Outdated rules weigh heavily on business, says Sim Tshabalala

South Africa’s business environment remains weighed down by outdated regulations that stifle efficiency, hamper profitability and deter innovation — particularly for small and medium black-owned enterprises.

That’s the warning from Standard Bank CEO and chair of the B20 finance and infrastructure task force Sim Tshabalala, who is calling for a modernisation to align business regulation with 21st-century economic realities.

“SA could definitely benefit from a review and modernisation of our business regulation to make sure that benefits outweigh costs, and to make it easier to start and run small and medium enterprises — and black-owned small and medium enterprises in particular,” he said on Wednesday.

“At Standard Bank, we are required to comply with literally hundreds of regulations, many of which are now too old to be relevant, and some of which are at cross-purposes. We would be considerably more efficient and profitable — and better able to serve our clients and support transformation and inclusive growth — if these rules were modernised.”

SA could definitely benefit from a review and modernisation of our business regulation to make sure that benefits outweigh costs, and to make it easier to start and run small and medium enterprises — and black-owned small and medium enterprises in particular.
— Sim Tshabalala

This echoes long-standing concerns among entrepreneurs and investors that the country’s regulatory architecture is not only ill-suited to the demands of a rapidly digitalising, climate challenged global economy but is also actively undermining competitiveness.

According to Tshabalala, the B20 this year has “clearly helped” change the nature of the global debates on ratings accuracy and on appropriate risk weights for bank lending to infrastructure projects.

“It’s notable that there’s considerable alignment, for instance, between the recommendations of SA’s G20 expert panel and the B20 finance and infrastructure task force on ratings,” he said.

“Further, [Reserve Bank] governor [Lesetja] Kganyago mentioned excessive risk weights on bank lending to infrastructure in Africa in a speech in September. I have recently heard these views echoed by other policymakers in Africa and beyond.… a consensus may be starting to form.”

This consensus often translated into action, he said.

Tshabalala previously noted that while $3-trillion is spent globally on infrastructure annually, a significant and growing gap remains, particularly in terms of bankable projects.

The B20 finance and infrastructure task force made three recommendations to close the gap.

Read: ‘Sticky wicket’ won’t stop B20’s global infrastructure goals, says Sim Tshabalala

Efforts must focus on expanding the pipeline of infrastructure projects that are attractive to investors.

“Many projects die not because they are bad ideas, but because they are badly prepared,” Tshabalala said.

Thorough attention must be given to feasibility assessments, governance structures and the distribution of risk.

“Critical infrastructure — in the energy and digital sectors — should be prioritised. These sectors are critical to unlock broader economic development and innovation and serve as attractive ‘lighthouse’ projects for private investors,” he said.

There is also a need to scale up the use of blended finance models and foster stronger partnerships between the public and private sectors.

“Let concessional capital derisk projects so that private capital can follow with confidence,” Tshabalala said.

“Third, ensure that African risk is more accurately assessed so that investors of all kinds understand that investing in Africa is not nearly as risky as many people assume.”

SA puts overhaul of global finance rules in spotlight of G20 presidency