Traditionally entrepreneurs, not only in South Africa but everywhere where I have worked have three pet hates. First of all and the most popular of all is of course the tax man. Who do you know who does not have tax issues? Secondly, and especially in SA, off course we have the banks, who increasingly look like they, for some or other reason see small business as a huge threat to their own multi billion profit margins.
Third but not least by a long shot is the issue of red tape, weighing small business owners in all industries, but some more than others, down despite their, already against all odds, existence. Increasingly, when a small business or entrepreneur does succeed, it seems more of a miracle than hard work and clever business acumen. Luckily we as entrepreneurs all have inch thick skin, one track minds and a relentless will to endure and succeed, no matter what the odds. Viva entrepreneurship!!
--------------------------------------------------------------------
Mathabo Le Roux reports from Johannesburg:
SA's entrepreneurs have it pretty easy compared with their peers elsewhere on the continent, according to a recent World Bank report. SA was ranked first among African countries in the annual Doing Business report.
It also made the top 30, scoring especially well in the indices measuring protection of investors and enforcement of contracts.
The country's tax rate compared to the regional average of 71% is a relatively lenient 38% of company profit. The cost of exporting is a modest $850 a container, while the rest of the region pays double that amount on average.
Investors also enjoy a high level of protection in SA, with the extent of disclosure scoring an eight on a scale of zero to 10, compared to the average for the region of 4,4.
The rest of the continent, however, is hardly a good benchmark.
Only eight African countries made the top 100 on the list, yet the continent hogs more than 75% of the bottom 35 positions.
Compared with most other investment climate assessments, the Doing Business report carries much weight with governments. This is because its indicators are specific and objective, as opposed to many other surveys which are based on perceptions.
SA's achievement is therefore quite a feat. But the picture is not necessarily as rosy as it seems, points out independent analyst Reg Rumney.
He says the report does not track variables such as macroeconomic policy, geographic location, quality of infrastructure, currency volatility, investor perceptions or crime rates.
And its indicators measure levels of bureaucratic red tape that are common to all countries. The factors gauged are: employment of people, licensing, property registration, credit funding, investor protection, tax regimes, cross-border trading, enforcing contracts, and the starting and closing of businesses. Unique pieces of legislation are not taken into account and on this front there is a massive responsibility on SA's entrepreneurs in terms of government's broad-based black economic empowerment codes, which seek to advance the transformation of the economy.
While transformation is a political imperative, there is no denying its added burden on businesses, says Rumney.
And SA is yet to see its full impact because the codes are still to be implemented.
If they are implemented effectively, the codes will have a cascading effect on procurement, which means all enterprises operating in the economy -- no matter how small -- will have to have their empowerment credentials verified.
Rumney says the CE of a large listed company recently pointed out that if all of its 900 suppliers had to be assessed, the entire verification process would cost the group more than R1m. Apart from the impracticality of the verification process, commentators have also pointed to the administrative burden that the implementation of the codes will place on companies -- because they are so complex.
They have warned that the administrative burden is likely to be enormous, and would require the dedicated services of professionals with a legal and technical background.
Germien du Plessis, an equity partner at debt and equity specialists Bravura, points out that the amount of information required in terms of preferential procurement, which forms only one component of the empowerment scorecard, is comparable with tax law obligations and comes down to an audit of a company's entire supply chain.
This means an added expenditure for companies which would not add to the bottom line, she says.
"We must realise we are adding another layer of regulation to the economy. We must not shy away from this; there will be a regulatory cost implication," says Rumney.
But it is not only SA's new empowerment legislation that is making life difficult for business.
Vic van Vuuren, CE of business umbrella body Business Unity SA, says that in dealings with foreign investors, empowerment hardly ever comes up. Investors are far more concerned about crime levels, the threat of HIV/AIDS and political stability in the region, especially after recent events in Zimbabwe spread jitters among the investment community.
It is difficult to measure the effect of issues such as crime, disease and corruption, because they are based on perceptions, hence governments easily dismiss such studies as subjective. But Rumney says that when it comes to investment, it is perception that matters.
--------------------------------------------------------------------------------
Copyright © 2006 Business Day.
