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Regulatory compliance bad for businesses

Jun 13 2013 12:46
Cape Town – Entrepreneurs can’t always afford to hire specialist employees or consultants to provide guidance and advice on compliance issues and this can cost them dearly, according to Christo Botes, spokesperson for the Sanlam/Business Partners Entrepreneur of the Year competition.

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.

It is no secret that South Africa suffers from an unemployment crisis, with millions of people actively searching for employment, said Botes.

The unemployment rate in the country has increased to 25.2% in the first quarter of 2013, according to the recent Stats SA Quarterly Labour Force Survey.

Botes said entrepreneurship is often promoted as a means to curb unemployment, yet despite the growing unemployment statistics, many obstacles remain.
South Africa was ranked 123rd out of the 144 countries surveyed in terms of the burden of government regulation, according to the latest World Economic Forum (WEF) Global Competitiveness Report for 2012/’13.

The regulatory environment is seriously affecting businesses due to the cost of compliance, time and complexity, said Botes.
Limited access to finance is another reality many entrepreneurs continue to face.

“Small businesses often find that they do not qualify for credit due to low collateral and too high debt to equity levels,” explained Botes.

Only 14% of people intend to pursue a business opportunity within the next three years, according to the 2012 Global Entrepreneurship Monitor (GEM) South Africa report.

This is below the average of 27% for efficiency-driven countries and Botes said is 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.

“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,” warned Botes.

He adds that limited appropriate entrepreneurial training and development programmes being implemented is also a constraint, and one of the key reasons why such a large percentage of new businesses fail.

In his opinion a lack of education and training reduces management capacity and limits the survival and growth of new businesses.
“This downfall can, however, be improved with more appropriate and practical entrepreneurship training at primary, secondary and tertiary level. Creating additional incubators where entrepreneurs can be monitored and mentored during their first five years of start up will also aid entrepreneurship,” he said.

For entrepreneurship to flourish, South Africa needs to change the way the spirit of enablement, empowerment and real support of entrepreneurs is practiced in his opinion.

“Influencing government legislation, in not only how the country facilitates the subject of entrepreneurship in schools, but also what legislation should be put in place to ensure that a healthy legal environment, in which entrepreneurs can operate, is vital to promoting entrepreneurship,” he said.
Such a healthy environment would include electricity rebates for small and medium enterprises (SMEs) within their first five years of operation and improved incentives to employ more people, as well as relaxed compliance to laws, by-laws, rules and regulations.
“We must revert back to acknowledging and promoting entrepreneurial excellence as the norm and not the exception and in turn develop a new standard of excellence in entrepreneurship all over South Africa,” concluded Botes.

- Fin24


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