OVERREGULATION and red tape are the biggest constraints to business expansion in SA, according to a survey by accounting, audit and advisory firm Grant Thornton.

The survey was based on the views of CEOs, chairmen and business owners in the fourth quarter of last year.

Red tape was now as pervasive a problem in SA as in other Brics (Brazil, Russia, India, China and SA) countries, Grant Thornton Durban managing partner Deepak Nagar said yesterday.

The survey found 37% of privately held business owners in SA cited red tape as their chief constraint, followed by a lack of a skilled workforce, at 36%.

Durban Chamber of Commerce and Industry CEO Andrew Layman said the results were "spot on" and SA's regulatory environment, for small businesses in particular, needed to be reviewed.

The increasing complexity of regulations such as additional tax or governance requirements, labour issues, black economic empowerment, the time taken to register companies or change directors' names was stunting the growth of business, Mr Layman said.

The second-biggest constraint to business globally was reduced demand for products - the effect of economic problems in the US and Europe. In SA, the second-biggest constraint to business was a shortage of skilled staff, said Mr Nagar.

Keith Brebnor, CE of the Johannesburg Chamber of Commerce and Industry, said it had become "very intimidating" for young people to start a small business in SA because of the onerous regulatory environment. Dealing with crime and a lack of skills also added significantly to the cost of doing business in SA, he said.

The survey found business owners in SA were more optimistic in the fourth quarter of last year compared with their global counterparts. In SA, 58% of respondents were positive about the state of the economy, compared with 16% globally and 40% in Bric countries. At the end of 2010, 60% of South African business owners were optimistic.

The survey found 27% of KwaZulu-Natal business owners had given serious consideration to leaving SA permanently in the past 12 months, as a result of the high crime rate and political uncertainty. In comparison, 23% of Gauteng's business owners, 19% in the Eastern Cape and only 11% in the Western Cape had considered emigration.

There was a downward trend on crime, with 46% of business owners across SA affected by crime in the past year. The survey found 52% of Gauteng businesses were affected by crime, and 39% in the Western Cape and Eastern Cape.

Nevertheless, "it is one in two respondents ... the impact of crime on South African business is still unacceptably high," Mr Nagar said.

The survey found that 53% of South African businesses were affected by poor government service delivery, with the Eastern Cape the province that was the most affected (63%), followed by Gauteng (50%) and the Western Cape (47%). In KwaZulu-Natal, 44% of business owners were affected by poor service delivery.

When asked which service delivery elements affected businesses the most, 41% of businesses in SA rated utilities such as gas and electricity as having the greatest negative effect.

Other service delivery items included billing problems, taxation, poor roads, potholes and malfunctioning traffic lights.

weste@bdfm.co.za