Sneering bargaining council officials are often the last straw for small firms

South Africa has a dual economy: one that thrives in an environment of fairly minimal regulation and another stifled by the dead hand of the bargaining council system.

If you are lucky enough to run your business outside of a central-bargaining agreement, spare a though for the probably 25% of South African owner-managers who do fall under a bargaining council.

The worst thing about the system is not the minimum wages that are pegged so high that only large, established companies can afford them.

Nor is it the piles of paperwork that all businesses under bargaining council rule are expected to process, whether they are big enough to afford a human resources and admin department or not.

Nor is it the fact that employers and workers have no choice but to belong to the bargaining councils' often badly run and opaque provident and sick funds, even if they are willing to contribute to much better schemes on the free market.

These things are painful to small businesses and hurt job creation in the industries governed by the bargaining councils.

But the pure poison, the last straw that makes a business owner finally say: "That's it. I've had enough," and shut down his factory, is the attitude of the bargaining council inspectorate.

These officials swagger into the workshops of small businesses with the attitude of a vice squad raiding a brothel. Exuding thick disdain for the owner, they demand to speak to the workers separately.

Their threat to "shut down this place" hangs in the air for days afterwards and the relationship between the rattled owner and the workers never seems the same again.

That's just by way of introduction, to let the business owner know he must register with the bargaining council and start paying levies. When he does so, he is treated with the same aggressive suspicion and sneering officiousness in his interactions with the bargaining council officials.

In their eyes, the small-business owner is presumed to be a transgressor, a sweatshop slave-driver, a dodger of tax and social responsibilities, an exploiter of vulnerable workers.

There is no "thank you" for mortgaging the family home to start a factory in a risky industry and create some sorely needed jobs. No acknowledgement of the fact that the owner hasn't yet drawn a proper salary himself and probably won't for the foreseeable future while his business finds its feet. No appreciation for the fact that it would have been easier for him - and quite likely more lucrative - to stay in his comfortable corporate job than start his own business and create jobs for others.

People who have never run a business of their own do not realise how many times the only thing that keeps a small business going is the will of the owner, and how an encouraging word from family and friends, or a banker or an official somewhere, helps him push through the bad times.

Consider the experience of Victor Yenketsamy, who owned a 50-employee clothing business, Talia Fashions, in KwaZulu-Natal for 13 years. Because of uneven work flow, he fell behind with his bargaining council levies. At one "arbitration" hearing he was fined R13000 for outstanding levies of R27000.

Despite this, and the cheap imports of clothes from the East flowing into the country, he kept going, hoping for better times. Then 18 of his workers who were on short time deliberately botched a production run so as to add to their working hours. (The bargaining council does not allow productivity-related remuneration.)

In the ensuing labour dispute, an official told him: "Why don't all you small people close up, and we can get a rich guy who can open a big company, and employ all the people."

It was that comment that did it for Yenketsamy. He could probably have scaled down and kept the business going in some form, but emotionally, it wasn't worthwhile anymore, and he decided to close down. He remembers how the official suddenly changed his attitude and offered to help with the workers' productivity.

"I said to him, you know, you put me through hell, and now you decide, at the end of everything, that you can help me and get these workers to work properly. Why didn't you do that in the beginning?"

It seems that the government is waking up to the damage caused by the system. The minister of economic development, himself a former leader of the clothing union, recently stepped in to save small clothing factories in Newcastle against closure by the bargaining council. It's a hopeful sign of an official change of heart, but as in Yenketsamy's case, probably too late to save the decimated South African clothing industry.