CUTTING THE RED TAPE TO SMALL BUSINESS

Small business development in South Africa is hampered by Government red-tape.

According to the World Bank's 2007 "Doing Business" survey, South Africa now ranks 57th out of the 175 countries surveyed for ease of starting a new business - eight positions lower than the 49th position it achieved in 2005 and only one position higher than Rwanda, a country that trails South Africa's level of development by some distance.

Problems include the high cost, complexity and amount of time it takes to deal with red-tape associated with starting a small business in South Africa. There are, for example, nine different and complex procedures an entrepreneur is forced to comply with before he can start a business in South Africa. This is confirmed by other authoritative surveys on the topic, such as the one published by the Small Business Partnership in 2005.

The Democratic Alliance believes that the role of small business should be the following:

• To grow the economy
• to integrate the so-called "first" and "second" economies; and,
• to solve the unemployment problem.

If this is to happen, we need easy and fair regulatory access for potential small business owners from the unemployed sector, as well for those from the informal trading sector. This, in turn, means that dealing with the regulatory requirements of starting a small business cannot to be too expensive or too complex for the unemployed and informal traders to comply with.

To solve this problem, the DA believes that Government should introduce an integrated data-capturing system for all the regulatory applications that need to be made by people wishing to start a small business. Such a system should be run through a One-Stop Shop for Small Business Development as recently proposed by the Democratic Alliance.

The DA has put together seven steps that Government need to implement in order to streamline procedures and make starting a business in South Africa easier. The steps, along with a more detailed description of the problems, are set out in the document that accompanies this statement, but briefly they are:

STEP 1: Create a single regulatory access / application point at One-Stop Shops for Small Business Development.

This will ensure that when a potential entrepreneur wants to do all the regulatory applications he needed to do, all that would be necessary for him or her to do would be to enter the One-Stop Shop.

STEP 2: Target a reduction in the number of red-tape procedures for prospective entrepreneurs from nine to two.

With the single access point at the One-Stop Shop in place, the only procedures that would need to be done by the potential entrepreneur would be one centralised application for compliance with all the necessary regulatory requirements from South African Revenue Service (SARS), the Department of Trade and Industry, the Department of Labour and local government.

STEP 3: Centralisation of captured application information receipts and application information distribution within each department.

This simply means that when information from an applicant reaches a department, there should be a central point at which applications are received and sent out to the necessary registration offices. In the case of SARS this would include Value-Added Tax, Income Tax and for Employee Withholding Tax. This would make any further intervention by the applicant unnecessary.

STEP 4: Eliminate the duplication of application requirements and information submission across all relevant departments and entities.

This would require the Departments of Trade and Industry and Labour, SARS and Local Government to come together to create a single template for the capturing of application information. In this manner, an applicant would only need to complete one form that would provide for all the necessary information needed by all the different departments.

STEP 5: Reduce the costs of starting a small business from an average of 6.8% of per capita GNI to 1.1%.

This would require that the costs associated with the lodging of documents with CIPRO to be drastically reduced to an average of R327 per application, thus placing South Africa in the top ten countries in terms of ease of starting a business. It would make the starting of a small business a much more reasonable prospect for the poor.

STEP 6: Target a five-day time limit for the finalisation of small business start-up procedures.

STEP 7: Create a web-based portal to cater for simultaneous submissions of administrative and regulatory-related applications and information.

The creation of such a portal would make it possible for consultants at the One-Stop Shop to enter application on behalf of applicants, or for computer literate applicants to enter their applications themselves. Once entered into the system, the necessary information could then appear instantaneously on the information systems of the necessary Government departments.

Mozambique has recently announced its intention of positioning itself in the top ten in Southern Africa with respect to the ease with which entrepreneurs would be able to so business there. There is no reason why South Africa could not be in the top ten internationally. If the ANC Government implemented systems such as outlined by the DA's seven steps in to make starting a small business easier, South Africa would already be well on its way.

Download supporting documents (Streamling The DTI - Clearing The Red Tape.doc)