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SMEs - regulation in Africa

Written by: Dr. Rob Smorfitt

Article Overview: Is regulation a problem in Africa?

SMEs - regulation in Africa

The question is always raised as to whether or not developing countries are over-regulated or not. The World Bank Doing Business Report in particular assesses these aspects of these African countries and the general consensus is that they are over-regulated.

There are essentially two problems here however. The first is whether over-regulation is a bad thing. I am no expert on the USA, but it is my understanding that it is a very highly regulated environment, and also extremely complex in that it can vary dramatically from city to city and state to state. So then, is the African problem that itis over-regulated? I think the observation is being misinterpreted and the problem is not in fact over-regulation (a generalisation) but rather a case of the governments being inept and unable to manage the regulatory environment they have created.

This leads to the second problem. South Africa is a good example. Since independence in 1994, the ANC government has introduced many new laws. Many of these are in fact extremely advanced in their thinking, but South Africa does not have ability to enforce the regulations. A classic example is the smoking legislation. While as a non-smoker I fully endorse the legislation, they have absolutely no chance of this legislation succeeding as they do not have the capacity, in all respects, to implement and enforce this legislation. They same holds true for a number of these new laws.

South Africa has legislation that is extremely advanced, and often ahead of many leading developed countries. However, their ineptitude and inability to manage their own legislation leads to a complete disrespect for the rule of law. This is because that as business sees new legislation arriving they initially see the pro's and con's and decide if it presents an opportunity or a threat. However, once nothing arises from its passage through Parliament, it soon becomes obvious that it is simply just another law on the books, and the impact will be nil. And so the disrespect for the legal system develops into a Western style free for all.

So perhaps these African countries are not over-regulated, but are rather under-managed. It is not about passing sophisticated legislation, but rather about enforcing the legislation that exists.

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Article Tags: development, law, legal, regulation, SME, Smorfitt



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Re: In-House or Outsource? - Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas". I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing. In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties. I say do it! Rob Smorfitt
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Re: Newbie from Africa - Hello Biiyke Welcome to the forum. Which part of Africa are you from it is quite a big continent? I live in South Africa. MichelleJ
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