As we have seen with so many educated and professional people leaving South Africa for foreign shores in the last decade, chances are that small business owners and entrepreneurs will follow suit. With small business already straining under the burden of red tape, the hostile relationships with SA banks and severe skill shortages, many are now seeing increasing BEE demands as the last straw. Why put up with all these obstacles if it is already a huge challenges if other countries are more welcoming:

Mathabo Le Roux from Johannesburg

THE cost of government's empowerment policies and rigid labour laws could drive manufacturers to move their operations to other countries, including neighboring, landlocked Lesotho.

Michael Pimstein, the president of the Steel and Engineering Industries Federation of SA (Seifsa), recently warned that the cost of compliance with empowerment requirements was onerous on the manufacturing industry, already reeling under cheap imports, a volatile exchange rate, rigid labour laws and a skills shortage.

But while government has acknowledged the need to develop small businesses -- particularly in downstream industries -- it is piling additional requirements on companies, making the cost of doing business in SA prohibitive.

An internal study undertaken by one of Seifsa's members concluded that the cost of compliance with government's black economic empowerment codes would be 14% of earnings.

However, neighboring countries such as Lesotho present an attractive alternative to companies that want to expand capacity or relocate altogether, with a more tolerant labour market and lenient tax regime.

Circuit Breaker Industries (CBI), a major manufacturer of electrical distribution and protection components for low-voltage electrical distribution systems, with operations in Kempton Park and Puthaditjhaba in QuaQua, last year opted to expand its operations to Lesotho.

With the company having to compete with manufacturers in Mexico and China, a drive to remain competitive and a more favourable wage environment were the prime reasons for the company's decision, says CBI CE Helmuth Fischer.

Many companies in the manufacturing industry that struggle to compete, eventually simply give up, relinquish production and start importing products.

According to Fischer only seven or eight companies in the industry imported products during the early '90s. Now as many as 24 companies are importing.

As a large-scale manufacturer, CBI has massive capacity to employ people -- in line with the kind of downstream industry government's new industrial policy wants to advance to alleviate endemic joblessness in the country.

However, the policies government is pursuing are ostensibly contradicted by the legislative regimes it enforces.

Government's aims may be admirable, but the costs are prohibitive," says Michael McDonald, an economist with Seifsa.

Fischer says he would not be a good businessman if he did not consider the options available. The company could cut costs even more drastically if it relocated all its operations to Lesotho and opened a sales office in SA.

McDonald urged government to carry out impact studies before implementing new legislation.


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