Early this month, the departments of Trade and Industry and Cooperative Governance and Traditional Affairs jointly launched their Guidelines for Reducing Municipal Red Tape: How Municipalities Can Improve Service Delivery that Supports Small Business.

Developed in cooperation with the South African Local Government Association, these guidelines actually cover small, medium-sized and microenterprises (SMMEs).

Let me refresh your memory. Government acknowledges the importance of SMMEs in the country’s economic growth, realises that only two out of every seven SMMEs survive their first year in business and has said that a 2011/12 study of 12 municipalities across the country established that municipal red tape affected SMMEs. The guidelines are focused on overlaps and duplications in municipal regulations, unnecessary or inflexible regulations, excessive paperwork and reducing procedural encumbrances on SMMEs.

The document defines red tape as “rules, regulations and bureaucratic procedures that are excessively complex and which pose unnecessary delays, inaction and costs that exceed their benefits”. A particular aim is to get municipalities to pay their debts to SMMEs in less than (instead of, as now, more than) 30 days (with the intent being to reduce this to 15 days).

Great news! Except these are only guidelines – recommendations, and so, by definition, not mandatory. Municipalities might simply ignore them, and so they might not bring any benefits for SMMEs at all. Moreover, what about provincial and national red tape? To his credit, then Cooperative Governance and Traditional Affairs Deputy Minister Yunus Carrim – who has since been promoted to Minister of Communications – did acknowledge that SMMEs also suffered from provincial and national red tape. But, oddly, he seemed to blame this on ‘mindsets’ – not the actual regulations. But rules and regulations create mindsets. The quickest way to change mindsets is to change the rules and regulations.

It is noteworthy that Trade and Industry Minister Rob Davies made a point of saying that the guidelines did not amount to deregulation but were aimed at inefficient bureaucracy. As far as I am aware, no one has ever been able to successfully target bureaucratic inefficiencies without some degree of deregulation – after all, deregulation does reduce the burdens on the bureaucracy as well.

But the South African government is, in general, no fan of deregulation. Indeed, the Department of Trade and Industry is developing a new law, currently the Licensing of Businesses Bill, which, if passed in its current form, would require all businesses to register at their local municipality. While big business would have little difficulty in doing this, it would clearly impose a new regulatory burden on SMMEs – the smaller the SMME, the bigger the burden.

However, although all too rare, deregulation is not unknown in this country. Thus the proposal to amend black economic-empowerment legislation to eliminate the requirement for black-owned SMMEs to go through an empowerment verification process that costs between R30 000 and R40 000 and, so, is usually unaffordable for them. This is very good news indeed.

However, the problem is that South Africa exists in the twenty-first century, in an era in which information and communication technology (ICT) has brought tremendous choice and flexibility to ordinary people and businesses alike. It is also an era of globalisation, in which even SMMEs find themselves competing with foreign companies (which can also be SMMEs, empowered by ICT, such as the Internet) in their own home markets.
In this global arena, countries with too much regulation are at a disadvantage in comparison with those that have just the right amount of regulation (because you must have some regulation). Such disadvantage translates out as lower economic growth, higher unemployment and greater poverty.

Meanwhile, a couple of days before the announcement of the new guidelines in South Africa, over in London, the UK government published its draft Deregulation Bill. This aims to cut regulations affecting business, civil society, individuals and, indeed, State agencies and other public bodies. In all, it will amend or repeal 182 different laws.

Regarding business, the Bill will impose a deregulatory ‘growth duty’ on the country’s noneconomic regulators, obliging them to promote growth and halt unnecessary regulation; it will make the apprenticeship system more flexible by eliminating a lot of the prescriptive detail in the current legislation; and it will remove the power of employment tribunal judges to make wide recom- mendations to businesses brought before them. For the self-employed (effectively, microenterprises) in low-risk occupations, health and safety rules will be eliminated. The UK government stated that this would free 800 000 people from these regulations and save them £300 000 a year. Bigger businesses in low-risk activities have already been exempted from health and safety regulations.

Other deregulatory steps for business that the current coalition government in London has already carried out include major simplifications of the registration and payment system for company charges, which have saved businesses more than £21-million. In all, the British government has decided to scrap or reduce 1 900 ‘substantive regulations’. It claims that its campaign against red tape is already saving the country’s businesses £212-million a year. And the Deregulation Bill is not the end of the process. London is doing this in order to make the British economy more competitive and dynamic in an era marked by the rise of energetic emerging economies, particularly in Asia.

The South African government, I fear, has still not fully grasped the realities of the world today and is still in the ‘too much regulation’ camp. And the country is suffering the consequences.