Cut red tape so that small business is enabled and encouraged
It’s no secret that South Africa, along with many emerging economies globally, is struggling to tackle the triple challenges of poverty, inequality and unemployment. These challenges are not insurmountable, but we are now on the wrong side of the curve, with signs that the economy is more concentrated than ever before. Unemployment in general, and youth unemployment in particular, is a ticking bomb; most South Africans are excluded from the mainstream economy.
To address this serious issue, government and business alike increasingly regard small businesses as a panacea of sorts. Anyone who has travelled extensively through African and Asian countries will know the value that small businesses can bring to a local economy. Large enterprises may bring in the bulk of the foreign revenue and formal employment opportunities, but it is small businesses that provide incomes for most people in these countries.
South Africa has realised the value add that small enterprises can bring to the economy, but we seem confused about how to go about creating them. Sure, there are a number of government-led programmes under way aimed at creating small businesses; special economic zones (SEZs) have been created as trade hubs, supplier development is a core element of broad-based black economic empowerment, land reform and agri-parks seek to create smallholder farmers with value chain linkages, we’re planning a jobs summit with a focus on small businesses and we even have a minister of small business development in Cabinet. So why are we still struggling?
The answer is quite simple: the regulatory environment is hostile to small businesses. The complexity and costs needed to comply with the various reporting requirements, expert evaluations, permits, standards and associated admin that businesses must comply with is enough to discourage any aspirant entrepreneur from starting their own business. It’s much safer to take a desk job in a large business where someone else takes on that responsibility, but this is definitely not the way it should always be.
As a developmental state, it is good to see the government take proactive steps to encourage small businesses, and government should be lauded for these efforts. But its primary function in the economy is to create an enabling environment, and this is sadly where we have taken our eyes off the ball. SEZs, job summits and all the other initiatives will only bear fruit if we get serious about reducing the regulatory hurdles that small businesses find so difficult to clear.
Many regulations are put in place to protect legitimate public interests such as public safety, working conditions and the protection of the environment, and one can hardly argue against the need for some control. But those control measures should not be structured in a manner that forces a small business to fork out hundreds of thousands of rands to consultants to obtain a permit of certification.
The focus placed on small businesses in the lead-up to the jobs summit announced by the president is encouraging. I, for one, sincerely hope that we can go beyond merely endorsing a handful of good projects, but rather emerge with a renewed drive to cut down on unnecessary regulation in the economy.
The old adage holds true: “If you don’t need to regulate it, then you need not regulate it.”