SME LEAP Summit, Auckland
Small and Medium Enterprises, Leading Enterprise Acceleration and Productivity Summit, Westpac Conference Room, level 9, Takutai Square, Britomart
Good Morning. Thank you, Tenby. It’s a real privilege to be speaking to you today as the Minister for Small Business.
I would like to thank the organisers and sponsors of this Summit, and all of those here today, for taking the opportunity to be present at this event.
Our Government is committed to building a strong economy, so I would like to talk today about the role of SMEs in our wider economy. I also want to talk about my aspirations for the sector.
But for me, the real value for this summit is your ideas on what government can do to drive support and optimise the potential of the SME sector in New Zealand. So while I am here to speak, it’s more important that I listen.
New Zealand on the International Stage
New Zealand performs well against a number of international measures. The World Bank consistently ranks us near the top of its ‘Ease of Doing Business’ rankings – and in this year’s report we ranked first out of 190 economies. They gave us the top spot for starting a business, registering property and getting credit.
The OECD (Organisation for Economic Cooperation and Development) ranked New Zealand first for control of corruption, fifth for rule of law and fourth for government effectiveness. So our public services and public policy rate really well, and our public sector is seen as independent.
The OECD also measures well-being beyond GDP. We performed well in their Better Life Index, ranking at the top in health status and third in community. But we’re not doing well enough for housing, income and work-life balance – something every small business owner will understand
International rankings like these show that New Zealand performs well compared to others; but, as a country with nearly half a million small businesses, and very few large businesses, it is vital that we keep making improvements.
We are fortunate to be a country that is an attractive place to visit and live; however, we need to think about reshaping the economy to deliver improved well-being and ensure the benefits are spread fairly across society.
Our Government is focussed on improving the wellbeing and living standards of all New Zealanders through productive, sustainable and inclusive growth for a strong low-carbon economy.
What this means is that we want to ensure our businesses are prosperous, but also safeguard the future prosperity of our children.
This Government will support businesses both small and big, that produce goods and services, provide decent jobs for New Zealanders, and export.
We usually think of exporters as big companies – but if you look at businesses with 6-19 employees, almost a quarter export, and market access is crucial for improving theirs and New Zealand’s export performance.
Overseas markets provide access to more buyers, to new technologies and to new sources of capital. Exporting helps businesses harness economies of scale. It builds a strong incentive to innovate, and improves productivity as a result. It also exposes businesses to greater competition – which can be tough – but it forces us to sharpen up our own business practices. Trade helps us create a greater number of sustainable jobs in New Zealand with higher wages.
But the government needs to make sure that we live, and enhance, the brand we take to the world. This clean, green 100 per cent pure marketing slogan that has somehow morphed into our global brand is the one thing we have that can’t be copied in low-wage economies. And we devalue it at our peril.
SMEs have a distinct role to play in our economy. They provide opportunities for entrepreneurship, productivity and employment. And they are sources of innovation.
Small businesses are the backbone of our economy. From the plumber in New Plymouth to the next high-tech start-up in Hamilton, or Peter Beck and Rocket Lab in my electorate – not that he’s exactly a small business anymore - you provide the jobs that keep New Zealand growing. We need to ensure that growth in this sector is maximised.
There are many social benefits to having a strong SME sector. Most businesses in the provinces are small. They play a crucial rule in their local economies, and help to build diverse communities.
Small businesses employ almost a third of our workers, and contribute over a quarter of our GDP.
They play a crucial role in our country’s and our regions’ economic success. For example, 42 per cent of all jobs created in 2015 were in the SME sector.
They account for over 97 per cent of all businesses in New Zealand; 96 per cent here in Auckland.
In a fast-paced world, with ever-changing technology and ways of working, having innovative and nimble small businesses, run by engaged individuals, is more important than ever.
We live in one of the most diverse nations in the world, and we benefit from diversity on many levels. It brings broader perspectives, connections and networks that generate innovation and lead to increased productivity – which can only be good for business.
It is important to prepare and support SMEs to be flexible, adaptable and technically skilled for a world that is increasingly digital, global and specialized.
72 per cent of small businesses have internet sales, and with the continued roll out of ultra-fast broadband more and more small businesses will ‘go digital’, embrace e-commerce and be able to get their products and services into the best-paying markets.
The world is changing and large multi-nationals like Ali Baba and Amazon are driving consumer behaviour like never before. We need to be on top of these changes, if we are to take advantage of them.
Government initiatives available to small businesses
Since taking on this portfolio, one thing I’ve learned is that far too many small business owners don’t know about the wide range of services and assistance available to them to help grow their businesses. Disseminating information is a key challenge.
Can I ask you to put up your hand - who here pays provisional tax? Who here likes this regime? Have any of you heard of AIM – or Accounting Income Method?
AIM is a new way to manage provisional tax, using accounting software. It’s been developed in response to small business’ feedback that they want a way to manage provisional tax in line with how their business operates. AIM is available as an option from 1 April and you will need to opt in, through your AIM capable accounting software, on or before the first AIM payment due date which, for most, who file GST two monthly, will be the 28th of June.
There’s no need to apply or register for AIM. You just opt in by sending your first AIM statement when you software prompts you – at the same time as the software is working out your GST. If you decide not to use AIM in the 2018-19 year, you’ll have another chance to opt in the following year. Businesses must choose to use AIM for the full tax year, but new businesses can start using AIM when they start trading. Have a think about whether your business would suit AIM. Your financial adviser, tax agent or software provider may be able to help you with this.
It’s just one of the ways we’re using technology to lower compliance costs.
As you will know, small business owners face challenges around employment, skills and training, health and safety and the day-to-day responsibilities of running a business. There is never enough money or time.
The core programmes that have been specifically designed to help small businesses sit within the Ministry of Business, Innovation and Employment. Improving efficiency and effectiveness in dealing with Government departments is top of mind for many small businesses. Our work programmes address the “pain points” that businesses have told us make interactions with government hard. We are listening. An obvious example is the 90-day trial in employment law. The feedback from the SME sector has played a part in the decision to retain it for small businesses. It strikes a balance between the needs of employers and workers.
The first place to go to find information and improve your capability is Business.govt.nz.
It is the government’s website for small business that brings together information from across government to make it easier and quicker for small businesses to understand and interact with government. If you have a spare 5 minutes, you should look at this site. It’s pretty impressive!
It has plenty of advice to help you with your business. You can find out about tax obligations, appropriate company structure, and learn about hiring staff, export laws, and where to apply for research and development grants.
One of the tools on the website is the ‘Employment Agreement Builder’, which makes it easy for small businesses to create legal employment agreements. In the last year it has been used to create an estimated 200,000 agreements, and has a user rating score of 94 per cent.
If you have a specific competency you want to learn more about, get in touch with MBIE to see if they can add it to the site.
NZBN and e-invoicing
Another way we are working to make it easier for you to interact with government is the New Zealand Business Number (NZBN).
It is a single, unique number assigned to all companies on the Companies Register. It helps businesses deal with the government online by reducing time and costs. This will only get better over time.
The NZBN will pave the way for e-invoicing, which is one of many digital innovations that are underway right now to make it faster and easier to do business in New Zealand.
E-invoicing is the ability to exchange an invoice document between a supplier’s and a buyer’s online accounting software. It is not about emailing a PDF document!
Sending, receiving and storing invoices in this way can deliver significant productivity improvements and cost savings from fewer invoicing errors and less time spent resolving those errors. Incorrect or lost invoices contribute to about 40% of all invoices being overdue. Not being paid on time is terrible for your cash flow.
All businesses in New Zealand will benefit from the NZBN - sole traders, partnerships, some trusts and government agencies and with a 15 per cent uptake of e-invoicing, New Zealand businesses and government agencies could save up to $500 million annually. But we want 85 per cent uptake – not 15. Now that’s a challenge – and I’m very keen to hear from you about how to achieve this. Please give us the feedback from this Summit which we need to make a difference.
There is a lot of exciting stuff going on right now, and I have a lot more planned for SMEs over the next 24 months.
Portfolio direction and aspirations
As Minister for Small Business, I want to help you manage your unique challenges and make sure all of government understands the issues you face.
Important responsibilities of my portfolio include: ensuring the voice of small businesses is heard, linking your needs to broader government priorities, supporting initiatives that make it easier for you to operate and engage with the government and making sure that appropriate, meaningful and useful research is undertaken that is going to add value.
I think this discussion between small business and the government is absolutely timely. We need to work out what we want for small business in the short and long-term, and make sure our settings are right to make this happen.
I hear the calls from some for the establishment of a new Institute for Small Business. I am open to hearing more about how this could add to the work we have underway.
For now, the priority is about strategy first, structure second. In architecture they have the principle of form follows function. In the Small Business portfolio, we need to have the strategic discussion first.
The new government is coming to this with fresh eyes after almost a decade of a previous administration.
For example, we have a new emphasis on regional economic development - to the tune of one billion dollars. Our urban infrastructure, especially housing stocks and public transport, will look different. We have appointed a Tax Working Group that is looking at the wider economic and revenue landscape, especially the impact of new technology. The space industry is quite literally taking off. There is a greater emphasis on clean, renewable energy and on sustainable business practices. And the international trade agenda is moving in sometimes unpredictable ways.
Government accounts will increasingly include measures to reflect our environmental health, our standard of living, and the overwhelming need to lift our children out of poverty.
Small and innovative businesses play crucial roles in these efforts. As you can see, small business policy spans the wider government. Other portfolios will impact this sector.
I am involving my Ministerial colleagues in this work to develop our new strategy. We need to have this discussion, and we need to hear from a wide range of voices before we embark on any structural change.
One of the things that may come out of these discussions will be refreshing the advisory service that used to exist in the guise of the Small Business Development Group (SBDG).
This was a fantastic initiative established in 2002, which has been on hold for the last nine months. My priority is to get it up and running again but with a new mandate. I want to move it forward and enhance its ability to really drive change and make a difference in this sector. But I absolutely need to know from you what form this should take and what its mandate, objectives and priorities should be.
I am looking at how we can shape the responsibilities of the group and give it a higher profile with more oomph.
I also want to drive forward a business-friendly agenda based on research and informed feedback. Key priorities include: improving the uptake of the NZBN; e-invoicing; business.govt.nz, and looking at access to finance.
Our Government wants to pursue high-quality trade agreements that benefit our exporters, whilst protecting New Zealand’s sovereignty.
Working with the Minister for Trade and Export Growth, we want to increase the number of small businesses that export by, amongst other things, raising awareness of Free Trade Agreements and how they can help you.
I also want to let you know that I am keeping a close eye on late invoice payments and payment terms. For starters, I’ll be asking my colleagues to have their departments report on their own payment times and terms to make sure government agencies aren’t part of the problem.
I’m also watching the Australian government’s commitment to speed up the payment of invoices; I will work closely with my colleagues to tackle this issue.
Throughout the year I will also be hosting 12 small business roadshows from May to September. My first roadshow will be in Wellington on the 29th of May and I will be back here in Auckland in late August for two events, one being for the Pasifika business community. I hope to see some of you there!
If we, as a government, are to make good decisions for small businesses then we require good information. Knowing the concerns and interests of New Zealand’s small business community is about the most helpful information we can have. I look forward to hearing the ideas you come up with in the afternoon session.
We are committed to building a strong economy, being fiscally responsible and providing certainty.
We are also committed to ensuring that the wider business environment is supportive for small business growth.
I appreciate the invitation to speak to you all today. Thank you all for your time.