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Entrepreneurs being battered by tough new company laws & a weak economy

26 October 2009

Entrepreneurs are battling to cope with a range of new stringent company laws and regulations and a weakened global economy putting many small and medium businesses at risk, Liza van Wyk, CEO of major training organisations AstroTech and BizTech said in Johannesburg today.

“South Africa is playing a challenging game of giving developed world challenges to businesses while nurturing a struggling developing economy. Greater help needs to be extended to new business owners to help them cope.”
Van Wyk said a range of challenges to business ranging from tougher laws to steep electricity hikes was making business a high risk process. “Eskom, as an example, is demanding 45% tariff increases per year for the next three years – how many companies have built that into their five year plan or long term strategy? It will place huge cost burdens on companies already battling to cope and could see them layoff more staff, cut production or even close. Companies need to be planning now how to deal with that, those renewable energy solutions they ignored only a short while ago – like solar panels, reusing grey water, larger windows to use more natural light and harnessing wind energy all become very attractive and even necessary solutions now.”

The range of challenges saw South Africa disincentivising entrepreneurship which is a necessity for job creation and economic growth, she said.

While the Global Entrepreneurship Monitor notes that entrepreneurial levels leapt 50% in South Africa last year, the country still lags other developing countries in entrepreneurial development – without which companies do not prosper. In 2008, according to the GEM eight out of every 100 South Africans owned a new business (it was five between 2004 to 2006), but in other low to middle income level countries that figure averages out at 13 adults own new businesses per 100, two thirds more than in South Africa.

“The encouraging sign last year was that 79% of those who started businesses spotted an opportunity and went for it, compared to 51% in previous years and only 21% did this because of unemployment. But most of those new businesses in South Africa, do not survive,” Van Wyk pointed out. “One of the challenges could be poor skills development in terms of business owners understanding basic finances, cash flow management, debt collection and staff management.”
She said courses they offered on those subjects were always well-attended, “but most delegates come from well-established companies, entrepreneurs are often so busy in survival mode or trying to keep the company growing that they lack the time to attend many of the courses they need.”

Van Wyk said the challenges facing entrepreneurs needed a greater focus “because small and medium businesses employ 75% of South Africa’s population. Given job losses of half a million people this year and existing high unemployment, the need to boost entrepreneur skills development and also to cut them some leeway on laws are imperative.”

She said companies, especially chartered accountants, are signing up in droves to risk management courses as they battle indicators suggesting that getting out of this financial crisis will demand new strategies and ways of doing business.

Also there have been a range of new laws and regulations putting pressure on business and civil servants to be more accountable. The new Companies Act could sees the Act giving the Companies and Intellectual Property Commission new powers to investigate, search premises, subpoena witnesses and to fine a company up to 10% of its annual turnover for failing to comply with administrative rules. These can be as minor as a company not keeping its statutory records at its registered office for inspection

King Three has a wide range of new challenges for companies including far more accountability for directors including potential jail terms for rubber stamping or allowing practices that contravene the law or pose challenges to the environment or other developmental issues.

“We are seeing companies pay far more attention to risk strategy. Our Risk Management course covers necessities like finance, brand operation, quality control, customer service and media relations – although all are absolutely essential courses for 21st century business it is surprising how many companies have not paid adequate attention to those challenges.

“Business has never been more challenging than now,” Van Wyk said. “It requires business leaders to improve their skills and knowledge and to ensure they employ experienced, top-level staff and to keep training them to keep knowledge levels high. But too we need a more sympathetic approach from government and business to the developmental challenges of new company owners.”


LIZA VAN WYK, CEO ASTRO TECH 011 582 3211 cell: 082 466 8975 or

Issued by Charlene Smith Communications 011-646 7637 or 021- 762 2656