In my day job, I spend most of my time dealing with the administration of compliance.
Not because I want to, of course – I’d much prefer to be “ideas guy” with all the big-picture-plans and the big-shot-schmoozing.
But it seems that my OCD is more valued than my thoughts. And admittedly, I have myself to blame – I am not patient about watching something come to nothing because it gets stuck with someone who can’t bear the thought of actually going to the bank right now and sorting out the fine-print. So on any given day, I get to be “ideas guy” for about 10 minutes before I turn into “details guy” for the next three weeks.
I bring this up because it demonstrates that South Africa has a deep and institutionalized hatred of business.
Businesses are treated as though they are wage-gouging, money-laundering, tax-evading, mass-firing, credit-mongering, deeply-racist and generally-all-out-evil bad guys. And those bitches needs to be regulated.
Curiously, regulators seem to feel that most of this can be fixed by regularly requiring one to prove one’s address.
Which is deeply mysterious to me. I mean – what exactly does proving a physical address assist with? Finding you when you’ve done evil? Because evil-doers are not known for getting the hell out of Dodge?
The trouble is – it costs a lot of time and money to be constantly trying to show that you’re not wage-gouging, money-laundering, tax-evading, mass-firing, credit-mongering, deeply-racist or a generally-all-out-evil bad guy.
And to be honest, the compliance burden is only really sustainable if you’re a Big Institution that became Big by being all those naughty things back when times were good and life was easy.
So who does this really affect?
The SMMEs and entrepreneurs and so on. Who are forced to spend much of their time and money on being compliant when really, they should be focusing on trying to get off the ground.
Despite the fact that small businesses are responsible for:
- 34% of South Africa’s GDP;
- 60% of employment; and
- 80% of all new jobs created.
So here’s an angry letter about it:
Dear South Africa
The craziness must stop.
Do you know how hard it is to set up a new business for a first-timer venturing out of the world of formalised employment?
Oh – I’m not talking about the things that you’re thinking of. All the stress and anxiety and lack of funding. That – that is the easy part.
I’m talking about the practical stuff. I have a list:
1. The Banks
4. Other Businesses
How the banks hate you
The minute you’re an entrepreneur: farewell new credit cards; farewell car financing; farewell mortgages. You’re on your own, because you’re a credit risk.
Of course, if you hire someone to work for you – they will be able to apply for credit cards and car financing and mortgages off the salary slip that you give them each month. But you won’t.
You’re a credit risk.
How hard it is to pay tax
The minute you step out, you become liable for tax in all kinds of new ways. If you decide to operate as a sole proprietor, then you’re immediately super-suspicious to the SARS efiling system. Your annual return? It’s always flagged for audit. Always.
So you’re forced to start furiously bookkeeping. Or you have to hire a bookkeeper. And more likely than not, you’re going to have to get someone to do your tax for you.
Costing you time. Costing you money.
And don’t get me started on VAT
To register for VAT, you need to prove that you’ll have more than R50,000 in turnover each year. And it takes you at least 21 days to be approved from the day that SARS finally agrees that you’re eligible to register (they’re concerned about VAT fraud, so the onus is firmly on you to demonstrate that you’re not trying to defraud SARS by being a small business that needs its VAT to be refunded).
What this means: your operating costs are 14% higher than a VAT-registered vendor.
You know what else that 14% is?
Your profit margin.
*poof into thin air*
And even once you’re registered, SARS doesn’t like to give refunds for all the months that you were paying an extra 14% of operating costs. So you’re going to be bogged down in more audits because you’re so suspiciously evil-looking for trying to get a VAT refund, you likely-tax-evader, you.
Let’s Talk About National Bargaining Councils for your employees
So if you fall into an industry – which is, you know, the unfortunate side-bar to being a business – chances are, your industry has a National Bargaining Council.
Because WHY THE HELL NOT.
The National Bargaining Council (NBC) will negotiate the terms of employment with the Big Institutions in your industry. And they’ll agree on pension contributions and compensation policies and sick leave payouts, etc.
Then, because businesses will obviously never stick to their word, the National Bargaining Councils will insist that businesses contribute monthly to all these new funds that the NBC will set up for pensions, gratuities, sick leave, vacation pay, etc. And the NBC will take responsibility for making those payments – if you’ll just send your staff along when they go on leave to sign some forms and they’ll get paid by the NBC instead of by you.
Now that they’ve thought about it – perhaps it would be best if you paid the employee, and then claimed the payment back from the NBC fund in question. Which will take months because you could be attempting to defraud the NBC. Because you’re so evil. Refer back to square one.
But you might think that this is just for the big players who agreed to this ridiculous set-up?
So so wrong.
The National Bargaining Council will take their agreed resolution to the Minister of Labour, who will use their legislative power to extend the coverage of the agreement to include all businesses in the industry.
And then the NBC will show up at your door, and charge you penalties for having failed to comply.
Finally, Other Businesses
Because all the slightly larger fish in the corporate sea are concerned about their own compliance, any time you apply for a tender, you’ll be anxiously attempting to prove that you’re BEE-compliant and VAT-registered and regularly-audited and formally-registered and tax-cleared and labour-regulated and fair-policied and all those things that require certificates and registrations and the varying approvals of approved bodies.
Otherwise, they run the risk of running into their own compliance dramas.
Here is my observation
This is the path to much fiscal stability.
But it’ll be a very small fiscus. With a lot of unhappy people. And many of them will be unemployed.
Is this really what we want?
Let the occasional employee get taken advantage of. Let a bit of money get laundered. All that will happen at the edges. It won’t be mainstream.
But this current attempt to rigidly abolish the fringe element is killing the host.
Stop it already.
Your Economy’s Backbone
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.