Red tape is the biggest constraint to the expansion of business in South Africa, according to Grant Thornton’s 2005 International business owners survey.
Forty one percent of business owners in South Africa cite regulation and red tape as the biggest constraint to the growth of their business, up from 34% last year when regulation was considered to be the second greatest threat to expansion.
The second greatest problem for South African business owners (37%) is now considered to be the availability of a skilled workforce.
At 68%, the construction industry in South Africa is the most affected by regulation and red tape while the retail sector seems to be the least affected, with 28% of businesses reporting that red tape hampers their growth.
Services and manufacturing are close to the national average, reporting 44% and 38% respectively. In February 2004 Finance Minister Trevor Manuel announced that a summit would be held to address problems in the construction industry, but so far no date has been set.
From a regional perspective, business owners in Gauteng consider red tape as the greatest constraint (68%), while 54% of business owners in Port Elizabeth and East London, 42% in Durban and 38% in Cape Town find red tape and regulation restrictive to growth.
Internationally, the survey was conducted amongst 6 300 owners of medium sized businesses from 24 countries and 36% of respondents globally identified regulation as the most significant constraint to growth, making it the number one threat to business expansion around the world for the second year running.
Further qualitative research in South Africa has identified that the regulations associated with labour present the greatest obstacle for business owners in South Africa with the completion of documentation being the worst offender. In previous years, government regulations were considered the greatest culprit.
”Business owners are spending an inordinate amount of time completing forms and documents for government and other regulators. Red tape and regulations often result in them spending too much time on administration and not enough managing and directing their business.
Government’s recent pronouncements aimed at reducing red tape appear to be focused more on micro businesses than on small to medium sized enterprises,” said Tony Balshaw, the managing partner of Grant Thornton Eastern Cape.
Internationally, Poland has the greatest proportion of business owners (72%) reporting red tape as a constraint to growth, followed by 58% in the Russian Federation.
Transition to a market-oriented economic structure in these countries appears to have had limited impact so far. However, fears that European Union membership will exacerbate the problem for Poland appear to be unfounded, given that in France and Ireland, the proportion of businesses viewing regulations and red tape as a major constraint are well below the global average. In France, the proportion citing this as major constraint has declined in recent years, reflecting the government’s efforts to improve and simplify administration.
In Singapore, the vast majority of businesses do not perceive regulations and red tape as a problem. Its importance has diminished significantly in the past year, from 48% to 8%.
A meeting in Cape Town at the weekend of the International Investment Council, a body created to promote investment in South Africa, concluded that South Africa was better positioned than ever to capitalise on its economic and social successes to further increase the rate of growth and employment creation.
Members indicated that with faster implementation of South Africa’s policies, six percent growth could be reached well before the government’s target date of 2014.
Some of their suggestions were that remaining barriers to higher growth, such as the skills shortage, some poorly designed regulations; and infrastructure capacity should be addressed speedily. – I-Net Bridge