South African red tape may not be that bad


By Thandisizwe Mgudlwa

A report this week reveals that entry as a Small and Medium Enterprise (SME) is not so restrictive after all.

And according to Gerrie van Biljon, Executive Director of Cape Town-based Business Partners, the general sentiment in South Africa’s business landscape is that the environment is plagued by challenges that hinder commercial activity.

Further,in recent months much has been said about the significant red tape that hampers business growth in the country, however, despite all the negative reports, South Africa’s business environment is performing significantly well in key areas.

Van Biljon then refers to the World Bank’s Doing Business 2012 Report, which ranks countries across the globe according to how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

Van Biljon says that overall, South Africa performed relatively well and was ranked 35th out of 183 countries in 2012, excelling in various elements which encourages the ease of business. “South Africa is also, in fact, the best performing country worldwide when it comes to accessing credit.”

He believes that the South African business environment successfully caters for the local SME industry in terms of funding and investment, for both entrepreneurs and financiers. “According to the report, South Africa ranked 10th in terms of protecting investors. Even more importantly, South Africa was the top ranked country internationally in terms of accessing credit.

“Another positive indicator is the fact that South Africa improved by 68% in terms of starting a business and is currently ranked 44th.”

Van Biljon also explains that there is a general misconception amongst small business owners that the lack of local entrepreneurs in the South African economy is the direct result of a lack of access to capital.

“The issue surrounding funding is more a myth than a reality. The problem is not a lack of access to capital, but is ultimately the result of an awareness gap between financing institutions and aspiring entrepreneurs. It is essential that entrepreneurs seeking capital fully understand the process and stringent criteria required to obtain financial support.”

In addition: He also points to the fact that South Africa is ranked 44th in terms of ease of opening a business, which is an improvement of 30 places since the 2011 report. “As all procedures, including the time and cost required to complete these procedures, were analysed as part of this study, South Africa’s ranking is very positive. The efforts of some government departments, especially the inroads that
have been made in clearing the backlogs at the Companies and Intellectual Property Registration Office (Cipro) and the streamlining of tax compliance by the SA Revenue Services, have greatly contributed to improvements in the ease of doing business in South Africa.”

However, van Biljon conceded that there remain certain areas of concern which are limiting for SMEs and may hamper the future growth of entrepreneurs and small business. “Latest data released by The Global Competitiveness Report (GCR), reveals that the South African labour market is characterised by rigid hiring and firing processes, inflexible wage setting structures and tense employee employer
relations. Our economy ranks 139th, 138th and 138th in these categories respectively out of a total 142 countries, and is being significantly hampered by these restrictive characteristics of the labour market.”

Van Biljon says that in South Africa, our “First World” labour legislation sometimes restrains SMEs from hiring additional staff due to the country’s strict labour laws and regulations. He explains that this can potentially result in SMEs making use of automated solutions such as machinery as alternatives to new staff, which is harmful to the economy and skills development goals.

He adds: “South Africa’s extremely powerful trade unions do a great job of protecting the interests of their members, who are individuals with jobs. However, many South Africans are unemployed and therefore no one speaks out on their behalf.

“A more flexible labour regime is necessary for SMEs to encourage them to hire more employees, thus making an even larger contribution towards solving our country’s unemployment problem.”

Van Biljon says that although the South African business environment is thriving in certain aspects, other sections need to be reviewed in order to streamline SME growth in the country. “Like any business or industry, in order to succeed it is essential to identify and analyse the strengths and weaknesses of the corporate landscape,” concludes van Biljon.

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