B.E. Assessment

Counting the cost of red tape, SBP South Africa, 2004

    Summary of results
    Regulatory compliance "red tape" cost South African businesses R79 billion in 2004, an amount equivalent to 6.5 per cent of GDP. This is the bottom-line result of SBP's pioneering study of regulatory compliance costs to the South African private sector, from large corporations through small and medium enterprises (SMEs) to the informal sector. No comprehensive survey of this kind has previously been undertaken in this country. Indeed, to the best of our knowledge, it is the largest general regulatory cost survey ever carried out anywhere.

    Organised business and the South African government agree that it is necessary to create an enabling environment which spurs economic growth and job creation. Our study provides strong research-based evidence with which to take forward the discussion about how to achieve a regulatory environment that will be most conducive to the private sector's optimal performance, particularly for SMEs. The study is also a valuable point of reference in the growing debate around the institutionalisation and use of regulatory impact analysis in South Africa.

    The rewards of an improved regulatory environment are large. A 2002 study of 10 developing countries including South Africa by SBP and Bannock Consulting concluded that an appropriate regulatory environment was the single most important element in an economic growth strategy. A 2004 World Bank study has found that many developing countries could improve their annual growth rates by as much as 1,4 percent if they created a world-class regulatory environment for business. Though South Africa has a better regulatory system than many developing countries, improving the regulatory environment could have a significant impact on our economic prospects too.

    Improving the regulatory environment will take hard work, and excellent information. However, unlike improvements in education or health, results can be seen relatively quickly. What's more, the socio-political costs of much regulatory reform are low: nobody was ever elected to parliament on a promise to increase red tape. Well-informed, well-designed regulatory reform presents an opportunity to accelerate growth and development that South Africa cannot afford to miss.