding gap of between R86 billion and R346 billion.