International Monetary Fund analysis links higher regulatory compliance time to weaker job growth in South Africa and backs national business licensing reform

The International Monetary Fund published research on South Africa’s business environment arguing that fragmented and costly licensing and permitting requirements are weighing on firm growth and job creation, with particularly acute effects for small and medium-sized enterprises. The analysis points to comprehensive regulatory reforms, including a simplified and coherent national licensing and permitting policy, as a lever to support private investment and employment. Using South African firm-level and cross-country data, the IMF finds that managers’ time spent dealing with government regulations has risen over time and is high relative to peer economies. Firms facing greater compliance burdens show slower sales growth, weaker employment growth, and lower productivity, with a one percentage point increase in management time spent on regulatory compliance associated with a one percent reduction in job growth; for firms with fewer than 20 employees, the productivity impact is nearly twice that of the average firm. The article highlights the proposed Business Licensing Bill of 2025 as an opportunity to modernize the decentralized licensing system and sets out reform principles including a single-window digital platform, clearer intergovernmental responsibilities, stronger municipal implementation capacity, tailored and concessional licensing for micro and informal firms, risk-based requirements by activity, and an up-to-date public inventory of required permits and licenses.