By: Anna Majavu
SMMEs that were hoping that government would announce far-reaching measures to fund their shift to renewable energy will be disappointed by the lukewarm measures announced in the budget on Wednesday. President Cyril Ramaphosa said in his State of the Nation Address that the budget speech would list new ways for SMMEs to access funds for solar power from the bounce-back scheme originally designed to help them recover from Covid-19, civil unrest, and floods.
But Finance Minister Enoch Godongwana’s tepid “Energy Bounce Back Scheme”, launching in April, will see the government guaranteeing a small part of solar-related loans for small and medium enterprises only. Micro-enterprises are excluded, and the loans are on a 20% first-loss basis – a mechanism whereby the government will compensate banks and other commercial lenders at 20% of the loan if the borrower defaults. Ubuntunomics economist Sibusiso Nyathi cautioned that SMMEs would only qualify for the 20% guarantee if they were creditworthy enough to afford the other 80% of the loan.
“We have been on this path before. The R200 billion bank guarantee loan scheme for Covid-19 support for small businesses went the same way. The banks only approved around 10% of those,” Nyathi said. Godongwana’s second path to solar power is a two-year scheme beginning 1 March, where businesses can claim back 125% of the cost of any investment in renewable energy as a tax rebate. But this will only benefit those SMMEs who earn enough to pay for a solar power system upfront.
By May 2023, however, Treasury will announce plans for commercial banks to borrow directly from the Energy Bounce Back Scheme to buy solar equipment and lease it to small businesses. Also, by May 2023, “small businesses installing solar will be able to borrow finance for working capital”, said Godongwana. Meanwhile, small and micro-businesses that have been hardest hit by the Covid-19 pandemic, floods, riots and load shedding since 2020 will receive an R2.8 billion boost from the Township and Rural Entrepreneurship Fund over the next three years.
Godongwana said the funds would be channelled to 120,000 businesses in rural areas and townships. Independent political analyst Dr. Dale McKinley said the amount was “completely and totally inadequate”. “It is a very small amount per business. What is needed is a really serious commitment by the government to small enterprises in the township economy – they must truly put their money where their mouth is, localise the programme and ensure people can get these funds without having to jump through so many different hoops that they give up” McKinley said.
The fund was launched in 2021 with an initial R694-million in funds. It provides grants and loans to the smaller township and rural businesses that do not qualify for commercial bank loans. Godongwana also announced that R2.7 billion had been allocated to the Department of Small Business Development’s Small Enterprise Development Agency (Seda) to support small businesses over the next three years and that an extra fund of R280-million would be provided in the form of incentives.
The details of how these funds will be spent are likely to emerge only in the department’s budget vote in May this year. In last year’s budget vote, Seda was allocated R2.8 billion over the medium term. Ramaphosa had also promised SMMEs a new and “very substantial” R10 billion fund, of which government would commit R2.5 billion. But they were left in the dark yesterday after the new fund was not mentioned by Godongwana in the budget speech.
SMMEs are sure to be disappointed with other vague assurances in the budget speech, such as the long-standing promise by the Department of Small Business Development to “improve local and international market access for SMMEs”. Parliament’s Standing Committee on Appropriations on the 2022 Medium Term Budget Policy Statement had urged Godongwana to “substantially increase” the department’s 2023 budget. In last year’s medium-term expenditure framework, the department was set to receive R2.57 billion this year, and R2.7 billion next year. But only R8.1 billion was allocated on Wednesday to the department over the next three years.