[Question] Boosting entrepreneurship in SA - What should government do?

[Chatmaster]

I have a burning issue I would like our knowledgeable forum members to comment on urgently.

What should government do to grow entrepreneurship in South Africa, and this is a matter of urgency for our country?

Why is it a matter of urgency?

• An estimated 80% of young people up to age 24 will NOT have a job next year!
• South Africa, out of 183 countries, ranks #34 in terms of "ease of doing business" but #75 in terms of starting a new business. SOURCE
• South Africa's unemployment rate is published at 25.3%, ranking SA at number 173 out of 199 countries in the world, the reality is however that this "percentage" doesn't reflect the real situation. This figure excludes discouraged job seekers! (Source)
• If the facts are presented correctly. Out of an estimated 32million people falling in the age group of 15-64 only 13 million are employed! READ MORE

This leaves us at the question, what needs to happen? In my opinion the only thing we can do is create a culture of entrepreneurship in South Africa, to address economic growth and unemployment.

As most of you know, starting a business in South Africa is a difficult prospect. Taxes hitting your cash flow, labour laws increasing risk and many more reasons.

So back to my question. What could government do to boost entrepreneurship in South Africa?

[Justloadit]

Scrap the BEE process, as it is not working
Scrap the LRA as it is too rigid and gives the employee far too much power, and reduce the amount of power the Unions have.
Reduce the red tape with all the puny laws that keep on being thrown to the small business.

[Dave A]

I'll support Justloadit's suggestions.

I think the "single registration for taxes" is going to help some, especially if it can streamline filing returns at the same time.

I'm not happy with "new business" subsidies. There have been plenty dished out already for very little return in successful new businesses. What it has produced is a bunch of pirates plundering the public purse - and we've got enough of those already.
It would be far better to have expansion subsidies for businesses that have already proved themselves viable over a minimum of two years already.

And when it comes to driving entrepreneurship - the LRA is probably the greatest enemy of them all. Many a successful entrepreneurial career was kicked off with the words "you're fired!" or because the would-be entrepreneur was desparately unhappy with his/her employment conditions.

With sheltered employment - who wants to run the risk of launching a business?

[Chatmaster]

It is great to have agreement on where the government should go, it seems the poll is also showing the obvious.

The LRA is a more serious issue than I thought it would be, but realistically I cannot see that government would get rid of BEE or the LRA, as their voters and alliances would see this as a hostile action and then this will also dis-empower them to gain financially from their own under the table income streams.

The first idea though seems like something that can be viable. No taxes for entrepreneurs for their first 36 months. But this will off-course require a couple of rules and requirements not to be abused. How would you suggest such a system should be formulated?

[Justloadit]

Hi Roelof, the moment the government dictates how business must take place, is the moment that business can not work. Continuing the way the labour issues is going, will bring the country to it's knees. I think that this will have a far greater impact when the next round of votes comes along. The number of Cosato members can not outvote the unemployed who will be feeling the failure more than anyone else.

[Wander]

I would suggest the subsidies for business expansion for small businesses. Put simply; the governments role in any economy is to redistribute funds to make sure that other small businesses can grow.
I think that if small businesses can submit a business plan to the government, with accurate projections and targets, then should the department deem that business plan to be a good one and the projections to be reasonable and accurate, then they can promise the business a subsidy (for expansion) should they reach the targets or come in reasonable distance of it.

The only problem is that there could be a lot of corruption from this, and with our country's track record, need I say more?

[Dave A]

No taxes for entrepreneurs for their first 36 months. But this will off-course require a couple of rules and requirements not to be abused.

I expect it won't be abused - it'll be raped mercilessly. And I don't see it creating jobs - not in a nett calculation.

Here's what would go wrong:
Launch a start-up, use the tax hole as a competive advantage, huck market share off your competitors who have to pay tax; you add employees while they shed jobs; and then either flog it to those competitors you've had the advantage over or just wind it up at 2 years 11 months...

If you carry on after that, you'll be at a competitive disadvantage to the next new kid on the block, assuming you're even viable anymore now that you have to pay tax.

Between turnover tax and the small business tax breaks there's already quite a lot of scope to make some money as a start-up without being cleaned out by tax.

[wynn]

Subsidise to me means government picking up the tab on the interest part of the HP to buy machinery, plant, tools, equipment etc. not cars.

BEE scrapped on any business that has below say 10 employees and any one man (solopreneur) business irrespective that started after say 2000.

Tax holiday if no subsidy.

LRA, if I have less than 10 employees I must be able to hire or fire them for the first year of their employment (like a trial period) after that if they are still employed they go onto contract under LRA.
When starting up you don't actually know who you need to do what, I may feel that after I have employed a person I actually don't need them to do the work I thought needed doing so I must be able to lay them off without complication.

[Chriss69]

the government is pretty useless I guess they should stop stealing tax money and use it to create jobs. All the money i see getting invested from the government is new ways to take our money. Like the gauteng highway story. That will effect many small businesses. the highway is just as congested. They need to stop taking our most of the money we earn. If I had a job they say after tax and expenses you can get roughly ten percent of your salary if you lucky for yourself.

[IanF]

To me we first need a "moral regeneration" Remember President Zuma was put in charge of this campaign when he was deputy President. My thinking is to teach everyone that wealth creation comes from hard work and clever ideas, not from previously disadvantaged.
Then we need a BUY SOUTH AFRICA campaign that everyone will believe in.
Next sort out corruption and the perception that it is all over SA and everyone gets away with it.
Then sort out the labour legislation where it is easier to fire someone so it will easier to give someone a chance as you know if they don't work out they go with no repercussions.
I would have a serious look at BEE and AA, my naive thinking in the New SA is that we have such growth that companies would nurture talent and this would force everyone to hire best for the job and the demand would be so high that everyone got a chance.
One last one would be to have a red tape hotline where red tape issues are raised and sorted out.

Anyway it will need major shift in policies outlooks? So Chatmaster can you start this at the top?

[mother]

Then we need a BUY SOUTH AFRICA campaign that everyone will believe in.

This is an issue I feel passionately about as well! Last year (2nd year of my business), I looked at getting the "proudly South African" stamp... Do you know how much that costs?!?! How can any new & small business afford it?

There should be a government drive behind putting new SA small businesses on the map. I haven't given it enough thought to have a clear picture in my mind of what we need, but I imagine it would start with some kind of organisation/body that new businesses can belong to. The purpose of this organisation is SUPPORT. This support would include mentorship where needed (one-on-one or in the form of seminars) and helping to promote new businesses (perhaps in the form of expo's - expenses can be covered by entrance fees / sponsors). Membership and interaction with other entrepreneurs will also eliminate that feeling of isolation, as it will provide a network, where ideas/concerns/questions can be shared (that's one of the main reasons I joined this forum).

[IanF]

This is an issue I feel passionately about as well! Last year (2nd year of my business), I looked at getting the "proudly South African" stamp... Do you know how much that costs?!?! How can any new & small business afford it?

Mother, we seem to be good at creating unnecessary bureaucracy in SA, (I can't believe the industry behind BEE certificates) Maybe we should draw attention to the SA value add in our products and services. The check and balance will be when someone calls us on this.