The document discusses regulatory impact assessments (RIA) and the costs of red tape in South Africa. It provides examples of SBP's work conducting regulatory compliance cost studies and best practice assessments in multiple countries. RIA is presented as a tool to evaluate the need for government intervention and identify unintended consequences of regulatory proposals. The benefits of RIA include more efficient, evidence-based decision making and reduced costs. Key aspects like oversight, consultation and transparency are compared for RIA processes in various countries. The document concludes with lessons learned around implementing RIA and the aim of cutting unnecessary regulatory costs while maximizing benefits.

1. The Western Cape Government
Economic Development and Tourism
Red Tape Reduction Conference
29 & 30 September 2014
Chris Darroll

2. Cost of Red Tape in South Africa &
Regulatory Impact Assessments
SBP’s work on regulatory costs and impacts:
• Regulatory best practice assessments
Botswana, Ghana, Kenya, Malawi, Tanzania, Uganda, Nigeria, Zambia, South Africa, Vietnam
• Regulatory compliance cost studies (red tape)
- Counting the Cost of Red Tape for Business in South Africa
- Cutting the cost of Red Tape for Rwanda
- Sectoral studies, eg. Counting the Cost of Red Tape for Tourism in South Africa
• Administrative barriers to investment in South Africa
joint partner with the World Bank
• Regulatory Impact Assessments (RIA)
- South Africa
- Western Cape
- Vietnam
- Nigeria

3. What do we mean about
regulatory costs?
Three types:
• Efficiency costs
• Compliance costs
• Costs of non-compliance

4. Costs of complying with regulations and administrative procedures which
include:
• Time spent on understanding rules and complying with them
• Fees to service providers (eg. accountants, tax consultants)
• Costs caused by delays and inefficient procedures
Not all regulations are red tape
What is red tape?

5. SBP’s compliance cost survey of 1,800 businesses (small, medium, large) nationwide
showed - in 2004
• Total compliance costs – red tape – amounted to R79 billion
• 6,5% of GDP
• 2,8% of total turnover in 2003
• 16% of the total wage bill in 2003
• 28% of SARS revenue (2002/2003)
• Big firms have the largest cost in real terms
• But, small firms bear the heaviest burden relative to size
Red tape in South Africa

6. SBP’s SME Growth Index (longitudinal study tracking 500 firms employing less than
50 employees in Cape Town, Durban and Johannesburg metropoles):
• Each firm spent on average 75 hours a month dealing with red tape
• Using conservative estimates of the Davis Tax Committee this amounts to each business
owner spending equivalent of R18 750 per month or R225 000 per year, per firm.
• Correlations show that in 2013 cost of red tape was between 4.5 – 6% of turnover for SMEs
• Almost 60% of firms reported that they did not know all the regulations they were expected to
comply with
That was then, what about now?

7. Regulatory Impact Assessments (RIA)
How can red tape be reduced without
reducing the benefits of regulation?

8. • A tool to test the practicality & feasibility of regulatory proposals
• Assesses need for govt intervention and options for interventions
• Identifies possible risks, adverse impacts & unintended consequences
• Ensures the benefits justify the costs
• Looks for most cost-effective option
• Enables meaningful consultation
• Can be applied to new & existing laws
• A means of achieving priority policy objectives (eg. increase growth & jobs)
• Key instrument for better regulation
What is RIA?

9. • Ensuring that govt only regulates when necessary
• Keeping adverse impacts to a minimum
• Evidence-based policy making
• Informed decision-making
• Encompasses 5 key principles
What is better regulation?
Proportionality Regulation should be appropriate to size of problem
Targeting Regulation focuses on the key problems & does not cause
unintended consequences in other areas (economy & society)
Consistency Decision making is predicable & avoids uncertainty
Accountability Regulatory actions & outcomes accountable to Ministers,
Parliament, users & the public
Transparency In all matters of decision-making in regard to process &
decision taken
Source: “Imaginative Thinking of Better Regulation”, BRTF, UK Govt

10. Key Features
RIA Practice – South Africa and other selected countries
Country Year RIA
Introduced
Formal
Requirement
Central
Oversight &
Quality
Assurance of RIA
RIA published
alongside
legislation
Public
debates/scrutiny
of RIA process
Australia 1985 ✓ ✓ ✓ ✓
Canada 1992 ✓ ✓ ✓ ✓
United States 1974 ✓ ✓ ✓ ✓
United Kingdom 1985 ✓ ✓ ✓ ✓
Northern Ireland 2001 ✓ ✓ ✓ ✓
New Zealand 2001 ✓ ✓ ✓ ✓
Estonia 1996 ✓
Lithuania 2003 ✓
Poland 2004 ✓ ✓ ✓ ✓
Mexico 1996 ✓ ✓
South Africa 2007 ✓

11. • Encourage careful consideration of options before deciding on
regulation
• Improves quality of evidence informing decision making
• Enhances efficiency by thinking through broader impacts,
consequences early in the process
• Increases transparency and accountability by clearly stating reasons
for and implications of decisions
• Benchmark for measurement + evaluation post-implementation
• Increases participation through consultation and government
co-ordination
Why RIA – The Benefits

12. RIA improves Public Sector performance
Analysis:
Costs & benefits of
Govt action
Increase benefits
Lower costs
Reduce policy failures
Consultation:
Responsiveness
Transparency
Build Trust
Reduce information
monopoly
Integration:
Getting depts. to
work together
Policy
coherence
Reduce silo mentality
Change Culture:
Increase
Responsiveness
Accountability
“client” orientation
Reduce unneeded
regulation

13. Source: SBP RIA insight Training programme
RIA in summary

14. Message to governments
• Clarify what RIA should achieve – what will success look like
• Manage expectations at the outset
• Understand the existing environment – “regulatory audit” and building consensus on a
regulatory reform agenda
• Build momentum at all levels through champions, platforms, etc, with reform incentives
(bottom up)
• Design methodology, performance management and pilot (testing for survival in the
system)
• Formal and explicit policy and endorsement (top down leadership)
• Activate actors (private sector, CSO, media, parliament, etc) in regulatory system
(sustainability)
• Formalise methodology and implement
• Monitor, evaluate and refine (accountability)
• Applying RIA flexibly
• Awareness raising of RIA at the outset of the concept and continuously
What have we learnt about implementing RIA?

15. • Compliance costs – red tape – can never be reduced to zero
• Aim should be to cut unnecessary costs, reduce negative impacts and
maximise benefits
• Need to assess impacts, benefits and costs objectively for regulatory proposals
• Uncover the causes of inefficiencies and high costs
- baseline against which to measure the impacts of regulatory change and
reform
In summary

16. Chris Darroll
Chief Executive, SBP
Tel. 011 486-0797
chris@sbp.org.za
www.sbp.org.za
Thank you