Simplify business registration process

THE call for increased entrepreneurship has been an ongoing effort by governments particularly in developing countries in recent times.
The global economy is not growing and the short as well as the long term solution for the problem is to encourage the proliferation of SMEs.
These organisations have the potential to drive economic growth and to minimize the unemployment rate by filling the gaps of the private sector on one hand of the spectrum and the informal sector on the other.

In a least developed country like Lesotho entrepreneurship is usually not the first choice of graduates who enter the job market. Entry into this space is often driven by the conditions of a stagnant economy. Young people in particular start businesses only after failing to secure formal employment.
On the other hand, people in other age groups start businesses in order to supplement their incomes. This suggests a significantly low drive towards starting businesses in countries which need to increase economic activity the most to alleviate poverty.

Nevertheless, the operational constraints for SMEs to successfully conduct business cannot be over emphasized. These insurmountable challenges include factors such as inadequate formal or informal training for both employers and employees to execute the requisite tasks for sustainability as well as the lack of capital and investment opportunities.

The latter can be regarded as the biggest impediment to growth not only for SMEs but for the establishment and sustainability of larger corporations as well.  A stable political climate is essential for attracting investment. This factor is obviously not in the control of the entrepreneurs themselves.
In addition to these operational challenges, administrative constraints are also a problem. The cumbersome procedures that are required to set up businesses should be a priority for the government particularly in developing countries.

In order to accelerate the formation and success of small businesses which ultimately boost development, procedures must be simplified.
However, this is not always the case. Lesotho in particular is lagging behind in this area. For instance, the World Bank ratings for ease of doing business ranked Lesotho 100/190 countries in 2016.

The highest ranked countries (1-20) have the easiest processes and regulations that are conducive for doing business. Although it has improved from 114 in 2015, a lot still needs to be done. A decentralized system of business registration is the main regulatory glitch. Countries that have an easy regulatory environment all have a similar feature for registration.

This is a single point of contact system whereby a person goes to one place and is able to acquire all the necessary documents to conduct business. These documents comprise a tax clearance, traders’ licence and bank account. The second feature is the cost of registration. Earlier we discussed the high cost of doing business as an impediment in low income countries due to the lack of investment opportunities.

However, before getting to the point where a business is operational, a registration fee must be paid.
The fee in Lesotho is currently M530. Compared to the amount of R175 that one pays in South Africa at a bank which offers a centralised registration location for all necessary documents, this is overpriced.

Also, considering that Lesotho has a smaller economy and that the idea is to increase entrepreneurs, the price seems counterproductive.
Thirdly, the time it takes to acquire the necessary documents to conduct business is a major hindrance. Most people are ready to do business before incorporation and a slow legal process can be frustrating.

Efforts have been made in this area. The purpose of the establishment of the One Stop Business Facilitation Centre is to simplify the process of registering a business.  An online registry system has been established for this purpose. This government initiative has been in existence since 2009 and was founded on an agreement of cooperation by the agencies relevant in the issuance of permits and licences.
This has played a pivotal role in improving the ease of doing business in Lesotho. Nevertheless, there are some challenges pertaining to the time it takes to have the right to lawfully conduct business.

While the registration process has been simplified, in order to operate a business one must be in possession of a tax clearance, traders’ licence and bank account. This is where the problem lies. An applicant needs one document to get another. For instance, as a first time applicant a trader’s licence is needed to acquire a tax clearance and vice versa. The process is excruciating.

A review of these processes by the LRA and the ministry of trade is necessary in order to synchronize the acquisition of documents and to make the lives of business owners simpler. The future of entrepreneurship and consequently job creation may depend on it.

l Contact Thato for legal and business writing, and speaking at business events on 58419117 or t_mokhothu@yahoo.com