Lula commends fiscal discipline but urges specific relief for SMEs

In a positive response to the recent Medium-Term Budget Policy Statement (MTBPS), the SME services provider Lula has welcomed Finance Minister Enoch Godongwana’s commitment to fiscal discipline and progress on structural reforms.

Lula argues that such measures directly alleviate the cost and risk burden faced by small and medium-sized enterprises (SMEs), a sector crucial to the South African economy.

According to Garth Rossiter, Lula's Chief Risk Officer, the Finance Minister has clearly signalled an intent to address two of the primary operating risks for SMEs: fiscal management and infrastructure.

“The commitment to stabilise public debt at 77.9% of GDP in 2025/26 and achieve a R68.5 billion primary budget surplus provides some necessary macroeconomic certainty that underpins confidence for long-term SME investment and hiring,” Rossiter stated.

Lula has been vocal in its insistence that the MTBPS must focus on reducing the cost and risks associated with doing business in South Africa. The organisation had previously called for a straightforward trajectory addressing challenges in electricity supply, logistics costs, and national debt management.

Among the significant positive developments highlighted was the progress in infrastructure, integral to small businesses' operational efficiency:

• Logistics: The Minister confirmed that infrastructure reforms are accelerating, with the first rail corridor Request for Proposal (RFP) expected to be issued by December 2025. Additionally, port vessel waiting times have been reduced significantly by 75%.
• Energy: The allocation of R2 billion to a Credit Guarantee Vehicle aimed at expanding electricity transmission is seen as a crucial step in tackling one of the most daunting threats to SME growth.

Despite these encouraging signs, Lula remains cautious.

“The greatest challenge for our SMEs is not resilience but capital commitment in the face of tax uncertainty,” Rossiter cautioned.

While the Finance Minister has hinted that the potential R20 billion tax increase for 2026 may be shelved, he did not offer a definitive commitment. The decision will be deferred until the February Budget, leaving SMEs in a state of apprehension.

Furthermore, Rossiter pointed out the absence of new, targeted tax relief measures for small businesses, which are vital for fostering growth and nurturing job creation.

“We call on the government to ensure the announced structural reform timelines are met so that tangible improvements can be felt by SMEs on the ground,” he urged.

As South Africa navigates its economic recovery, the path forward for SMEs will hinge significantly on decisive governmental action and sustained fiscal discipline.

Lula's advocacy for concrete measures reflects the urgent need for a supportive environment where small enterprises can thrive and contribute to the nation’s economic resurgence.

BUSINESS REPORT