Plight of the SMME

2008-09-10 00:00

The SMME (small, medium and micro enterprise) sector is undoubtedly crucial to the development and growth of the economy. Why then are these businesses subject to a regulatory environment where tax and other legislative requirements stifle the success and growth of such business?

In addition to the legislative burdens, business owners have felt the effects of rising costs on the back of an economic downturn. The cost of fuel, electricity and supplies, increasing employment costs and the enterprise’s susceptibility to fraud in this economic environment add to the challenges faced by the business owner. With their mind firmly focused on getting through this economic downturn, it is easy for the business owner to neglect compliance with many aspects of regulations governing their business.

A compliance oversight could land the business owner with interest and penalties adding further strain to the already dwindling cash flows of the business. The automatic reaction is to seek out additional loans and financing for the business, which inevitably further impacts the cash-flow position.

The SMME environment is challenging at the best of times, however, now more than ever, these business owners are in need of assistance and advice to get them through the tough times.

Granted, government have initiatives in place to assist SMMEs, but it is also crucial for the private sector to play a role in these initiatives to ensure the success thereof.

Enterprise Development Initiatives (EDIs), which are relatively new to corporates, encourage the private sector to push the boundaries and explore unique ways of contributing to the country’s transformation needs.

In addition, corporates will be supporting government initiatives by assisting in the development of SMMEs.

In a recent ground-breaking initiative, KPMG together with Absa embarked on an EDI day, which was held on August 20. In one day, professionals from KPMG together with relationship managers from Absa met with businesses in 15 cities around the country.

Pertinent issues such as financial management and cash-flow in a downturn economy, tax compliance and black economic empowerment were discussed with business owners. This enabled professional staff of KPMG to utilise their time in a meaningful way to engage with small and medium business owners at no cost to the business owner.

Large corporates are challenged to take up the opportunity and engage in similar projects to assist in the upliftment of the SMME and contribute towards its future economic success.

Usha Maharaj

partner in advisory, KPMG

usha.maharaj@kpmg.co.za

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