Labour laws hamper SMEs: survey

Johannesburg - Rigorous labour laws and a lack of qualified people are the biggest hurdles for the growth of small and medium enterprises (SMEs) in South Africa, according to a survey conducted by Softline Pastel.

Of the 2 000 local SMEs which participated in the online survey, 17% said an inability to find the right people for the job had prevented them from expanding their businesses.

Of the respondents, 11% said they were too nervous to employ more people because of the country’s “rigorous” labour laws.

“SMEs require less rigorous legislation and it appears that our labour laws are just getting tighter.... I am not sure that government is getting to the heart of solving our employment problems,” Pastel Accounting managing director Steven Cohen said on Monday.

“There are an estimated 1.5 million SMEs in SA that employ around 60% of the country’s labour force. In a country with 25% unemployment, creating jobs is absolutely essential,” he said.

The second-biggest barrier to business growth was found to be paperwork and compliance.

The survey found that just over a quarter of respondents spent more time filling in forms and ensuring compliance with tax and other requirements than running their businesses.

Funding was found to be the third-biggest hurdle to growth, with 20%  of respondents either unable to raise capital or unaware of how to do so.

“Half of the respondents who report that funding is an issue could not raise money from their own bank,” said Cohen.

“We hear time and again that the most common reason for businesses not getting funding has to do with poor applications.

“Either the reason for funding is not specified, the business plan is not clear or the financial reports are incomplete.”

The Pastel SME survey was conducted among small businesses nationally during December 2010 and is to become an annual review.