Reducing red tape, specialist visas, and reviewing the labour market regulations are steps in the right direction to create a thriving startup ecosystem.

That’s the word from Matsi Modise, steering committee chairperson of the South African Startup Act Movement.

He says plans announced by President Cyril Ramaphosa in his State of the Nation Address to create a business environment that will enable South African startups – including the development of a startup visa and the reduction of red tape for small businesses will empower startups significantly.

The movement is dedicated to collaborating with the broader entrepreneurship ecosystem and the government, to co-create a more conducive environment for startups to start, grow and scale their businesses. Part of this is done through advocating for the development or refinement of policies that support favourable change.

Ramaphosa announced that a comprehensive review of the work visa system is currently under way and is exploring the possibility of new visa categories that could enable economic growth, such as a startup visa and a remote working visa. The government will also be working to improve the business environment for companies of all sizes through a dedicated capacity in the Presidency to reduce red tape.

“This announcement is very progressive; a positive step in the right direction,” Modise says. “It illustrates that stakeholders who have been engaging with the Presidency, around the challenges that startups face, have been heard. It shows the Presidency’s intention to create an ecosystem that advances entrepreneurial activity in the country.

“On behalf of the South African Startup Act Steering Committee, we are pleased with our constructive discussions with National Treasury. Their team continues to look for ways to adjust legislation to support startups across the nation, which is key to job creation, without compromising the fiscus. These adjustments include further progressing the loop-structure revision published in January 2021, accelerating the exchange control approval process and deferring capital gains tax until future liquidity event among others.”

An enabling environment

As stated by the president, more than 70% of the workforce is employed in the small and medium enterprise (SME) sector. Small businesses, micro-businesses and informal businesses are the ones that “create the most jobs and provide the most opportunities for poor people to earn a living”.

To encourage the startup sector, powerful legislation needs to create an enabling environment for key economic drivers, Modise says.

One of the barriers against the expansion of the startup environment is the limitations of the South African business visa which currently does not extend beyond 90 days. This prevents business professionals, as well as potential investors, from conducting business locally. The consequence of this is that local startups are often unable to benefit from international funding and investments needed to scale their businesses.

However, following the announcement made by President Ramaphosa, the government will be reviewing the current visa processes to modernise them and make them more conducive to an enabling startup environment.

This will be done through the introduction of a startup visa and a remote working visa.

The startup visa and remote working visa are essentially travel permits that will allow business professionals to stay in and travel across South Africa for longer than three months, provided that they are able to produce proof of their business transactions or employment.

The government is expected to streamline the process to reduce the paperwork and requirements through an e-visa portal.

In addition to extending the stay of travelling business professionals, the proposed visas may require applicants to provide evidence of employment or proof of registered business abroad, as well evidence of a sufficient income. The new visa may also make allowances for the applicant’s dependents to accompany them during their stay.

Further recommendations from the president include expanding the criteria for participation in the employment changes to the tax laws including an amendment to the Employment Tax Incentive (ETI) that refined the criteria for businesses to benefit from the ETI. These will take effect in March.

The government will also be reviewing the Business Act and other legislation that affects small businesses in an effort to reduce the regulatory burden on informal businesses. More detail around these changes is expected to be made public during or after the 2022 Budget Speech.

Tax incentives will encourage the private sector to create more jobs and ultimately reduce unemployment, and government has already made several inventives available.

“President Ramaphosa summed up the challenge facing startups in his address: ‘There are too many regulations in this country that are unduly complicated, costly and difficult to comply with’,” Modise comments. “While we welcome the announced reforms by President Ramaphosa, we understand that the government alone cannot do this by itself.

“We have to collaborate and co-create a conducive ecosystem and be part of the solution.

“The announcement is a positive step in the right direction, showing political will to create an enabling environment for high-impact startups. We will continue to engage with the government and offer advice based on real-life experiences and challenges the startup ecosystem faces.

“We have valuable input to offer a voice for those on the ground, and we look forward to helping shape South Africa’s long-term approach to building a thriving startup ecosystem,” Modise adds.