What is the Business Licensing Bill (‘Bill’)?
The Bill is a draft law stemming from the Department of Trade and Industry (DTI). It aims to achieve a registry of all businesses operating within the country in both the formal and informal sectors. This will be accomplished by the businesses having to register with, and obtain a licence from, their local municipality. This Bill replaces the Business Act of 1991 which required businesses that served food, operated health facilities such as massage parlours, or entertainment venues, to be licensed with local authorities.
Within the planned legislation:
The Bill intends to provide an uncomplicated, facilitative framework for the licensing application procedures by providing set norms and standards. Another endeavour is to promote competent governance and support.
Objections
The Mises Institute of South Africa has sent a formal objection to the DTI on the Business Licensing Bill. Some submissions made to the DTI include:
“Nothing, absolutely nothing, will escape the clutches of the bureaucracy which the Bill will require. The country will be deluged by wall-to-wall apartheid-style bureaucrats, who will control everyone who supplies anything” Leon Louw (3)
Section 25 of the Bill seems to validate this view as hawkers could face an astonishing punishment for doing business. If one is found guilty of the offence, which is trading without a licence, one would be liable to a fine of an unspecified amount or imprisonment for up to 10 years or both. In accordance with section 42 any number of onerous requirements could be added under the authority of this blanket provision and the justification for this Bill. (3)
State reaction
According to Lionel October, Director General of the DTI, the Bill will merely extend and standardise the issuing of licences. This process already exists but is not being implemented uniformly. It is claimed that the process of registration would be simple, fast and cheap:
"As soon as people hear regulation, they automatically think that socialism is coming in. It is a complete overreaction. Every successful economy has a set of well-managed, simple regulations." (4)
Advantages of this Bill according to October are:
Private sector reaction
Business Unity SA (BUSA) believes that there is merit in what to the Bill seeks to achieve with regard to promoting an environment conducive to business expansion and ensuring compliance. However, they also consider it as yet another piece of legislation that overwhelms small businesses with yet another piece of legislation to comply with in an already extensive regulatory framework.
BUSA believes that the current draft of the Bill will unintentionally impede the growth and development of small and medium enterprises (SMEs) and further harm a sector with an already high business failure rate. This is also worrying considering that most economists see SMEs as being the engines of growth in developing economies. The Bill contradicts the National Development Plan (NDP), which sees 90 percent of all jobs by 2030 derived from the small enterprises sector.
Areas of concern to business are:
HSF Comments
The requirement of a license to trade would increase the tax revenue that the country gains as those businesses would be taxed which would lead to an improved fiscus.
However, the draft licensing legislation should be subjected to a regulatory impact assessment analysis so that all the consequences, intentional and unintentional are considered with regard to this Bill.
The power given to inspectors should be regulated so that possible instances of abuse of that power can be minimal.
Additionally, we need to align more economic and business policies with the ideas and goals of the NDP as well as to purposely cultivate SMEs, instead of creating more paperwork that could overpower them.
References
(1) Business Licensing Bill 2013
(2) http://www.mises.co.za/2013/04/objections-to-the-licensing-of-business-bill-of-march-2013/
(3) http://www.polity.org.za/article/the-licensing-of-business-bill-the-government-must-come-clean-2013-05-07
(4) http://www.sanews.gov.za/south-africa/bill-standardise-business-licences-%E2%80%93-october
(5) http://www.busa.org.za/docs/BusinessDraftBill
Eythan Morris – eythan@hsf.org.za
Intern
Helen Suzman Foundation