Red tape causes failure to launch business


Cape Town – A start-up owner said his business has failed to get off the ground due to the stranglehold of bureaucratic and regulatory requirements.

Fin24 user Nmbude said starting a business “has been a nightmare”.

“There is too much bureaucracy and too many regulations. I registered my business in July 2013, but to date it has generated zero income. I had to register it for this and that organisation or association to be compliant.

“But that does not guarantee that I will get business. As fees for these associations are steep, I had to ask some government agencies like Seda to assist, but I had to go through too much paperwork.
“One thing that I do not understand if a business is black owned, which I can prove through registration papers and identify documents of directors, is why do I still need to go through a BEE agency to issue me a BEE certificate, which costs me money?”

Fin24 expert Catherine Wijnberg responds:

“Oh how I understand your frustration!

“As an owner of a business myself, I still get frustrated and at times downhearted at the amount of paperwork and regulatory barriers that we face. But that is the reality of South Africa at the moment and so it’s no point complaining – as a business owner we just have to do whatever needs to be done to succeed!

“In fact the sign of a successful businessperson is that they never take no as an answer and will succeed no matter how many barriers are put in front of them.

“So let’s focus on your business. What is it? Who are your customers and what are you selling? How can you get to be in business ‘no matter what challenges face you?’ What other solutions can you come up with to succeed in the meanwhile?

“And lastly, as a start-up black-owned business, you automatically qualify for a level 1 BEE certificate, which you should be able to get from any verification agency for less than R750."

Fin24 Anton Ressel responds:

“I feel your pain.

“In spite of our new SME ministry and the general rhetoric, the fact is that South Africa remains amongst the most challenging places in the world to start a small business.

“That said, as you have not indicated which sector you operate in, it is difficult to advise as to the legislative and compliance requirements - every industry is different and some are indeed heavily regulated, such as mining, food and energy for example.

“My advice when starting out, is to ensure minimum compliance, but do not drown yourself by registering for every association out there - your priority from day one is to start building your business, and this means two things initially - marketing and sales.

“In terms of BEE, sadly abuse of the codes has led to stricter verification requirements and this does cost money. That said, it pays to have it done properly as a good BEE verification agency will not only verify your current level, but also advise as to how you can strengthen your credentials to get the best rating possible.

“Have a look at Catalyst Mag and you will find some useful tips and resources to get you on the path to success.”

* What tips do you have to help business owners caught in this rut? Share them now.

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