NEW BILL WILL CHOKE SMALL BUSINESSES IN RED TAPE

Business Report June 2013

Business Report
June 2013
Jonathan Yudelowitz

The National Development Plan recognises that small and medium-sized enterprises (SMEs) create more jobs than large corporates and are key to addressing unemployment and to South Africa’s future. At the same time the government has “muddied the waters” by punting the Licensing of Businesses Bill, which will choke SMEs in red tape.

The bill seeks to ensure all businesses pay tax and operate within the boundaries of the law, even though existing regulations, which they are either unable or unwilling to enforce, replicate these aims.
Small business success depends on the freedom to act and decide for oneself: to seize opportunities, take chances, exercise good judgement, take responsibility for consequences and, most importantly, resilience in the face of setbacks or failure.

Although the bill is destined for redrafting, the fact that it seeks to regulate instead of enable small business shows how little the government appreciates the dynamics of small business. The taxi industry is a fine example of entrepreneurs’ achievements and their mistrust of the state is telling. The government has done little to encourage them or acknowledge the significance of their self-earned success The implementation of BEE policy has disregarded entrepreneurialism and incentivised political allegiance and networks. Instead of building skills and confidence in their own abilities among black business people, BEE has commoditised black economic participation and leadership, insisting that one previously disadvantaged person is as good as another; discounting quality as a factor.

Production and results are chief priorities for an entrepreneur. Members of the government or corporate bureaucracies are often more concerned with their status and power than they are with these business fundamentals. Significantly, the government tries to solve problems in mining, agriculture and textile industries through dialogue with big business and big labour; resulting in labour and commercial legislation highly favourable to big business. Moreover, how can the SA Chamber of Commerce and Industry represent entrepreneurs, who are by their nature self-interested and who should avoid attending endless talk shops? Many of the participants in these forums have little concept of what is required to start and run a small business.

Although cash flow is vital for small businesses, despite promises, the state cannot even guarantee its SME service providers something as basic as prompt payment. Rather than respecting the fundamental needs of its suppliers, the state and the state-owned enterprises mire themselves in a mess of their own making by tangling themselves in a web of red tape and buying fancy payment systems, which their own officials are unable to operate. Cosatu is disintegrating, a natural and inevitable consequence of its inability to adapt to how South Africa’s labour market has opened up and the changes that have occurred in the world economy over the past two decades.

Despite the opportunity for exercising real economic leadership, slaughtering the “holy cows” stemming from its struggle debts and acting in the interest of South Africa, the ANC and the government have continued to intervene to patch up recent internal quarrels among Cosatu’s leadership and between its affiliates.

The government’s support of Cosatu makes it difficult for the rival Association of Mine Workers and Construction Union to trust the state and its institutions to be an “honest broker” and champion of a fair process, even though this should be its primary economic goal. This lack of neutrality is causing economic instability and loss of investor confidence in South Africa.

Moreover, if the government showed nerve in dealing with Cosatu and encouraged new trade unions to grow and represent real worker interests fairly; if it embraced the entrepreneurial potential of citizens, implemented a form of socio-economic transformation that rewarded merit and business acumen; if it encouraged economic discipline; trusted instead of tried to control enterprising individuals; if it appreciated calculated risk taking and the energy, time and money it takes to build small businesses, then we would have a productive economy.