Dr Brian Benfield: Government legislating poverty into permanence

South Africa’s leaders vow to end poverty and unemployment. Yet the laws they pass make it harder for the poor to earn a living. Free Market Foundation board member Brian Benfield says the burden of red tape keeps 10 million people out of work. That burden includes licensing, zoning, minimum wages, collective bargaining, B-BBEE and tax. Each rule may have a respectable aim, he argues, but together they choke off the small businesses that would hire people. His fix is a Freedom to Enterprise Act. Under it, every regulation would have to prove it is necessary and proportionate. Approvals would run through a single portal, and new rules would come with sunset clauses..By Dr Brian Benfield*.A government’s first error is to presume that enterprise requires permission.The surest measure of a government’s commitment to the poor is not how much it will give them for free. It is whether it allows them to earn a living without first seeking its permission. Our country’s politicians routinely proclaim their determination to eradicate unemployment, inequality and poverty. Yet the laws they enact, the regulations they impose and the bureaucracies they perpetuate frequently obstruct the very enterprise, initiative and productive effort through which these evils are overcome. It is a profound betrayal of the poor to profess compassion for their plight while obstructing the very means by which they might escape it. No government can credibly claim to fight poverty while making productive endeavour harder, more costly and less accessible. The question is no longer whether South Africa can afford to dismantle these obstacles. It is how much longer it can go on with them.No statute openly declares that its purpose is to keep people poor, but the cumulative effect of our regulatory system comes perilously close to achieving precisely that.South Africa’s performance is indefensible. Mass unemployment persists on a scale that shames any government claiming to have prioritised economic freedom. Behind the statistics are ten million people whose productive potential remains unrealised, not least because the costs and complexities of employing them or establishing businesses capable of doing so, are inscrutably high.Regulation may not be the sole cause; inadequate skills, crime, corruption, weak investment and collapsing infrastructure all contribute. But the regulatory burden introduced by this government is an obstacle that it can quickly and substantially reduce through its own volition.Consider someone wishing to establish a small workshop, sell prepared food, operate a cleaning service or employ two assistants. The aspiring entrepreneur will encounter business and taxation registration requirements, municipal zoning, trading permits, health regulations, building approvals and sector-specific licences. Environmental, water-use and heritage permissions add further costs and complications.Some of these requirements may be justified. However, the problem is their proliferation, duplication, cost and frequent disproportion to the risks involved.An established corporation can employ lawyers, accountants and compliance officers. A small entrepreneur cannot. Every hour spent negotiating bureaucracy is an hour diverted from finding customers, earning revenue and creating employment. The consequences extend far beyond inconvenience. Every business prevented from opening represents a potential source of income, employment, competition and innovation that never materialises. These invisible losses never feature in official assessments of regulatory success.Employment law compounds the problem.The National Minimum Wage Act, collective bargaining arrangements, the Labour Relations Act, the Basic Conditions of Employment Act, and employment equity requirements impose obligations that make hiring increasingly difficult for every business.The statutory minimum wage, increased once again in March 2026, illustrates the dilemma. A wage floor may protect the earnings of those who remain employed, but it cannot make an inexperienced worker more productive. Where the cost of employment exceeds the value a prospective employee can initially generate, employers simply decline to hire.Collective bargaining arrangements extend negotiated conditions to businesses that had no part in negotiating them. A labour market dominated by the interests of established employees, organised labour and large employers is poorly equipped to accommodate those standing outside of it.Beyond employment law, a formidable accumulation of regulations and costs restrict enterprise.Whatever the merits of broad-based black economic empowerment’s stated objectives, its recorded practical effects on investment, competition, small and medium business formation, wealth creation and employment are catastrophic.Taxation compounds the burden. Corporate and personal income taxes, dividend withholding tax, capital gains that are not inflation indexed, VAT and the administrative demands of compliance diminish the returns available to those who invest, innovate and employ others. Poorly designed competition law, financial services regulations and consumer protection regulations increase barriers to entry and impose further costs. A regulatory intervention may sound desirable in principle, but only its regularly measured empirical benefits can justify its continued existence.Electricity interruptions, water shortages, sewerage failures and collapsing roads impose additional costs on enterprises already struggling with official requirements. Businesses are forced to divert resources from productive investment into compensating for the failures of government to provide essential infrastructure.The cumulative effect of each additional cost narrows the range of ventures that remain commercially viable, discourages investment and reduces the number of people whom employers can afford to hire.The unemployed rarely have the resources to lobby against regulations that prevent them from being hired. The entrepreneur who abandons a business proposal leaves no record of the enterprise that might have flourished. The jobs that were never created remain invisible.This is why it is insufficient to defend regulation by pointing to the respectable purpose of each. The proper test is its empirically measured effect, considered alongside the cumulative burden of the regulatory system as a whole..Read more:.SA should be aiming a lot higher on job creation: Geordin Hill-Lewis.Our country now needs a statutory presumption in favour of enterprise.Parliament should enact a Freedom to Enterprise Act that reverses the present presumption that business activity must be subjected to whatever restrictions government feels desirable. Its purpose would be to make freedom to conduct lawful business the norm, and regulation the exception.This would give practical effect to section 22 of the Constitution, which protects every citizen’s freedom to choose a trade, occupation or profession, while recognising that justified legitimate regulation remains permissible.The Act should expressly preserve constitutional protections and the powers of Parliament to legislate. Its force would lie in making regulation harder to introduce and harder to retain.The Act would have five principal provisions:First, every existing business regulation should be reviewed against a simple test: Is it necessary to prevent demonstrable harm, proportionate to that harm and the least restrictive means of achieving its objective? Requirements that fail this test should be repealed forthwith.Second, every law and regulation must require a published assessment of its direct and indirect compliance costs, effects on employment and small-business formation, and less restrictive alternatives.Third, routine business registration and licensing should be simplified through a single digital portal, the elimination of duplicate submissions and binding decision deadlines. Low-risk activities should not require any prior licensing unless a compelling case can be demonstrated. Approval should follow automatically, subject to clear pre-defined safeguards.Fourth, an independent regulatory review body should permanently oversee implementation, publish an annual account of regulatory costs and recommend the repeal or amendment of unnecessary, outdated or ineffective restrictions. Fifth, Parliament should require periodic reviews of regulations, with sunset clauses for new measures unless their continued necessity has been comprehensively demonstrated. No department should be permitted to impose a new compliance burden without first reporting to Parliament and accounting for its cumulative effect alongside existing requirements.Labour, tax, empowerment, competition or financial legislation that may inhibit enterprise should require their own substantive review and regular amendment by Parliament. The Act would establish the governing principle and an enforceable process for determining whether restrictions remain justified. .Read more:.Why job creation is the wrong policy: Ivo Vegter.The objective is not a lawless society. It is a society in which government must demonstrate why it should restrict productivity, rather than workers and entrepreneurs having to demonstrate why they should be permitted to pursue it..*Dr Brian Benfield, retired professor, Department of Economics, University of the Witwatersrand, is a Senior Associate and Board member of the Free Market Foundation..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.

Dr Brian Benfield: Government legislating poverty into permanence

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