“Every decision needn’t be a ‘big bang’ reform but a signal of proactive decision-making and removal of red tape and bureaucracy.”
That quote by Anand Mahindra, founder of the Indian multinational conglomerate, Mahindra Group, resonates with the dual nature of the policy challenges we have long faced in South Africa. While the country is tackling top-level “big bang reforms” where it’s necessary to remove blockages to economic activity and ensure more efficient markets, a bottom-up reform process is also crucial.
For small businesses, the Covid-stricken low-growth environment is difficult enough to cope with. In South Africa unfortunately, small businesses are also burdened with having to comply with many laws and regulations then they also have to deal with inefficient local government officials and structures to navigate the bureaucracy. We need some sort of administrative approval for just about any entrepreneurial endeavour, be it for starting up a new business or attempting to expand – or simply to carry on going in the case of licence or permit renewals.
Certainly, red tape is also more than a nuisance for big businesses and impairs their ability to operate efficiently. However, for small businesses the economic cost of time and resources committed to compliance can have a crippling effect.
To enable small businesses to operate efficiently, we need to fix our municipalities so that applications for permits, licences, building extensions, certificates and other administrative approvals – indeed all bureaucratic requirements – are processed instantly. This is what municipal services are there for and with the right people in the right posts, there is no reason why this should not happen. Yet we are so far removed from such a situation precisely because people who are not suitably qualified are appointed to most posts. President Cyril Ramaphosa conceded as much in his March 1 letter to the public: “All too often, people have been hired into and promoted to key positions for which they are neither suitable nor qualified. This affects government performance, but also contributes to nepotism, political interference in the work of departments, lack of accountability, mismanagement and corruption.”
The consequence of this: only 27 of our municipalities received a clean bill of health from the auditor-general’s office in its 2019/20 report – which is 10 less than the 2018/19 municipal audit. There was also R26bn in irregular expenditure.
The capacity of the state has long been highlighted as one of the key risks to the investment outlook for the country. Whatever the result of local government elections, I urge all participants to depoliticise and build a more capable and efficient state. It’s only through a capable, efficient, ethical and less corrupt public service that we can claw ourselves out of the great many crises we face.
President Ramaphosa has committed himself to staffing the public service with people “who are professional, skilled, selfless and honest” and has launched the rejuvenation process through the draft National Implementation Framework towards the Professionalisation of the Public Service in the works. It is an important document and we hope the government remains committed to its effective implementation.
Complementing that process, we need to reduce red tape. Some degree of red tape is of course necessary to protect consumers and ensure orderly commercial activity – but South Africa can do better. The World Bank has suspended its ease of doing business rankings due to data irregularities but SA was never competitive, ranking 84th in the 2020 report. Rwanda was 38th.
Government is well aware of this problem and in 2013 the Department of Trade and Industry announced a set of Guidelines for the Reduction of Municipal Red Tape, and in 2016 published the Red Tape Impact Assessment Bill, but these have disappeared. The DA has since introduced similar legislation.
We need our lawmakers to examine every business regulation that requires compliance of one sort or another. They must assess all aspects of it. What are the benefits? Do these outweigh the compliance costs in terms of time and fees? Do we need the regulation? If yes, can compliance be made easier? Finally, every piece of business legislation should be examined to determine whether small businesses can be excluded from needing to comply.
Such a rigorous exercise will be extremely rewarding in that small businesses will be able to operate more efficiently, increase profits and expand – so will hire more people. That’s the bottom line that should drive all policy, from the top levels of national government to the bottom tiers of local government.
This column is by Busi Mavuso and first appeared in fin24.
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