The implementation of the current draft Licensing of Businesses Bill would harm small business growth and must be subjected to a regulatory impact assessment, business organisations said on Wednesday.
The legislation was intended to ease the business licensing process and crack down on illicit business activities, but had, instead, attracted criticism from South African organisations for its inefficiencies, lack of clarity, potential criminalisation of legitimate businesses and potential extensive negative impact on businesses in the country.
In the latest criticism towards the well-intentioned legislation, Business Unity South Africa (Busa) and the South African Chamber of Commerce and Industry (Sacci) warned that the added registration bureaucracy would stifle the development and growth of small and medium-sized enterprises (SMEs).
“[The Bill would] … further harm a sector which is presently struggling with a high business failure rate,” Busa CEO Nomaxabiso Majokweni said, adding that it was “yet another piece of legislation that overwhelms small businesses with its compliance and regulatory framework”.
Sacci CEO Neren Rau added: “ … the additional layer of registration bureaucracy and the host of interventionist measures will hurt business confidence and job creation potential in the most vulnerable segment of the business community”.
Majokweni stressed that the compliance burden of the Bill was too onerous and would divert time and resources away from the core business of companies and heighten the risk profile of businesses facing the challenges of limited access to finance and cash flow bottlenecks.
Further, the draft legislation was deemed counterproductive to the aims of the National Development Plan, which targeted SMEs as the creator of 90% of all jobs by 2030, while the effect of various regulatory requirements would be to drive the cost of doing business higher.
The Bill was also expected to increase the administrative burden on already capacity-strained municipal authorities tasked with overseeing the licensing processes.
The South African Institute of Race Relations earlier this week warned that the Bill would require an “army of bureaucrats” at municipal level to implement and, with over 6.3-million businesses to register, the currently short-staffed and inept municipalities were likely to buckle under the extra responsibilities without the employment of more officials.
Rau also noted that the Bill would provide government officials with broad powers, such as entering and investigating businesses’ premises, ordering the licence holder to attend an interrogation and confiscating property.
“Whereas similar powers in, for example, the Counterfeit Goods Act, are balanced with protection measures to business owners from arbitrary use of authority, the current Bill has no such mechanisms,” he added.
Sacci further noted that the cost imposed by the legislation was unlikely to be proportional to the cost of the damage done by illegal activities, such as counterfeit goods sales or the contravention of immigration laws.
“It should be noted that there are existing mechanisms to enforce compliance in the very legislation which the Bill seeks to enforce, which makes the Bill largely redundant,” he added.
Corruption Watch last week slammed the Bill, believing it to be open to corruption and abuse, not least by way of traffic enforcement officials being used to police compliance.
Corruption Watch called for an overhaul of the Bill.
Similarly, the Free Market Foundation last week expressed its opposition to the Bill and called for its withdrawal, saying it was “draconian, unworkable and susceptible to corruption”, as well as being the opposite of government’s promises of less bureaucratic red tape.