The government must explain how it allowed the Business Licensing Bill to be published for public comment without an impact assessment, says Business Unity South Africa CEO Khulekani Mathe.
“Where is the impact assessment that confirms that this bill is in fact taking us in the right direction?”
Such an assessment is a requirement before legislation is introduced, he says.
“It is not clear that [one] was conducted, and if so, what it revealed. Did the department [of small business development] ask what the impact of this bill will be on jobs and growth? It doesn’t appear so. It’s not clear to us what the bill is trying to fix. But what is very clear is that it is going to burden small businesses in the formal and informal sector with onerous regulations impossible to comply with.”
The argument of the department of trade, industry & competition that the bill will curb illicit trade is “fallacious”, Mathe says.
“You do not need this business licensing bill for this. What you need is the effective implementation and effective enforcement of existing regulations governing what may or may not be sold in South Africa, and how goods come into the country. That is what you need.”
Far from curbing illicit trade, the bill is likely to increase it.
“We know that regulations that are not properly thought through and that criminalise something that people do every day pushes them into the illicit economy. We know from Covid that the stupid regulation of cigarettes pushed cigarettes into the illicit economy.”
So the risks posed by this bill should be perfectly clear, he says. “By putting onerous requirements even on well-meaning people who want to do business legitimately, you’re pushing them into the dark, into the illicit market.”
Mathe says the bill flies in the face of President Cyril Ramaphosa’s frequently expressed commitment to cut red tape.
“This is a classical example of how unco-ordinated government is. On the one hand you have the president making the issue of red tape a priority and employing somebody in his office to address red tape. On the other hand, you have this bill. I cannot for the life of me imagine that it comes from the recommendations of [red tape reduction team leader] Sipho Nkosi’s report.”
The rhetoric is that this bill is in recognition of the importance of the SME sector. But the NDP here is being used as a lamppost to pee on
— Khulekani Mathe
He says he can’t imagine that the Presidency supports the bill.
“I’m saying this in the context of the president having said that he wants to cut red tape. So what this bill says is that there is a lack of co-ordination in government that results in this thing.”
It’s not just a matter of a department “waking up one day” and publishing a bill. A lot of work will have been done internally even before the bill got to the draft stage, says Mathe, a policy development veteran with extensive experience in the government.
Draft legislation is submitted to various committees and directors-general, in this case in the economic cluster.
“It gets reviewed and will be given the green light, that ‘we think it ticks the right boxes’. From there it will go to the economic cluster of the cabinet. They will review it and give it the green light, and then it will go to cabinet for approval of the bill to be published for public comment.
“So clearly we must ask the government to explain this. We must also ask the Presidency how they let this happen?”
If the bill will have such disastrous consequences, should the president put his foot down and reject it?
“I cannot answer you and say the president must put his foot down. He had an opportunity to put his foot down when this thing came to cabinet, because he chairs cabinet.”
Busa has raised its objections to the bill “quite sharply” in a submission to the department of small business development, Mathe says.
“Even if the bill was justified, it relies on an infrastructure that is broken. It relies on municipalities establishing business registration offices, but municipalities cannot even collect the litter on their streets. How on earth are they going to be able to do this?
“Somebody who wants to comply with the bill lodges an application but the application is lost or takes forever to be processed because the municipality has no capacity. This bill is going to criminalise people trying to make a living in an honest way.”
The bill gives inspectors the authority to enter premises, confiscate goods and shut businesses without clear judicial oversight. Inevitably, this authority will be abused to extort money, thereby increasing corruption in the informal sector, says Mathe.
How does the bill align with the National Development Plan goal of 90% of all jobs coming from the SME sector by 2030?
“The rhetoric is that this bill is in recognition of the importance of the SME sector. But the NDP here is being used as a lamppost to pee on. To achieve the NDP goal you would need a much more vibrant SME sector. This bill does the opposite of creating a vibrant SME sector.”
He cites a study showing that in comparable countries 45% of people are employed in the formal sector and 45% in the informal sector. The remaining 10% are unemployed.
“In South Africa the first part holds up very well, with 50% employed in the formal sector. But the informal sector is as small as 19%. So we should be allowing more informal economic activity. Not illegal, not illicit, but informal.”
This bill will shrink the informal sector even further. And it will deter investment.
“When you have laws that don’t make sense, and you can impose these laws, it makes investors think, ‘How safe am I in this jurisdiction? Are they not going to suddenly come up with some strange law that may harm my investment in South Africa?’
“It sends a message of a country, an economy, where some arbitrary law can be enacted.”
Business Day
