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 The Labour Consultancy. THIS week, Labour Guides looks at the impact of labour laws on small businesses.
SMALL business occupies pride of place in the government's Growth, Employment and Redistribution (Gear) document, a fact apparently overlooked by South Africa's legislators. Another point often ignored is that small businesses contribute 44.8% and large businesses 55.2% to total private sector employment. The contribution to gross domestic product (GDP) is reckoned to be 32.7% for small, medium and micro enterprises (SMMEs) and 67.3% for large business. In Japan, SMMEs account for more than half of manufacturing output, 78.5% of retail sales, and 80.6% of industrial employment. In spite of government assurances that much of the impetus for future economic growth will come from the small business sector, little has been done to improve the regulatory environment confronting entrepreneurs. If anything, conditions have worsened. The Labour Relations Act and Basic Conditions of Employment Bill are expected to further raise business costs and discourage job creation, a trend already in evidence as companies, small and large, migrate towards more capital-intensive production. "Deregulation has become a dirty word," says SMME Alert, the newsletter of the Small Business Project, which lobbies for a more appropriate regulatory environment for small businesses. Quoting a UK-based publication, Small Business Perspective, the newsletter says deregulation is now increasingly associated with the reversal of social advances such as employee rights and the removal of safeguards for health, safety and the environment. "From the point of view of small firms, most of the deregulation that is really needed hasn't anything to do with reversing social advances. This denigration is just a smokescreen to cover up the real problem, which is that much (if not all) regulation heaps burdens on business but does not, for the most part, contribute at all to social advance; in fact, it retards this by siphoning off productive resources." SMME Alert says there are thousands of laws, ordinances, by-laws and regulations which collectively create an unfavourable business environment by restricting the abilities of small businesses to start up and grow. "Some of our laws, as many small businesses can attest, are at best described as lunacy," says SMME Alert. "And, as in Britain, the word deregulation is not voiced in politically correct circles. "Deregulation does not, however, mean a free-for-all environment. What it does imply is the reduction of the costs of compliance and administrative burden imposed on private enterprise, without jeopardising social advance." A recent survey by the European Network of SMME Research analysed the cost of administrative procedures in European private enterprises. It found that compulsory administrative procedures resulting from legislation accounted for 37% of administrative costs and that 60% of this amount "are of no immediate benefit to the individual enterprise". A more alarming finding was that compulsory procedures cost business between 3% and 4% of gross domestic product.
The Confederation of Employers of South Africa (Cofesa) says "employment costs" currently account for about 30% of companies' salary bills. The introduction of payroll levies to fund the national training programme will add to unemployment, currently rising at the rate of 10 000 a month. Cofesa says it has converted more than 150 000 employees at 3 000 companies into contract workers. This overcomes many of the restrictive clauses of the new labour laws.
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