By Alistair Anderson (Business Day)
Executive summary (SAIT Technical)
Regulations and taxation are making it difficult for small businesses to survive. The cost of compliance with legislation and regulations are a burden to small businesses that includes compliance with the Consumer Protection Act and labour laws.
ONEROUS regulations and a high tax burden are making it extremely difficult for small businesses to survive, according to findings by the Monitor Group, a consulting firm.
South African markets are dominated by monopolistic companies, the company said on Monday. But the biggest gripe for small businesses was the cost of compliance with legislation and regulations.
A survey of South African companies found that the average big business spent 0.2% of its annual turnover on compliance costs. In contrast, small business spent 8.3% of annual turnover on compliance.
"The burden on small companies is excessive. The current amendments to South Africa’s labour legislation lack any special clauses for small businesses,” said Tebogo Skwambane, MD at the Monitor Group.
One entrepreneur said an example of onerous regulation was the Consumer Protection Act (CPA). "The CPA is restrictive. All my products need a chemical analysis, which is costly for me but for big business, it is a drop in the ocean”.
An industry in which small business could be headed for hard times from next year is the automotive industry. This is because the automotive production and development programme (APDP) will allow vehicle manufacturers with a plant volume of at least 50,000 units a year, to import a percentage of their components duty free.
But while large manufacturers like Volkswagen would meet this target, small component manufacturers could be marginalised.
Ricardo Rosa, a representative of Chinese vehicle manufacturer Great Wall Motors, in September criticised the APDP, saying not enough was being done to help new manufacturers enter South Africa. "We have not seen a new entrant in the industry in decades. Very little is being done to allow new blood into South Africa, who can compete and grow the industry quicker and to a larger extent than APDP could try to,” he said.
The Monitor Group said on Monday results of its surveys conducted across more than 20 countries showed that South Africa scored below its peer group which included India, Singapore, the US, the United Arab Emirates, South Korea, Colombia, Jordan and Chile.
But the sophistication of its financial markets was a positive.