Storm clouds gather over SA businesses
Last week saw another storm and another power outage – welcome to a new year. For many South Australian SMEs, severe weather events are now just one of the many risks of running a business in 2017, writes SA business adviser Tania Tonkin.
Storm clouds over Adelaide.
The next 12 months could bring testing times, not just with local storms but with the chance of increased national and global economic volatility.
As growth slows we’re constantly told Australia is an economy ‘in transition’ from the mining boom. Surely this is exactly the right time to come up with innovative, business-boosting policies friendly to SMEs who are the backbone of our state.
Let’s take electricity prices for example. South Australia has some of the highest in the nation. For SMEs, this has a huge impact on operating costs and undermines our competitiveness compared to other states.
Repeated disruptions to supply make it even more difficult. Recently these seem to be becoming almost a monthly event. To a business owner this is disastrous. December’s power cuts led to hospitality operators like hotels and cafes closing for days, while local supermarkets lost trade and threw away thousands of dollars in ruined stock.
Current compensation packages are simply not adequate to cover the damage experienced by these kinds of cash-flow interruptions.
It seems too easy for the government to pass the buck. There should be far stronger penalties if the problems can’t be fixed within a specified time.
Last Thursday evening 58,000 properties were without power and by Friday morning there were still 23,000 cases to be fixed. In high temperatures that’s enough time to do a lot of damage. Extended loss of trading opportunities can be catastrophic.
It isn’t easy to thrive under these conditions. This month alone I’ve heard of several successful South Australian businesses pulling back on expansion plans due to tough conditions and high costs.
According to the Allianz Risk Barometer this month, ‘business interruption’ events, including supply chain disruption, continues to be the top risk for the fifth successive year, with 37% of responders naming it in their top three business risks. Analysis from blackout events in the US show that a 30-minute power cut results in an average loss of US$15,709 for medium and large industrial clients, and nearly US$94,000 for an eight-hour interruption.
Perhaps SMEs should be paying less for their power bills to take into the account the number of times the electricity supplier has failed their business and cost them money? It’s a question we should be asking.
Inefficient taxes aren’t helping SA business either. Retiring NSW Premier Mark Baird hit the nail on the head when he said Australia had missed an opportunity to provide meaningful reforms to the tax system.
We need to look at uniformity of state and federal taxes, simplification and a reduction in the high costs of doing business here. Governments at all levels needs to start talking about solutions to these problems – and they need to do it with urgency.
I can’t count the number of times business owners have complained to me about the effect of payroll taxes and the fact that they’re a handbrake on expansion plans.
The rebates for small business might help a little, but the problem isn’t going away. There’s usually a long, hard think before an owner commits to taking the number of employees above the threshold. And for those with branches in other states, it’s a real headache.
Add to this the costs of penalty rates and you have an idea of what businesses are up against.
The expense of employing staff out of standard hours means business owners are now forced to shut-up-shop on weekends and public holidays, or to try and cut down on staff to manage the on-costs of staying open.
It isn’t easy to thrive under these conditions. This month alone I’ve heard of several successful South Australian businesses pulling back on expansion plans due to tough conditions and high costs.
We need to create more jobs, not lose them. And the only way to create sustainable and long-term growth in South Australia is to start thinking outside the square and commit to innovative reform. This should happen on a national, state and local level.
And we should be encouraging greater flexibility in workplaces by allowing businesses to provide a wider range of benefits to employees without being subject to fringe benefits tax.
Power out again. Our resilience in SA to the slightest storm is next to nothing.#morethanalittlebitoverit
— Nick Reade (@NickReade) January 19, 2017
Childcare is one example. Fringe benefits tax exemptions are currently only available to large corporates who provide in-house facilities. Why not extend this to smaller businesses? Having options like this available would make it easier for employers to take on more staff and provide valuable benefits to workers.
I’m also a fan of standardising time zones and trading hours. Changing the 30-minute time difference to Eastern Standard Time would make it so much easier for business. At this time of year Australia has an unbelievable five time zones. By comparison China, a country about 25% larger than our nation, has only one. We should want to be part of a national and global marketplace. Simplifying time zones would make that easier.
Incentives like the SA Job Accelerator Grant Scheme are a great example of what can be done to create additional employment opportunities, but more businesses need to be made aware of the benefits and why it makes sense to apply.
With Australia’s GDP slowing, wage growth declining and high rates of unemployment, we’ll need to put everything into moving the dial in favour of support for SMEs.
On the list are significant tax reforms (still waiting for those), a reduction in the amount of red tape, employment growth and solid strategies to support economic prosperity — it’s really not that new.
I’m just hoping 2017 delivers.
Tania Tonkin is a business and financial advisory specialist and a partner at South Australian accounting & financial planning firm dmca.
