ENTERPRISE TYPES – Page 3

Accelerated and Shared Growth Initiative for South Africa (ASGISA), Anti-business, Black economic empowerment (BEE), Business incubation, Central planning, Company tax, Cooperatives, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Informal businesses, Job creation and unemployment, Lockdown, National Gazelles Programme, Registered companies / Incorporated businesses, Small and medium enterprises (SMEs), SME, Sole proprietors, Spontaneous order, Tourism & hospitality services

Enterprises, unlike bears, don’t hibernate: lockdown will cause the death of firms and people

Johannes Wessels
@johannesEOSA1

Government’s decision for a stringent lockdown has put at least 100,000 formal enterprises – incorporated and sole proprietorships – on death row by effectively freezing the economy. Unlike bears, firms do not hibernate well: without customers and clients buying their goods and services, they starve and die.

Business relief measures by the government and the funds established by the Ruperts, Oppenheimers, Motsepes and others may enable some enterprises to pull through. But a substantial percentage of formal SMEs will not. Not with an economy that is likely to retract by between 6 and 10%.

Enterprises are already in a predicament and have run up more losses than profits since 2014. SARS data shows that the assessed losses exceed the assessed taxable income for the period 2014 to 2018 by R830 billion (Figure 1).

An economy already damaged by anti-growth policies has now been dealt a vicious blow. The damage is systemic and a systemic approach is required to restore a healthy business environment.

Figure 1: The pre-Covid 19 situation of SA firms was dire

The economy doesn’t resemble Eskom’s electricity supply. Load-shedding means no electricity during the power lockdown, but when the switch is thrown on again with the transmission lines conveying electrical current, the lights burn, the fridges cool, the stoves cook and TVs entertain just like before.

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Anti-business, Central planning, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, ECONOMIC POLICY AND STRATEGY, Factories, Informal businesses, Job creation and unemployment, Lockdown, Small and medium enterprises (SMEs), Small towns, Sole proprietors, Tourism & hospitality services

Lockdown? Or is it perhaps meltdown?

Johannes Wessels
@johannesEOSA1

Halfway into a five-week lockdown it is appropriate to compile a kind of “balance sheet”. When the lockdown was announced, Pres Ramaphosa made it clear that protecting lives against Covid 19 was paramount: a position he reiterated when prolonging the lockdown.

For the ANC Government, all other considerations weigh less and may be sacrificed. Mutating from a supreme commander in military camouflage uniform rallying his troops to “kill the virus” to a pope like appearance during Easter sympathizing with the population for carrying the heavy cross, almost like Simon of Cyrene, Ramaphosa has been lauded all around as “bold” and “presidential”. The few voices that since the beginning have argued that severe restrictions that limit fundamental freedoms would fuel poverty and unemployment, were brushed aside as being both inhumane and wrong.

To date it is uncertain whether the lockdown, the wide application of Bacillus Calmette–Guérin vaccine in SA or any ther factor has contributed to the (still) low infection rate in South Africa. What is dead certain is that the economy (already in a critical condition prior to the appearance of Covid 19) has been rushed into ICU to a position close to the door where the dead are wheeled out to the morgue.

Read EOSA’s proposals on how Government can assist SMEs by cutting CIT and exempting those with a turnover below R2.5 million from VAT.

Government has, as yet, to indicate its estimates of the economic impact of the lockdown measures, e.g.:

the decline in VAT receipts;
the decline in CIT (and for sole proprietors, the decline in personal income tax);
the additional costs of demands on the UIF;
the additional costs of deploying the military and the police at the current levels;
the cost of measures to support the informal traders, small enterprises and other assistance measures to support businesses;
the support measures to assist businesses in the hospitality industry;
how these would impact on the budget deficit and what the implications are for government debt.

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Accelerated and Shared Growth Initiative for South Africa (ASGISA), Black economic empowerment (BEE), Competitiveness, Demographic-entrepreneurial relationships, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Enterprise friendly environment, Job creation and unemployment, Preferential procurement, State Capture, State Owned Enterprises (SOEs), Township enterprises, White monopoly capital theory

30 years on: Is Ramaphosa preparing his version of FW’s “to-the-dustbin-with-ideology” speech?

Johannes Wessels
@johannesEOSA1

Thirty years ago (on New Year’s Eve 1989), FW de Klerk knew that the South Africa was on the verge of massive change. The combined debilitating effects of apartheid’s shackles on the economy (including sanctions) and the impossibility to continue with the disenfranchisement of the majority of the population, prompted him to prepare his watershed 2 February 1990 speech in which he effectively pulled the plug on apartheid.

Will the combined negative legacy of the transformational drag on the economy and the implosion of state-owned enterprises (SOEs) prompt Ramaphosa to discard the ANC’s ideological stance in 2020?

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Anti-business, Central planning, Cities, Developmental state, Differentiated products, Economic freedom, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Enterprise density, Enterprise friendly environment, Enterprise regularities, Enterprise richness, Entrepreneurial space, Export-led growth, Free State, Immigration/Emigration, KwaZulu-Natal, Large towns, Municipal efficiency, Population size, Predictive capabilities, Spontaneous order, State Owned Enterprises (SOEs), Trading services, Urban economy and growth

The City of Surreal Ramaphosa on the banks of the Rubicon

Johannes Wessels
@johannesEOSA1

Cyril Ramaphosa’s vision of “a first post-apartheid city with skyscrapers, schools, universities and factories” (if implemented) has all the potential of becoming a disastrous social engineering experiment wasting resources on a massive scale. Not because the idea of a new city is wrong per se, but simply because the president is ideologically wedded to state-led development, holding a very negative view of the role of the private sector.

Ramaphosa doesn’t consider the private sector as efficient or more effective than the public sector, despite the fact that State-owned enterprises are mismanaged, bankrupt and a drag on economic development with Denel and the SABC even struggling to meet salary commitments.

Peas of the same pod

The creation of such a city is, in the Ramaphosa framework, not a vision of dynamic economic growth, but an ideological blinkered perspective of how government can improve society. Ramaphosa and all the social engineers within the ANC are, in that sense, not far from the approach of Hendrik Verwoerd. The National Party was, just like the ANC, a force pursuing transformation through prescription and limitation of choices.

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Anti-business, Black economic empowerment (BEE), Crime against business, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, Emigration/Immigration, Enterprise friendly environment, Opportunity tax, Productive knowledge, State Owned Enterprises (SOEs)

From Leader to Laggard: the Brain Drain & SA’s slide to the bottom

Johannes Wessels
@johannesEOSA1

Is South Africa’s ‘radical transformation‘ from a leader to a laggard in the upper middle-income countries the cause or the result of a brain drain? It is hard to tell. What is certain, is that there is an extremely strong inverse correlation.

In fact, it is so strong that one can use one statistic to deduce the other. And if high-skilled emigration is going to continue, the country’s decline towards the ranks of the lower middle-income countries will also continue.

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Anti-business, Black economic empowerment (BEE), Company tax, Crime against business, ECONOMIC GROWTH/ANTI-GROWTH FACTORS, ECONOMIC POLICY AND STRATEGY, Enterprise friendly environment, Enterprise profitability, Enterprise research, data and statistics, Small and medium enterprises (SMEs), Small enterprises, SME, Township enterprises, White monopoly capital theory

Small enterprise: the canary in the coal mine of a toxic business environment

Johannes Wessels
@johannesEOSA1

Small enterprise in South Africa is unimportant for the Government. Whilst there is lip service to creating conducive conditions for small enterprise, the Government ignores the reality of small formal firms disappearing at an alarming rate. Small enterprise is the canary in the coal mine of a toxic business environment: they die off first before the toxic conditions are lethal for large businesses.

Big Government favours Big Business (for tax income) or Big Labour (watering its socialist roots to ensure worker class loyalties). Small business cannot fulfil either these roles. The demise of small formal enterprises in South Africa (as recorded in SARS data) is indicative of an utter indifference by Government to the plight of small enterprise.

That raises two questions:

Is the demolition of the small formal enterprise environment a strategy by Government to achieve its objective of radical racial economic transformation?
Is it also a strategy to plug a hole in the leaking SARS ship since, from a VAT perspective, businesses with a turnover below R1 million is a drain on Treasury?

Based on SARS data on Value Added Tax (VAT) covering the years 2007/8 to 2017/18 the devastation on micro and small businesses with a turnover of R1 million or less, is evident. The number of VAT vendors in this bracket declined by 49% from 300 299 in 2007/8 to 154 559 in 2017/18.