Business Licensing Bill pt. II

The proposed Business Licensing Bill, which has been lambasted by critics as draconian and impossible to implement, will be significantly redrafted to take account of public submissions, Trade and Industry Minister Rob Davies promised last week. This brief examines the new developments.

Criticisms at a glance


The Business Licensing Bill has been met with widespread opposition. Business, civil society and informal traders have said it would:

  • drown the small business sector in paperwork;
  • increase the scope for bribery and corruption by municipal officials; and
  • overburden municipalities.

Specific organisations and people

  • African Christian Democratic Party MP Steve Swart said the additional licence requirement would be "time-consuming and onerous to obtain", especially for informal traders.
  • The Free Market Foundation has again criticised the Bill as draconian, unworkable and contrary to state policy. Executive Director Leon Louw said the Bill could have far-reaching consequences for traders and maximise corruption by the state and police. "The licensing laws criminalise ordinary economic activity, and create opportunities for corruption" said Mr Louw.
  • Informal traders — who the department says will benefit from the Bill — say it would, among other things, prejudice illiterate traders and give officials far-reaching powers to confiscate their goods.
  • Geoffrey Nemakonde, who trades on a Johannesburg street, said the Bill did not benefit traders and gave power to police, who already made life difficult for traders in the city, to further exploit them. "If you look at this bill, it looks like it wants to legalise the corruption that is happening every day," he said. [1]
  • According to Piet le Roux, senior researcher at the Solidarity Research Institute, the Bill would be detrimental for employees, employers and consumers and would pave the way for serious privacy violations and abuse of state power. “The real aim of the Bill is not promoting, but restricting and hindering the right to freedom of trade, occupation and profession by subjecting it to harsh, arbitrary regulations,” Le Roux. [2]

Promised revisions


The Minister accepted that the current version of the Bill is too crude. It is promised the revised Bill would be a "significantly improved product" from the published draft.  
A new model for the registration process will be proposed which will improve the previously stated onerous process in the Bill:

  • Importantly there must be a national database of all registered businesses at municipalities so records can be kept of who is trading and where,
  • this process will be examined in order to minimize the time spent consulting with the local governments, 
  • the decision to attempt the clearance of illegitimate businesses in the economy will remain unchanged,
  • a second database will be set up which will contain lists of individuals who have been found to be in transgression and denied registration,
  • the aim of this is to penalise transgressors by excluding them from business operations indefinitely or for a specific period through a judicial process.

"We have a significant illicit economy which is damaging the prospects of small business operators, particularly in townships. This is the economy of illegal imports, of trade in substandard products, of people who don’t pay VAT, and then compete with people who observe all these requirements." Minister Davies [1]


A single business register not due to the Bill


According to Trevor Manuel, Government has initiated the start of single business register that will include information from the South African Revenue Service (SARS), the Companies and Intellectual Property Commission (CIPC) and Statistics South Africa combined into one database. There have been various instances where a need for a single business register has occurred. This incorporated system would require co-ordination of the three disparate systems of records managed by these entities. There are challenges faced for such a system, such as false business registrations and fraudulently applied directors’ records, and requirements of the new Companies Act but these challenges aside, the first phase of the system of a single business register was initiated on May 4. [3]


HSF Comments


We welcome the fact that the Bill will be redrafted. The issues of onerous administration and overburdening municipalities have been noted and promised to be revised.

However the Bill can still be perceived as inhibiting business. This perception prevails as business activities need governmental approval before they can continue. With this in mind it appears that business which is not illicit or fraudulent will still be viewed as unacceptable simply because it is not licensed.

A second point is that nothing is mentioned about the power given to inspectors. This attracted much criticism, in the first draft, as it could lead to bribery and corruption. This remains an area of concern and is not being tackled effectively.
If the reason given for the Bill is to have a single business register, there seems to be a miscommunication as this is already being developed. Why then, this Bill?




23 May 2013
Eythan Morris –
Helen Suzman Foundation