Enter the entrepreneur? Budget 2011 Proposals for Many Small Businesses not Just White Tigers

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Zapreneur declares it has an interest in this subject. Photo - Moe and Milsey's Construction Company

We like them. The small business that succeeds against the odds. Minister Gordhan even saluted a couple of success stories on the budget. In the build up to the budget, I choose to read The White Tiger by Indian author Aravind Adiga . The White Tiger provides a devastating description of the poverty traps, and that rare success stories translate to private gain without a wider social impact. The central premise of the book is that successful entrepreneurs are as rare as white tigers. In fact, in South Africa the data provided by the Global Entrepreneurship Monitor indicates that job creating, opportunity based businesses are a rarity in South Africa. The book though not set in South Africa provides a useful refrain from the rah-rah usually associated with entrepreneurship. What then does the budget propose for the small business entrepreneur?

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Youth Subsidy and building consensus

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KwaZulu-Natal Midlands: Ceramic painters Zama Nqubuku (foreground) and Wiseman Ndlovu at work in the Ardmore Ceramics studio. Photo: Hannelie Coetzee

Minister Pravin Gordhan reintroduction of the proposals around the youth subsidy is a brave political decision, given the overwhelming and justifiable criticism of the proposal. In tabling the new proposal Minister Gordhan has listened to the criticism and opted to tweak the proposal. The first proposal provided a wage subsidy or hiring voucher to lower cost of labour and compensate employers for the perceived risk of hiring inexperienced workers. In tweaking the proposal, government has shifted from this position, so that it is now to be administered as a tax credit. This is significant step as it potentially means that entry-level wages will remain the same.

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The tough life of budgeting for social grant holders

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The national discourse on social grants as set by President Jacob Zuma emphasises that South Africa is creating a “developmental” and not a “welfare” state. The definitional debates on these terms are grounded by the realities of households reliant on social grants. Minister Gordhan announced increases to the social grant, yet when projected inflation is taken into account the majority of grants actually experience a real decrease or a small real increase as shown in the table below.

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What will happen to the R 9 billion job creation fund?

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2011 Budget Options

This article previews the budget looking at three options for spending the R 9 billion for job creation activities announced in the State of the Nation Address.
President Jacob Zuma left the details of the R 9 billion for job creation activities vague in his State of the Nation Address, simply saying:

We are pleased to announce the establishment of a jobs fund of 9 billion rand over the next three years to finance new job-creation initiatives.

The announcement on the details of this are eagerly anticipated when Minister Pravin  Gordhan delivers the 2011/12 Budget Speech. There are three major readings about what the details of the proposal will mean. The major options are:

  1. Application based fund
  2. Subsidy to support youth employment
  3. Support small business

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Taxes to support entrepreneurship

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Proposals on a major reform for small business taxes have been around for years. In this preview, we explore some of the options that potentially features in Budget 2011.

Proposal to utilise taxes to support small business and entrepreneurship are a strong possibility to feature in Budget 2011.Minister Pravin Gordhan, in his 2010 Budget Speech indicated that small business taxation would be an area of focus in government. Work in this area has been undertaken, and government might be ready to offer significant tax incentives to small business and start-ups.The logic is important to understand – more employers = more jobs.  The result is that economic participation and inclusion is supported.

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