Drowning in Red Tape: How Compliance is Crushing South Africa’s Small Businesses
South Africa’s small businesses are being suffocated by a growing compliance maze that extracts money, time, and energy while delivering little value.
Written By: Cynthia Lewis
As I try to navigate making sure I have provided for my own retirement, so as not to draw on government funds to live, by exercising my God given skills and abilities, to assist small businesses to remain compliant to all the various bodies that exercise some form of control over running a business in SA. I am struck by the extent of the authoritarian arm of government and how it has extended its reach (or in my opinion tentacles), into every nook and cranny of our lives and businesses.
I have a handful of clients. All trying to eke out a living on slim margins and usually no profit, employing a handful of people who put food on the table and can send their kids to school thanks to these little businesses. And it dawned on me that the government is sucking the very life out if these businesses with the amount of compliance they have to adhere to.
All of them have to comply with CIPC (Companies and Intellectual Properties Commission), Workmens Compensation (Dept of Labour), SARS (South African Revenue Service), and UIF (Unemployment Insurance Fund) legislation.
Furthermore, if you are for example in the Security Industry you have to belong to the NBC (National Bargaining Council) and PSIRA (Private Security Industry Regulatory Authority), if you are in the Property industry the PPRA (Property Practitioners Regulatory Authority) and have a Fidelity Fund Certificate, attorneys have to be members of the LPC (Legal Practice Council) and be registered with FICA to hold a trust account. In my industry you have to be a member of a Registered Controlling Body to practice as a tax practitioner. There's SAHPRA and FSCA, and ICASA and NHBRC...
The list goes on and on and on.
Now all these business must make payments to these bodies, who are entrusted with oversight (and one would think support) over these industries. But one just has to step into the life of a small business to find that the ONLY thing these bodies deliver is mountain loads of frustration, and a drain on finances.
In all my experience through my clients, I have never seen how these entities add any value. Not even from the perspective of making it easy to be compliant. Their websites limp along at best, and hardly work at all, at worst. Their client support is generally non-existent, and even when obtainable, generally hamstrung by the non-functioning greater body.
The amount of red tape that businesses have to deal with to operate in South Africa is overwhelming and obstructive. Meanwhile employees of these bodies earn salaries on the backs and backbones of the small businesses that have to belong and comply, while delivering no real value at all.
Whatever the intended purpose of all of this, it is my opinion that all these bodies were set up to suck money out of the economy and create "jobs".
They certainly seldom deliver on their mandates or deliver value. Just the other day, a property developer client of mine told me how an NHBRC inspector stopped the development because they don’t understand the first thing about building and applied the wrong code to the building process. The Ufiling website has basically been inactive for 6 months and I understand the link between CIPC and DHA is down regularly and for days at a time.
As tax practitioners being a member of an RCB adds absolutely no value to us. The bodies exist at the behest of SARS (so they are conflicted) and have NEVER implemented any processes that truly add value to the running and functioning of our businesses. The recent article/open letter by Charne Van Der Walt attests.
There is a social media commentator called Magatte Wade - who is backing up my concern with regular posts about how all this bureaucratic red tape is just sucking the life out of African markets and killing entrepreneurial spirit and small businesses across the continent.
What I fail to understand is why the businesses in SA have not stood up and said NO - enough is enough. Why do we continually swallow these bitter pills that are just making us sick and will eventually be the death of us? Please help me understand... I simply do not.
Cynthia Lewis is a former project manager and business analyst who now runs her own accounting practice alongside her husband, a tax and legal advocate. With 37 years of business and life experience, she has spent two years in the United Kingdom and the remainder in South Africa. She studied at the University of the Witwatersrand (Wits). She voted in the 1992 referendum that ended apartheid-era constitutional arrangements and welcomed South Africa’s democratic transition in 1994.
I whole heartedly agree. This regulation is not oversight to ensure that no one is getting crooked , it’s a mechanism for extracting money. Those costs get transferred to the users of your service, making it more expensive than it needs to be, while providing no additional value and effectively removing money that would otherwise be doing useful work from the economy . Well said
An excellent article, actually understated. Businesses have to comply with many more regulations besides those mentioned.
This is simply an extractive, state sanctioned criminal protection racket.