Licensing of Businesses Bill

Concern that new bill could put added pressure on SMEs

Small business is likely to suffer the most in accordance with the Licensing of Businesses Bill
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The Licensing of Businesses Bill seeks to introduce an additional layer of business registration aimed at curbing offences such as the selling of counterfeit goods. Unfortunately, the bill in its current form suffers from a host of interventionist measures that will materialise as unintended consequences and the likely impact on the economy – especially for the small to medium enterprise (SME) sector – will be negative.

The SA Chamber of Commerce and Industry (SACCI) is opposed to the bill and believes it should not be enacted, but has nevertheless prepared a comment in order to communicate its reservations.

The bill provides that all businesses must register in order to ensure businesses that are guilty of selling counterfeit goods, contravening the Customs Act, contravening immigration laws or contravening health and safety legislations are closed (Section 18).

SACCI appreciates the need for a holistic approach to ensuring the businesses do not contravene South African laws. However, there is a serious question as to whether the cost imposed by such activities warrant a new regime with its attendant cost of implementation and net losses to the economy.

In other words, it is highly doubtful whether the cost imposed by the legislation is proportional to the damages it tries to mitigate. Related to this is the obvious solution that a less expansive initiative be launched to counter the problem, and that some quantitative study be conducted (such as a regulatory impact assessment) in order to test the alternatives.

The need for adequate study of the options open to attain the goals of the legislation is all the more pertinent given that South Africa already has an agency devoted to company registrations, and that the current systems could easily be expanded in order to achieve the stated goals of the bill. This implies that the licencing scheme is, in fact, a duplication of the existing mechanisms for enforcement.

The bill provides broad powers to a variety of government officials (SA Police Service and Metro Police, among others) to enter businesses premises, investigate the premises, order the licence holder to attend an interrogation, and the power to confiscate property. It is clear that such broad powers confer great responsibility which will not necessarily be met, given the history of corruption across government.

South Africa already faces a highly regressive business regulatory environment; big companies can afford in-house lawyers whereas the owner of a small retail operation must devote his own time to filling out official forms and queuing in a government office. The avenue for abuse that the bill opens will only exacerbate the challenging environment faced by small business.

Operating a small enterprise in South Africa requires superhuman patience with endless regulatory burdens, and this is impacting on the cost of doing business and, ultimately, the job-creating potential of the private sector. While business owners are given official platitudes in terms of job creation, the actual working of the law and the escalating cost of compliance are making economic growth and job creation increasingly difficult.

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