Can the budget speech help reignite growth for
SA retailers?

SME retailers in SA will be hoping for some relief from the Finance Minister’s annual Budget Speech this year, following the devastating impact of the COVID-19 pandemic on their finances and businesses. Measures such as extending the Temporary Employer-Employee Relief Scheme (TERS) and easing red tape could help them to weather this turbulent time and get back into a growth mode.

 That’s according to Steven Heilbron, the CEO of the Connect Group, which provides Fintech solutions to SA’s retail sector. He says that given the central role that small and medium sized enterprises (SMEs) play in the economy, they could lead the country’s economic revival after the pandemic. However, COVID-19 and the economic recession does mean that many of our retailers are now in poor financial shape.

 According to Business Unity South Africa, the SME sector employs 47% of South Africa’s workforce and contributes more than 20% to the country’s gross domestic product (GDP) and pays about 6% of corporate taxes. Yet independent retailers, who have been hard hit by the pandemic, are often ignored in government decision-making.

 Retailers, especially, endured a difficult 2020, with retail sales each month from April to November significantly down year-on-year. Growing unemployment, periodic bans on cigarettes and alcohol, changing consumer behaviours, and intermittent load shedding all contributed to a challenging operating and trading environment for retailers, says Heilbron.

 Against this backdrop, it’s vital for the Budget to support businesses rather than to put additional financial burdens on them, he adds. “While we need to find funds to procure vaccines and invest in infrastructure, retailers will be hoping that Finance Minister, Tito Mboweni, will not hike the VAT rate or increase the personal income tax burden,” says Heilbron.

In an environment with an unemployment rate above 30% and weak consumer confidence, higher tax rates could actually reduce tax revenues over the long term by driving down spending, says Heilbron. “We would welcome steps to support consumer spending, rather than taxes that diminish consumers’ ability to support the growth of our retail sector.”

As a company whose focus is on enabling the retail sector, the Connect Group is supporting the vital SME retail economy with a range of solutions to help businesses reignite growth. For example, Capital Connect is a business finance offering designed with the retailer in mind. It is a fast cash injection providing retailers with funds in just 24 hours. Read the article