The government needs to remove the red tape that stands in the way of SMEs for the simple reason that we are facing a global recession that could affect the South African economy. Therefore, we must strengthen our economy from within and SMEs will play a critical role as the country navigates these uncertain times.
The World Bank’s latest projections show that per capita income growth in emerging markets and developing economies will average 2.8% over the next two years, a full percentage point lower than the 2010-2019 average.
“The untapped potential of SMEs in the country is amazing, but the red tape attached to them is even more amazing. In South Africa, we will not stand for our national team to play with our hands tied behind our backs. Instead, we allow millions of SMEs to be held back to reach their potential because of all the red tape,” said Alan Shannon, executive for small business and private client services.
“The volume of compliance with laws, regulations, policies, licenses and permits that business owners have to deal with can easily add up to many days of compliance work each year, time that could be spent building their business.”
Also read: The power of the President’s Red Tape Reduction task force is limited by red tape
SMEs can’t afford lawyers to help with red tape
Shannon says that while larger businesses can hire an army of compliance officers and lawyers to jump in, SMEs can’t because they can’t afford it and so the current process needs an urgent review.
According to the World Trade Report, SMEs in economies such as South Africa account for 60% of gross domestic product (GDP) and 70% of employment. “While SMEs employ the majority of South Africans, every effort must be made to remove the barriers that hinder their development. Unemployment, poverty and the impact of the global recession can only be reduced with the active support of small business owners.
Shannon said SMEs drive economic growth by providing goods and services to consumers and businesses, thereby increasing the flow of money in the value chain. “These businesses play an important role in innovation, which leads to new products, services and processes that drive economic prosperity.”
The obstacles to self-sustainable green energy providers are a remarkable example of a clear opportunity, Shannon said. “A step in the right direction is the announcement in the recent State of The Nation Address (SONA) about the intention of the National Treasury to work on the adjustment of the reverse loan scheme to help small businesses invest in solar equipment and allow banks and development-focused financial institutions to lend directly from the scheme to facilitate the leasing of solar panels.
Decisions and announcements about regulatory restrictions and even burdens should be watched more carefully than before, because they will encourage or discourage new entrepreneurs and investors, Shannon said.
Also read: Ease the burden: Time to clarify the reverse loan scheme for small businesses
Making business easier
“Collectively, we have an interest in new players entering the market and making doing business easier. In essence, SMEs help diversify the South African economy by offering a variety of goods and services, reducing the country’s dependence on a few large industries and creating a foundation that more resistant to economic success.
He quoted the CEO of the Small Business Institute, John Dludlu, as saying: “Take away the red tape. These SMEs are the rock stars of our economy. We should be treated as such.
SMEs are also an important pathway to entrepreneurship, providing opportunities for self-employed South Africans to start and grow their own businesses. According to Shannon, this leads to a more dynamic and competitive country, resulting in greater efficiency and productivity.
“However, the government and the private sector have an additional role by providing access to financing to accelerate the success of companies and create jobs. One of the main reasons given by Nedbank Small Business Services clients when applying for financing, is the need to maintain staff in a challenging economy or purchase equipment important from generators to vehicles.
He said it was a legitimate business imperative that weighed heavily on the minds of business owners. Taking the time to fill out countless complicated forms cannot be a priority for one day.
“To support SMEs and help them reach their maximum potential, the government and the private sector must work together to provide resources and remove barriers. This should include financial support, access to mentoring and training programs and the reduction of regulatory barriers that limit SME growth.
Also read: Here’s what small business investors want to hear
Good news about red tape
Shannon said the ray of light in SONA 2023 was the president’s reaffirmed commitment to the Red Tape Reduction Team, which is working with various departments to find simpler ways to do business.
Amendments to the Business Act to reduce regulatory barriers for SMEs and cooperatives to make it easier for entrepreneurs to start a business, will be finalized this year. “The vision of the National Development Plan is for SMEs to provide 90% of employment in South Africa by 2030 and therefore we must provide an easy and empowering path for thousands of entrepreneurs and new businesses to enter the market.”
South Africa can benefit from more dynamic, innovative and competitive businesses by providing a supportive environment. And when we remove the red tape, we can get the economy back in the black.