Comprehensive regulatory reforms, including a simplified and coherent national licensing and permitting policy, would help to unlock the potential of South Africa’s small businesses, drive growth and boost employment.
That’s according to analysis by Tidiane Kinda and Nasha Mavee of the International Monetary Fund, who believe that broad-based reforms are essential to improve the business environment.
“Our analysis, based on South African firm-level data as well as cross-country data, revealed that not only are South African business leaders spending significant time dealing with government regulations, but this extra burden has been increasing over time and is among the highest relative to comparable economies.”
The researchers found that firms whose managers devoted more time to regulatory compliance experienced slower sales growth, weaker employment growth and lower productivity.
“For South African firms, these costs are particularly high: a one percentage point increase in management time spent dealing with regulations is associated with a one per cent reduction in job growth. Moreover, for small South African firms with fewer than 20 employees, these regulatory burdens have nearly twice the impact on productivity compared to the average firm.
“These findings indicate that regulatory frictions directly undermine employment creation and especially the ability of small and medium-sized enterprises to scale up and innovate.”
The good news is that there is a lot that policymakers can do to alleviate these constraints on the growth of firms and employment.
“The proposed Business Licensing Bill of 2025 offers an opportunity to modernise the current business licensing system, which is decentralised and leads to inconsistent enforcement, duplicative procedures and misaligned fees across jurisdictions. Establishing a simplified and coherent national licensing and permitting policy could anchor reform efforts around several key principles,” the researchers say.
They also believe that clearly delineating responsibilities across levels of government and adopting a single window or centralised digital platform for licence applications and tracking would reduce duplication, increase transparency and shorten processing times.
“In addition, introducing a public, up-to-date inventory of all required permits and licences would help to deliver a more efficient and predictable licensing and permitting framework, making it easier for businesses to operate and South African firms to thrive, innovate and generate much-needed jobs.”
