Red Tape | Reality Check | World Economic Forum | SACC | Sage Pay

Red tape is a reality, but technology can help ease the burden

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10 August 2014
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South African entrepreneurs can counter some of the effects that red tape has on their businesses by taking advantage of online systems and services that enable them to streamline key business processes.

That’s the word from Charles Pittaway, Managing Director of Sage Pay, who says that dealing with bureaucracy, regulations and administration is one of the biggest drains on the resources of South African SMEs and start-ups.

“The costs of dealing with red tape are high and they’re growing all the time,” says Pittaway. “Business owners need to find ways to reduce the burden it places on their businesses if they are to grow and be profitable.”

According to the World Economic Forum (WEF), red tape costs SMEs a staggering R80 billion a year. Meanwhile, Neren Rau, CEO of The South Africa Chamber of Commerce and Industry (SACC) has been quoted as saying that that SMEs spend an average of 4% of their turnover on red tape.

Says Pittaway: “Against the backdrop of growing regulation, many SMEs are struggling to keep on top of red tape—not only government bureaucracy but also stringent procurement processes at their corporate clients and tough credit requirements from banks and suppliers.

“For the economy to grow, industry needs to keep lobbying government and corporate South Africa to reduce red tape for SMEs. But in the meantime, SMEs need to find creative ways of managing these pressures. For example, you should put in place business solutions that automate processes such as your payroll so that you can run a more efficient business.”

He adds that cloud solutions and connected services have made such solutions far more affordable to South African SMEs in the past few years. As a result, they can benefit from many of the same features and functionality large companies have enjoyed in their ERP systems for years.

Pittaway points to the challenges of collecting money, processing payments or checking credit risk of potential customers and suppliers as areas which have traditionally been time-consuming for SMEs. They need to open at least 10 different accounts with various service providers to carry out these basic tasks, usually incurring high charges in the process.

Solutions such as Sage Pay’s technology make it easier and cheaper for SMEs to verify employees’ ID numbers and bank account details, pay salaries online, perform credit checks on employees, pay creditors, and more. This delivers new levels of efficiency for SMEs who used to need to log into separate accounts and systems to perform these tasks, or who even did them manually.

“SMEs can save time and money by using technology to take care of a lot of their admin,” says Pittaway. “Instead of doing tasks in a cumbersome, manual manner, they can do a lot of their work through an electronic workflow. This saves them time and money, and also allows them to keep focused on growing their business rather than on doing paperwork.”