How easy is it to start a small business in South Africa?

Every year, the World Bank publishes their Doing Business report. This document tracks key indicators related to the ease of doing business in 190 countries. With these indicators as their guide, the Doing Business report then ranks all 190 countries according to how easy it is to do business in that country.

In 2017, New Zealand was the report’s top performing country in terms of ease of doing business. The worst country in which to do business in 2017 was Somalia.

The ease of starting a new business is a key measurement in the report – providing a useful insight for the small business owner just starting out in South Africa.

South Africa’s ease of starting a business

South Africa’s overall rank dropped two places, to 74th in the world in 2017. In Sub-Saharan Africa, South Africa was the fourth easiest place to do business, after Mauritius (49), Rwanda (56), and Botswana (71).

In terms of starting a business, South Africa dropped 6 places, from 125 in 2016 to 131 in 2017.

There are a host of reasons for the change, but of particular note is the procedure for registering a firm, as well as the time this takes. Averaging well over a month and a half, this process presents a significant barrier to entry, potentially impacting tax matters, as well as several risk aspects of the business .

Other factors

Along with the specific metrics used to calculate the ease of starting a business, other factors come into play when considering the ease of doing business in South Africa, and these will have an effect on the new business owner as well.

For instance, the difficulty of dealing with construction permits, registering property, and securing electricity all make starting and running a small business more difficult.

Economic factors have a large effect as well: securing credit in South Africa has become far more difficult as the economy has suffered a downturn.

Finding a solution

There is no simple solution to the problems of small business owners in South Africa. To overcome the hurdles these crucial cogs of the South African economy face, a concerted effort must be made to reform legislature to make it simpler and easier to start a business.

Along with this the economy as a whole is under pressure – a dilemma that has no easy fix, but which continues to hurt the very businesses which could help alleviate the problem.

The truth is that starting a business in South Africa in 2017 is not as easy as we’d like; but for those able to take the plunge, the rewards can be well worth the struggle.

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