In his recent Budget Vote Speech the Minister of Finance, Nhlanhla Nene,  said the economy is performing below the level required to deal with South Africa’s major challenges – poverty, inequality and unemployment – referring to our current situation as a ‘financial crisis’. The cost of servicing our foreign debt is a major concern, we must stabilise debt to improve our credit ratings and economic growth is an imperative.

The National Development Plan, the new Department of Small Business Development, moves to address transport infrastructure and energy outputs, and government sponsored think-tanks aimed at optimising the country’s natural resources are among efforts to ignite an economic upturn.

At the same time, though, Government is making numerous – arguably well-intentioned but unfortunately ill-considered – moves that will inevitably lead to job losses, stifle economic growth (critically, within the small, medium and micro-enterprise environment) and further diminish the country’s appeal to international investors.

It is common wisdom that deregulation has a stimulating effect on economies. Yet a recent slew of proposed, draft or hastily implemented regulations have small businesses and industry sectors up in arms – and international investors running shy. Security, Immigration, Complementary or Alternative Medicines, Employment Equity, Alcohol and Tobacco are among the targeted issues. These proposed regulations also pose a dire knock-on threat to a host of other industries and sectors, which clearly have not been considered when drafting the regulations. Nor has there been proper broad stakeholder consultation, as enshrined in South African law, in their drafting - not even it seems with other Government departments where the regulations are often at odds with their key strategic thrusts.

Take the recent Immigration Regulations’ new visa requirements – interested/affected parties were given one week to respond to the proposed regulations. Following an outcry, a further week was granted – hardly sufficient time for effective stakeholder consultation. Tourism, the international convention/conferencing arena, the film industry – all good foreign income earners in which the private sector and also government have invested millions – will certainly be affected. Will we see international captains of industry, global thought leaders and major Hollywood film stars sitting for hours in Embassy queues to get their visas? They’d rather just not come to SA.

The draft alcohol regulations, which seem to have gone quiet for now, have enormous consequences not just for the big alcohol companies but critically for the thousands of small, medium and micro enterprises that make up the alcohol value chain. If the ban on alcohol advertising and promotion such as with the tobacco sector is given effect, this will significantly impact all those advertising and promotions companies that serve the sector, the broadcasters and print media (already struggling to survive) who will lose invaluable advertising revenues, sport and all the other ‘lifestyle’ sectors that receive brand sponsorships from alcohol companies. And the poor arts and culture sector, always at the bottom of the sponsorship heap, will suffer further with sponsorships from companies currently supporting the arts being diverted to the high exposure arenas such as sport as they all fight for these valuable sponsorship rights

Already subject to intense regulation, the demonised tobacco sector – tobacco growers, manufacturers and retailers – is facing even more punitive regulations. Here, as with Alcohol, the Minister of Health is curiously the only minister involved in tobacco regulation despite the broader issue impacting the mandates of the departments of Trade and Industry, Finance, Agriculture and Small Business, amongst others.  And the Minister of Health has made it clear that he won’t engage with the industry on proposed regulations.

With the well-known consequences of smoking, of course some regulation and public education is necessary, particularly regarding the sale or promotion of cigarettes to minors. However, tobacco is a legal product and its trade to an adult, informed market should not be restricted. The cost of dealing with smoking-related health issues is far outweighed by the national coffers’ income from ‘sin’ taxes on tobacco products. But this is only the tip of the financial iceberg and clearly the big picture is not being considered in the drive to stifle the sector.

Tobacco farming across Africa is an invaluable contributor to the continent’s economy, in some countries accounting for up to 40% of GDP. While this figure is less in South Africa, the tobacco farming sector is still a major employer and taxpayer as are tobacco manufacturers and retailers.

The proposed regulations on Point-of-Sale limit tobacconists – whose entire income is derived from tobacco or related products – to a 4 m² display space, while other retailers, eg Hypermarkets, corner cafes and garage forecourt shops that derive up to 16% of their income from selling cigarettes –will be limited to one square meter.  Shop-owners are outraged at the potential damage to their businesses and the number of jobs they’re likely to have to shed.

Public Place Smoking draft regulations include banning all indoor smoking (businesses that have invested in designated smoking areas will now have to reinvest in tearing them down); banning smoking within 10 meters of any ventilation point (these will all but destroy township taverns whose clientele gather for a drink and a smoke and where there are extremely few places where one is more than 10 meters from any ventilation point, and certainly every smoker in a squatter camp will be liable for prosecution!); the banning of smoking at all outdoor public events and, perhaps most ridiculously, that one may not smoke within 50 meters of any other human being on a beach!

These proposals cannot be argued to be reasonable or rational.  It is widely recognised that bad- or over-regulation and the levying of hefty ‘sin taxes’ on sectors such as tobacco and alcohol doesn’t reduce consumption but merely increases illicit trade in the products, mostly run by organised crime. The current estimated loss of tax revenue due to illicit cigarette trade is a staggering R3.5-billion annually. Moreover, many of the proposed or rumoured regulations fly in the face of international trade conventions to which South Africa is a signatory.

If Government is serious about trying to improve our economic outlook, perhaps top of the new Finance Minister’s “to do list” should be a chat with his peers to ensure that the country’s regulatory framework supports its economic growth objectives and boosts, rather than diminishes, international investor confidence. Indeed, have these regulations been before the full cabinet? Sanity and a good look at the big picture must trump well-intentioned but ill-considered regulation.