SMME's the neglected key to property growth

Small to medium enterprises (SMME’s) are the key to further solid, broad based recovery of the property market and there’s a strong case to be made for nurturing this market through fresh incentives.

That’s according to Gerhard Kotzé, CEO of the ERA South Africa property group who says it’s widely accepted that SMME’S have become an engine of economic growth and employment.

“Traditionally corporates were the major employment generators and the biggest sources of fixed investment. Today however they are cutting staff as part of their survival strategy and the dilution of their role in this respect has contributed to the worldwide property market slowdown.

“Here at home while our Government continues to pay lip service to nurturing SMME’S, that support does not go nearly far enough. That explains, at least in part, why the lower end of the property market has been hardest hit by the recent property recession.”

Kotzé refers to the latest UK budget as an example that SA could emulate. “The British Chancellor of the Exchequer, Alistair Darling, recognised that SMME’s are key drivers in generating economic recovery and he introduced specific measures to assist this sector.

“These included an increase in capital gain relief, a doubling of the annual investment allowance and recognition that the regulatory burden of small businesses needs to be re-examined.

“Other specific changes under scrutiny at the moment include the suggestion that inheritance tax liabilities that can arise when small entrepreneurs seek to pass on their wealth to their families are an indirect deterrent to small business – as indeed they are in South Africa.

“By contrast, Minister Pravin Gordhans’ first Budget speech proposals for small and micro business enterprises relief went no further than reiterating a general encouragement of small business development and entrepreneurship and some tinkering with the tax rates applicable to small business corporations (annual turnover of R14m) while turnover tax applicable to micro enterprises (turnovers not exceeding R1m) remained unchanged.

“Moreover it’s widely accepted in South Africa that the regulatory environment for small business remains onerous although admittedly there have been some adjustments in this respect in that micro business may now use a ‘presumptive’ tax system rather than normal income tax to simplify their tax affairs.

“Other worrying aspects in terms of this scenario are that business confidence among small business owners and managers moved marginally into the red for the first quarter of 2010, according to the Afrigrowth Institute.

“The bottom line is that existing tax, investment and other concessions to small and micro enterprises need to be reviewed, specifically aimed at creating stable employment, possibly linked directly to home ownership assistance for employees.”

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