JOHANNESBURG, SOUTH AFRICA
IN his State of the Nation Address (SONA) last week, South Africa’s President Cyril Ramaphosa said, “There are too many regulations in this country that are unduly complicated, costly and difficult to comply with. This prevents companies from growing and creating jobs.”
These remarks, and the remarks that the private sector is the job creator and not the government, were the President’s most popular remarks from the SONA.
Ramaphosa announced that he had appointed Sipho Nkosi, one of the country’s respected, experienced businessmen and former CEO of Exxaro Resources to lead the Presidency’s team, tasked with cutting regulations in South Africa’s economy.
As I echoed in my post-SONA column, Ramaphosa’s comments on the economy were sensible. He said things that he should have said and stressed in his first SONA as President of South Africa back in February 2018. This is how he should have started his presidency.
However, I must stress that what matters are action and implementation, not talk. South Africans know very well that the government has been terrible when it comes to implementation over the years.
That Ramaphosa plans to tackle regulations in the economy is encouraging. We are witnessing and living in an economy that is depressed. Excessive regulations are a contributor to this depression.
Government regulations are costly to businesses, as the President said. The cost of compliance with the regulations slows down business growth. The consequences of this is destruction of jobs and job opportunities. In a country with the highest unemployment rate in the major emerging markets, regulations must be removed as soon as possible to help boost growth.
When I was on a webinar last week, organized by North West Business School, Piet Croucamp asked me what the red tape is that harms business in South Africa. It was an easy question to answer.
The black economic empowerment (BEE) regulations are at the top. The procurement process governed by BEE regulations can be long and costly for many businesses. The BEE regulations need to be relaxed to encourage business productivity.
In an article published by FA News last October, Gareth Stokes, a communication and content specialist, wrote that “Firms in the financial services sector face a raft of regulations over and above the standard set of business rules and regulations. They operate in a sector governed by 15 acts and accompanying regulations and standards, all overseen by the Financial Sector Conduct Authority (FSCA). These laws are in addition to the country’s complex competition, data protection, labour and tax laws.”.
Stokes also points to, as an example, the irrational driver’s license requirements – for example the “renew your drivers’ license card every five years” “experiment”. This irrational regulatory requirement is costly for private citizens – and obviously costly for business too – partly because of “bureaucratic ineptitude” – Stokes wrote.
My personal experience was when I had left one radio station and was looking for a new job a few years ago. The station that would have hired me could not because of ICASA’s program scheduling regulations – the regulations that were senseless and that I will not waste time detailing here. Because of these ICASA regulations, I could not get the job. It was a lost opportunity for me – and a lost opportunity for the radio station too.
And many other regulations that complicate business and government operations in the country. If these regulations are all removed on a massive scale, our economy will take off in a few years.
I do not advocate, and have not advocated for a society with zero regulations. All I want is minimal regulation that will enforce contracts and strengthen law and order. It must be regulation for the benefit of the people, not for political motives as we often see in the country.
Our excessive regulations have increased labor costs in the economy. South Africa’s labor costs are the highest in the developing world. As far back as 2010, the World Bank fingered South Africa’s high labour costs as a deterrent to investment.
Because of these regulations, our country lacks competitiveness, as shown in the IMD World Competitiveness Index. In the 2021 list of 64 countries, South Africa was placed at 62nd, a decline from the previous year. We also score low in the World Economic Forum Global Competitiveness.
Many South Africans wrongly think that more government regulation is in the interest of the country. And politicians love passing laws – they believe their major responsibility in our society is to pass laws. Very wrong! Their mission ought to be to keep regulations as minimal as possible – to remove all regulations that impede growth.
Sipho Nkosi will face many challenges, including the inefficient, lackluster government bureaucracy he will have to deal with. Judging by his resume, he’s a capable man who has enormous experience. I hope his wisdom translates into real, significant reduction in South Africa’s excessive regulations.
We are fortunate that our nation still has leaders of Nkosi’s calibre. I wish him success – and hope that he will be effective in his role. PM
First published on Politicsweb.co.za
© PHUMLANI M. MAJOZI