The Small Business Institute (SBI) has shared its discontent about certain provisions in the National Small Enterprise Amendment Bill, which has been gazetted for public comment, albeit not in “draft” format as is customary.

The SBI is most concerned with the provisions in Chapter 3A, which the organisation says sets out sweeping powers for both the Minister and a proposed Ombud, potentially encroaching on, and overriding, already established civil and contract law in South Africa.

SBI CEO John Dludlu explains that defining arbitrarily what constitutes an “unfair trading practice” and granting powers for an Ombud to intervene in contractual arrangements or other legal relationships between small enterprises and any other party could well lead to indiscriminate intervention and the potential for “ombudpreneurs”, who would not be prevented under the amendments from vexatious or frivolous claims.

Additionally, he believes the Amendment Bill would contribute excessively to the "already eye-watering" amount of red tape confronting small, medium-sized and microenterprises (SMMEs). It is also unlikely to promote prompt payment of invoices, he notes.

“Without a regulatory impact assessment, which is in the power of the Minister to exercise and indeed require of her fellow cabinet ministers, this is another example of policy on the hoof,” he says.

Dludlu continues that there is no indication of what the establishment of an Ombud would cost – let alone what it would cost to maintain – and the proposal comes at a time when the National Treasury is forced to siphon off budget from dozens of programmes and agencies to "feed the hungry mouths of a failed airline, let alone afford a Covid-19 vaccine, arguably the most pressing problem of our age".

The SBI would also have expected to see the following in the Bill: a business case for legislative intervention; fact-based reasoning to support the interventions contained in Chapter 3A; that the interventions are proportionate to the problem and minimise consequences; expected costs for the proposed Ombud and whether other measures were considered; and a list of all affected parties consulted, their responses, and how concerns were addressed.

Dludlu also points out that a number of Ombuds, including the Tax Ombudsman, the Consumer Protection Commission, the Banking Ombudsman, were already available to small business owners.

“Such institutional overlaps cannot be justified, nor can any potential interference in international trade agreements, treaties, or tribunals.

“There is no specificity in the Bill in respect of late payments, not even how ‘late’ should be defined, leaving yet more room for interpretation. While there are no data available about how ‘late’ small firms are paid by big businesses, we do know that the average delay in payment from government ranges from 90 to 181 days and more, according to the Department of Planning, Monitoring and Evaluation (DPME).”

Dludlu notes that it is not legislative guidance that is lacking on the matter, but administrative competence.

Instead, the SBI proposes the following considerations in its submission to the Minister.

It suggests that the threshold for Small Claims Court claims be increased to R15 000 and that juristic persons/small businesses be allowed to approach the court for dispute resolution.

It also proposes that more resources be directed to the DPME Special Unit to help small businesses receive payment on their invoices.

Further, it believes monitoring processes should be strengthened and that better enforcement of payment policies within government be pursued.  "At the very least, develop a log-in system for invoices to track payments in government, benefiting both government departments and small business suppliers.

Lastly, it says government should consider finding ways to partner with business in voluntary campaigns such as #Payin30 to institutionalise a culture of 30-day payment to small businesses amongst the broader business community.

The mandate SBI has from its chamber and business forum members is to positively influence the environment in which South Africa’s SMMEs are struggling to start, run and grow.

“Instead of layering legislative interventions on top of others that fail to create a nurturing ecosystem that supports enterprises of all sizes, we implore the minister to reconsider and withdraw the ill-advised Chapter 3A of the Amendment Bill,” Dludlu urges.