In a stark indictment of the state of the economy, South African business leaders are issuing a desperate warning: the country’s crushing regulatory burden is suffocating legitimate enterprise while doing nothing to stop the criminals who simply ignore the law. The system, they argue, penalises the compliant and creates a perverse advantage for fraudsters.
The sentiment is captured by David Shapiro, Sasfin Wealth’s chief global equity strategist, who laments that corporate leaders are now too exhausted to fight. “The corporate leaders just don’t have the energy to go through battling with the government any longer,” he told BizNews. The “oil” that once greased the wheels of businesslike easily opening a client accounthas been replaced by viscous, costly bureaucracy.
A Staggering Cost of Compliance
The financial sector exemplifies the crisis. Shapiro points to the immense difficulty of starting a new financial services firm, a process so arduous it disqualifies most entrepreneurs. The result? Established players must divert massive resources from growth and innovation to compliance. Standard Bank, for instance, employs 3,000 people solely for regulatory compliancea “staggering” cost of doing business, as STANLIB’s Kevin Lings notes.
The Financial Sector Conduct Authority (FSCA) levied R1 billion in administrative penalties in 2023/24, up from R100 million the year before. This environment forces legitimate firms to have more compliance officers than investment specialists, stifling competition and locking clients into existing service providers due to the sheer hassle of switching.
A System That Protects No One
The cruel irony, as veteran wealth manager Wayne McCurrie explains, is that this labyrinth does nothing to stop the “bad guys.” Ponzi schemes and investment scams like BHI Trust and MTI have flourished, defrauding South Africans of billions. “The FSCA and its regulations are irrelevant to scammers,” the analysis states. These criminals operate outside the legal framework, often using sophisticated AI and deepfakes to lure victims with promises that bypass all the tedious paperwork honest firms are shackled with.
The system creates a dangerous imbalance: legitimate businesses must force clients through exhaustive due diligence, while fraudsters make it dangerously easy to hand over money.
An IMF Warning and a Path Foreclosed
The International Monetary Fund (IMF) ranked South Africa last out of 49 countries for ease of doing business, stating that reaching the average could double the country’s economic growth rate. The regulations aren’t just an annoyance; they are a direct brake on national prosperity, preventing new businesses from starting and strangling the innovation needed to compete globally.
The conclusion is damning. South Africa has built a regulatory regime that successfully harasses its most law-abiding economic citizens, drains resources from productive enterprise, and erects insurmountable barriers for newcomers. Meanwhile, the actual criminalsthe fraudsters and scammersoperate with impunity in the vast space between the lines of red tape. It is a system that burdens the honest, empowers the lawless, and ultimately undermines the very economy it claims to protect.
