On 29 November 2022 the Free Market Foundation (FMF) presented the small and medium-sized enterprises (SME) study titled, The Case for Economic Deregulation and Decentralisation. The study was undertaken and presented by Dr Christoph Klein, who has a PhD in Economics and is the Managing Director of consulting firm dotadvisors. The study provides evidence of the regulatory problems faced by small businesses.
When regulations and red tape overwhelm small businesses, the entire economy suffers. When regulations are eased, the entire economy benefits.
The SME definition masks the real nature of many businesses. What are called large corporations, like banks for instance, are usually a giant umbrella for hundreds of small businesses. Your local bank branch probably does not employ more than 100 people. Supermarkets are merely a collection of local stores, bundled together for purposes of increasing purchasing power. A McDonald’s franchisee is legally an owner of a small businesses.
Klein’s study notes that over-regulation is harmful to small business, but so too is a lack of financial autonomy, mismanagement and corruption at municipal level. Any study of regulatory impact must consider those factors crucial to the running of any business namely, water, electricity, sewage and telecommunication infrastructure.
The study suggests that the best way to achieve high economic growth for SMEs is to allow people, entrepreneurs, to take matters into their own hands and define their destiny without state intervention.
Dr Christoph Klein said: “Economic damage caused by red tape reverberates through the entire economic system and everybody suffers.”
The study concludes that the recommendations contained in the Laws Affecting Small Business booklets, are the perfect solution to the problem of red tape which inhibits growth in the SME space in South Africa.
Small businesses are the engine of the South African economy, and therefore the legislative instruments governing them are integral to creating an environment of growth and job-creation. When private citizens serve private citizens without escape mechanisms such as government bailouts and grant funding, a culture of true accountability can grow.
