IMF urges South Africa to simplify business regulations for job creation and economic growth

South Africa’s slow growth and high unemployment could be eased if the government makes it easier to start and run businesses.

This is according to the International Monetary Fund (IMF), which said that currently, the country’s complex and fragmented licensing and regulatory system was holding back small and medium-sized businesses, slowing investment, and limiting job creation.

According to the IMF, while South Africa's economy remained resilient in 2025, growth is still too low to significantly reduce unemployment.

"To fully unlock South Africa’s growth potential, stimulate private investment, and boost employment, additional broad-based reforms are essential to further improve the business environment," the IMF said.

"Indeed, operating a business in South Africa—especially dealing with product-market regulations such as required licensing and permitting—is significantly more burdensome, fragmented, and costly than in peer economies".

The IMF said, "these constraints deter investment and stifle innovation, and they are especially challenging for small-and medium-sized enterprises".

"Not only are South African business leaders spending significant time dealing with government regulations, but this extra burden has been increasing over time and is among the highest relative to comparable economies".

The IMF called on South Africa to establish a simplified and coherent national licensing and permitting policy.

"There is a lot that policymakers can do to alleviate these constraints on the growth of firms and employment. The proposed Business Licensing Bill of 2025 offers an opportunity to modernise the current business licensing system, which is decentralised and leads to inconsistent enforcement, duplicative procedures, and misaligned fees across jurisdictions.

According to the fund, establishing a simplified and coherent national licensing and permitting policy could anchor reform efforts around several key principles:

1. Streamlined digital platform: A single, centralised system to reduce duplication, increase transparency, and speed up processing.
2. Capacity building: Strengthen municipal administration through training, digital tools, and better coordination.
3. Support for micro and informal firms: Simplified licensing, digital onboarding, and easier access to trading spaces to encourage entrepreneurship.
4. Risk-based licensing: Tailor requirements to business risk, allowing low-risk activities to operate with minimal regulatory burden.
5. Predictability: Maintain a public, up-to-date inventory of all permits and licenses.

"Moving forward with these actions to deliver a more efficient and predictable licensing and permitting framework, together with other reforms making it easier for businesses to operate, are essential for South African firms to thrive".

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