The Effect of Regulations and Legislation on Small, Micro and Medium Enterprises in South Africa

The rates of entrepreneurship and new venture creation are of concern in the South African economy. This phenomenon is reflected in the low rates of businesses operating as small, micro and medium enterprises (SMMEs). Due to the importance of SMMEs in the economy, this study identified and investigated employment and wealth creation factors inhibiting the establishment and growth of SMMEs. The regulatory environment and related legislation and compliance were identified as primary inhibitors of business start-up and growth. Excessive red tape with regards to compliance with labour laws, human and industrial relations, tax and tax-related issues, legal requirements, municipal regulations and support for business start-ups are key obstacles experienced by SMMEs. To improve rates of SMME establishment and performance, the government is urged to review its restrictive regulations and implement initiatives to promote a more supportive environment for business. Such changes would contribute to economic growth and improved government performance.