Zandile Majavu
With South Africa expected to remain grey-listed for another year, small business experts say the sustained strain on the economy is being felt across the board, including the SME sector. Following the budget speech, the Treasury revealed in its 2024 financial sector review documents, that the country would continue to be on the grey list for this year. A global crime watchdog, the Financial Action Task Force, placed the country on the list for not fully complying with international standards around the prevention of money laundering and proliferation financing nearly a year ago.
Small Business Development Institute chairperson Xolani Qubeka told Vutivi News that greylisting was a measure that mainly affected the country’s capacity to borrow loans from the international market. “Unfortunately, access to capital by SMMEs is a problem for all seasons. It is a problem that has been normalised and institutionalised as a norm. In this country, SMMEs are poor cousins of the economy and are not considered part of the mainstream economy. “Until SMMEs are an integral part of economic development and economic growth, and the only way this could be achieved would be through being integrated into the major value chains of large companies with long-term contracts,” said Qubeka.
He added that there were already many obstacles, such as redlining, which made interest rates and the cost of borrowing money much more expensive for SMMEs. “This is because SMMEs are sitting on the periphery of the economy. The commercial banks can only take SMME funding seriously if they have offtake agreements that are worth more than the paper they’re written on, when in fact they are catapulted into the mainstream economy,” Qubeka said.
Meanwhile, Rhodes Business lecturer Owen Skae explained that small businesses were not bound to see the direct impact of the grey list if they sold on the local market, however, the effect could be negative if they had export and import ambitions for goods and services. “This is due to the international community not seeing us as a country that can be trusted to make sure that we aren’t doing enough to prevent money laundering or dealing with corruption. The cost of business increases due to extra compliance, and additional checks and balances that will be placed on us,” Skae commented.
Meanwhile, the Treasury said it was on course to address five outstanding technical deficiencies out of 22. It believed the country would be removed from the grey list by February next year. On how these restrictions could shut doors for international funding for SMEs, Skae pointed out that a funder would need assurances that the money was not being used for purposes other than originally intended.
Political economist Patrick Bond told Vutivi News that the main implications of the greylisting were that the Treasury, the SA Revenue Service (SARS), and the SA Reserve Bank must crack down on the extreme abuse of exchange controls and tax dodging. “Hopefully, if the Sasfin prosecution announced on Monday is an indication, that will weaken the most corrupt elements within the financial institutions. And we can only hope that as a result, the forces in the economy and society favouring small businesses will therefore gain in power,” Bond said. SARS has issued Sasfin Bank with a summons for more than R4.87 billion in damages, plus interest and costs due to the unpaid taxes of former clients.
