Small and medium enterprises play a massive role in our economy, whether through employment creation or social contributions or a source of tax revenue for the government.
Acknowledging their importance, the Minister made several provisions for SMEs in this year’s budget, in various sectors and different financial and non-financial ways.
The introduction of a Tourism Business Continuity loan by the DBM for SMEs at a rate of 0.5% per annum might encourage enterprises in the sector to take more loans for survival or growth purposes, given the low cost of borrowing and even motivate debt-financed innovations to keep up with the ever-increasing shifts in the tourism world which the pandemic has severely impacted.
The setting up of an Agro-Processing Zone at Wooton will include infrastructure and equipment for processing, food testing, and warehousing, with the help of the ADB, to be made available for businesses, including SMEs will help promote agro-processing business in our country. By making these facilities available to SMEs, they will be more likely to join and invest in growth in the agro-processing sector, especially if these are affordable and of good technological standards.
The provision of a rebate of up to 30 % on the annual rental of industrial space to SMEs engaged in the manufacturing sector over the next three years, construction of an SME Industrial Park of 5,000 square metres at Solferino in addition to Plaine Magnien and Vuillemin and allocation of 20 % of spaces in these upcoming parks rent-free to start-ups for the first three years of operation, all have the potential to lift our industrial sector. By providing these SMEs with more space, with lower rents, the government is supporting them to really manufacture goods and services for the population and develop even further on a larger scale, with less worry about rental prices, essential for the new ones for whom rent tends to be a significant proportion of their costs.
Implementing the renewable energy scheme of the CEB for SMEs, whereby through the CEB Green Energy Scheme for SMEs, CEB Green Energy Co Ltd will install a solar PV kit at around 2000 small commercial enterprises freely and bear all related operational and maintenance costs. The SME will also “receive a reduction in its monthly electricity bill, which will net off partly or fully, as applicable, the electricity payments over 20 years”, helping to cut down electricity expenses and thus raise profits or motivate fund allocation to other vital expenses like further development costs.
- The Credit Guarantee Scheme (CGS) extension to cover 5 per cent of the default amount on leases contracted from private leasing companies, which might allow them to obtain leases more quickly, given the government partially backs them.
- The extension of the Tax Arrears Settlement Scheme for SMEs up to December 2021 could help SMEs tackle their tax liabilities. Under the Tax Arrears Settlement Scheme (TASS) 2019, “A small and medium enterprise whose annual turnover for the year of assessment 2017/18 did not exceed 50 million rupees may benefit from 100% waiver of its accrued penalties and interests on tax arrears outstanding as at 10 June 2019 in respect of assessment issued and return submitted on or before 30 June 2018 under the Income Tax Act and Value Added Tax Act”. Arguably, any extension in the scheme is likely to be favourable for the financial situation of SMEs by completely cutting off expenses related to tax arrears.
- A rise in the total maximum grant across all schemes implemented by SME Mauritius Ltd from Rs 150,000 to Rs 200,000, making it easier to cover eligible expenses and finance more and better business activities.
- A 110 % deduction of the taxable income for the direct expenditure incurred on the purchase of products manufactured locally by SMEs, encouraging businesses to buy more manufactured goods from SMEs instead of foreign sources, expanding the client base and revenue for SMEs in the manufacturing sector.
- The availability of DBM loan schemes, namely Rs 100,000 interest-free loan for cash flow issues and a 0.5 per cent COVID-19 Special Support Scheme of up to Rs 1 million, to keep more SMEs afloat during their financial troubles and ensure their survival, crucial for the development of our economy.
- The provision of loan facilities by the DBM of up to Rs 5 million to retailers with a turnover of up to Rs 250 million at a concessional rate of 3.5 per cent per annum to support those affected by the pandemic.
- The setting up of an online marketplace by the EDB for start-ups to promote their products and services, reach more customers and boost their sales, revenue and profits by gaining more exposure, recognition, reputation and branding.
While it may seem that these measures would be of tremendous support to our SMEs, we should also note that their impacts will depend on several factors like how well they are implemented, the prevailing business confidence in the economy and risk aversion behaviour of SMEs, as well as any possible external shocks. Neither the budget of a country nor its business climate should be viewed with rose-coloured glasses but what we can do is hope that lending a hand to our SMEs will help them lift themselves from the waves of the pandemic faster and emerge more resilient than ever.
Krshtee Sukhbilas, BSc Economics & Finance student at the University of Mauritius, YUVA Intern