Cut red tape to prevent small business staying informal

Sipho Nkosi

Both the finance minister and the new minister for small business development have laid down a few cards before the public in support of small businesses and economic growth. We’re glad to see they’re tossing some of their chips in to help eradicate red tape.

The burden of red tape is, of course, felt disproportionately by small and medium enterprises (SMEs), so much so that the International Labour Organisation says the problem “can encourage businesses to remain informal and small to avoid compliance costs, which of course limits our ability to create the jobs we need”.

Given the latest unemployment statistics, minimising constraints for SMEs to employ people has become urgent. We need to find the will to do whatever it takes collectively to create the most conducive environment possible for SMEs. Eradicating red tape should be the highest priority — for every minister in SA. Small businesses make up 98.5% of the formal economy across all sectors, yet are able — or willing — to create only 28% of formal jobs.

It won’t be difficult to focus the minds of the cabinet. Small business development minister Khumbudzo Ntshavheni merely has to gazette section 18 of the National Small Business Act to require each minister to conduct regulatory assessments of every policy, law or regulation issued. The impact on small businesses would have to be considered so that they could be offered relief, or considered for specific special treatment if necessary. Finance minister Tito Mboweni has suggested this, and raised the idea that we revisit the Regulatory Impact Assessment Act, which would result in 25% of regulations being scrapped over the next five years.

Click here to read more of this Business Day article by Sipho Nkosi.