Red tape is the biggest tax on South Africa’s small businesses

Jane Sithole 

South Africa speaks often about supporting small businesses. We speak about funding, incubation, market access, township economies, youth entrepreneurship and job creation. All of these matter. But we often avoid the most painful truth: for many small businesses, the biggest burden is not only lack of finance. It is the cost of dealing with government.

Red tape has become the hidden tax on South Africa’s entrepreneurs.

It is paid not only in money, but in time, uncertainty, lost opportunities, delayed openings, failed applications, duplicated paperwork and endless visits to municipal offices. It is paid by the spaza shop owner who cannot get clarity on a trading permit. It is paid by the small manufacturer waiting months for land-use approval. It is paid by the restaurant owner who must comply with multiple overlapping requirements before opening their doors. It is paid by the informal trader who wants to become formal, but finds the process too confusing, too slow and too expensive.

For large companies, bureaucracy is frustrating. For small businesses, it can be fatal.

Every day that a permit is delayed is a day without income. Every unnecessary form is time taken away from customers. Every unclear by-law creates fear and uncertainty. Every late government payment can mean unpaid staff, missed rent, or a business closing its doors.

This is why South Africa must stop treating red tape as an administrative inconvenience. It is an economic crisis.

Small businesses are expected to create jobs, absorb young people into the economy and drive local development. Yet many are forced to spend more energy navigating government systems than growing their businesses. We cannot demand that entrepreneurs create employment while government itself remains one of the biggest obstacles in their way.

The problem is not that regulation is unnecessary. Every economy needs rules. Health, safety, consumer protection, zoning and fair competition matter. But regulation must be clear, reasonable, predictable and efficient. When compliance becomes more complicated than running the business itself, the system has failed.

South Africa does not need more layers of bureaucracy. It needs a serious red tape reduction agenda.

First, ease of doing business must become a performance target for every municipality and government agency that interacts with small businesses. Municipal managers and officials should be measured on turnaround times for business licences, trading permits, rezoning, land-use approvals, complaints resolution and supplier payments.

Second, these turnaround times must be made public. A municipal red tape scorecard would allow citizens, businesses and policymakers to see which municipalities are helping businesses grow and which are holding them back. What gets measured gets managed. What gets published gets taken seriously.

Third, government must establish a National Red Tape Portal where small businesses can report delays, duplication, unreasonable requirements and non-payment. Entrepreneurs should not be forced to suffer silently when systems fail them.

Fourth, the 30-day payment rule must be enforced across all spheres of government. It is unacceptable for the state to speak about supporting small businesses while failing to pay them on time for work already done. Late payment by government is not a minor administrative issue; it is a direct threat to business survival.

Finally, South Africa should consider a dedicated Red Tape Reduction Act. Such legislation would require government departments and municipalities to assess the impact of regulations on small businesses before imposing new requirements. It would force the state to ask a simple question: does this rule protect the public interest, or does it merely make it harder to do business?

The success of small businesses cannot depend only on entrepreneurs being resilient. Resilience is important, but it cannot compensate for broken systems. No entrepreneur should need political connections, endless patience, or repeated visits to government offices simply to start or expand a lawful business.

If South Africa is serious about economic growth, then cutting red tape is not a favour to small businesses. It is an economic imperative.

The easiest job to create is often the one government stops blocking. The fastest investment to unlock is often the one stuck behind a counter, a form, or an approval that should have been processed months ago.

Small businesses do not ask government to do everything for them. Many simply ask government to stop standing in their way.

If we want entrepreneurs to build, employ and grow, then the state must become an enabler, not an obstacle. Red tape is the biggest tax on South Africa’s small businesses, and it is a tax we can no longer afford.

* Jane Sithole is the Deputy Minister for Small Business Development. 

** The views expressed do not necessarily reflect the views of IOL or Independent Media.

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