Regulatory compliance and strict labour legislation are the top challenges to business growth, as identified by 369 firms interviewed in the 2026 Business Environment Survey.
The Cape Chamber of Commerce and Industry commissioned the Bureau for Economic Research at Stellenbosch University to survey 369 businesses to identify what needs fixing to promote much-needed economic growth.
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Cape Town-based consultancy Impact Economix managed the survey’s design, analysis and reporting.
The survey focused predominantly on the Western Cape, with 308 of the 369 participating businesses based in the province, and many of the constraints identified originated nationally from state-owned enterprises, regulators and government departments.
Labour legislation
Almost 80% of the 23 largest employers surveyed – businesses with more than 200 staff – rated labour legislation a serious constraint, and the same group put skilled-worker shortages close behind.
According to the Employment Equity Amendment Act, South African businesses with 50 or more employees are designated employers that must follow national employment equity laws by setting five-year numerical targets and submitting employment equity compliance reports.
Some respondents said the additional employment equity requirements applicable to businesses with 50 or more employees discouraged them from expanding beyond that threshold.
“We cannot transition from 45 staff to more than 50 due to the massive additional cost and legislative burden posed by employment equity,” a medium-sized manufacturer said.
Labour was rated a serious constraint by 73.6% of 53 manufacturers and 64.7% of 17 construction businesses. But it was less of a concern for the financial and business services, government, education, and health and social services sectors.
Labour laws versus skills shortage
“Labour rules and the skills shortage feed each other,” CEO of the Cape Chamber John Lawson said.
“Fix the rules, and businesses can reach the expertise they need to grow and to hire.”
South Africa’s official unemployment rate increased to 33.6% in the second quarter of 2026, up from 32.7% in the first quarter, with the total number of unemployed rising by 345 000 to 8.5 million, according to the Statistics SA Quarterly Labour Force Survey.
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The survey asked over 360 respondents to rate 61 named constraints as seriously limiting, slightly limiting, not limiting at all, or not applicable at each of the four levels. The intention is to repeat the questionnaire at regular intervals to create a database that can inform economic policy and targeted interventions.
“It is the responsibility of business, through surveys like this and other means, to clearly articulate what is needed as a priority,” Lawson said.
The Port of Cape Town and the decaying freight rail network come up repeatedly, named as costs rather than assets.
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Municipal constraints were also highlighted, with traffic in Cape Town and public transport being key concerns.
Lawson said there is real frustration at the slow pace of reform of the rules that hold business back.
Source: https://www.moneyweb.co.za/news/economy/large-businesses-flag-labour-legislation-as-key-constraint/