In a country basking in the sun of unemployment such as South Africa, one would have expected to see the laws regulating entrepreneurship to be flexible and friendly, but this is not the case.
Instead they are rigid and severe, rendering chances of entrepreneurship growth minimal and hampering opportunities to fight unemployment through the creation of small and medium enterprises.
South Africa’s unemployment rate stands at 25.2%, according to the latest figures released by Statistics SA.
There are more than 1.5 million registered small and medium businesses in South Africa, which are believed to contribute 40% of the country’s jobs.
But the sad part of the saga is that these businesses are said to be operating in some kind of ‘hostile’ regulatory environment generated by the country’s unfriendly entrepreneurship laws.
This week, one expert slammed these laws, saying the country’s regulatory environment was seriously affecting businesses due to the cost of compliance, time and complexity.
“Entrepreneurs can’t always afford to hire specialist employees or consultants to provide guidance and advice on compliance issues,” Christo Botes, spokesperson for the Sanlam/Business Partners Entrepreneur of the Year competition, said.
“Some businesses need to comply with more than 45 laws and have to submit up to 24 returns. The time that it takes to comply with all of these regulations can be a substantial cost to a business,” Botes explained.
Apart from these tougher laws, there is also the issue of funding, which seems not to be a South African entrepreneur’s best friend.
“Small businesses often find that they do not qualify for credit due to low collateral and too high debt to equity levels,” he said.
Due to the litany of challenges created by unfriendly laws and a hostile regulatory environment, many South Africans seem discouraged to be embarking on an entrepreneurship journey.
The 2012 Global Entrepreneurship Monitor (GEM) South Africa report found that only 14% of individuals intend to pursue a business opportunity within the next three years.
“This is below the average of 27% for efficiency-driven countries,” Botes said, deploring this low percentage which he said could be attributed to the obstacles and challenges entrepreneurs are likely to encounter along their entrepreneurial journey.
“Increasing costs which entrepreneurs do not have control over, such as electricity, rates and taxes and unionised labour forces, are factors entrepreneurs have to bear in mind,” he charged.
“These rising costs provide a constraint to South African entrepreneurs as they can’t compete against illegal cheap labour practices by competitors and imported products coming from areas where costs such as energy, municipal charges and labour are much lower.”