Synopsis of Institute Submission
According to the Department of Trade and Industry (DTI), the Licensing of Businesses Bill of 2013 (the Bill) is intended to ‘promote the right to freedom of trade, occupation, and profession’. It is also supposed to ‘encourage a conducive environment that promotes compliance and sustainability of businesses’.
Instead, the Bill will truss up all businesses, both large and small, in yet more onerous red tape. Its impact will fall most heavily on small and medium enterprises (SMEs), which lack the resources to deal with still greater administrative burdens.
Contrary to DTI assurances, the Bill will indeed spawn new bureaucracies at municipal, provincial, and national levels, for these will be needed to consider and grant licence applications, maintain business registries, and write reports. It will thus increase the already high costs of the public service without bringing any compensatory economic benefit. The Bill will also place a huge additional administrative burden on all municipalities, many of which are already unable to discharge their core responsibilities.
The Bill requires all hawkers to obtain licences and threatens them with extraordinary penalties – including imprisonment for up to ten years – for engaging in unauthorised trading. In doing so, it will repeal a 1991 statute which largely freed hawkers from such constraints. Instead, it will subject informal traders to penalties far greater than those ever applied under apartheid.
Foreigners wanting to operate as hawkers will also need licences, but will be barred from obtaining these unless they already have valid business permits issued under the Immigration Act of 2002. Writes Jonathan Crush, honorary professor at the University of Cape Town: ‘This means that every cross-border trader and informal entrepreneur from neighbouring countries will first have to apply for a business permit in their country of origin and guarantee that they have R2.5m to invest in South Africa before they can get a licence to trade.’
The Bill also seeks to impose the same excessive penalties – again including imprisonment for up to ten years – on those who:
· fail to produce a licence on request; or
· engage in ‘fronting’ by applying for licences in their own names but on behalf of foreigners wanting to go into business here.
The Bill will foster corruption and the extortion of bribes. It will also undermine the rule of law by allowing inspectors to issue ‘administrative fines’ in contravention of constitutional guarantees of due process, administrative justice, and access to court.
In addition, the Bill will take up the time of policemen who ought instead to be concentrating on combating much more serious crimes. It is likely to promote xenophobia, while cutting consumers off from the better goods at cheaper prices that foreign traders often bring.
Writes Professor Crush: ‘The Bill is a fundamental attack on key aspects of South Africa’s vibrant and growing informal economy, which provides a livelihood for many people. One of the less subtle objectives of the Bill is to make it so difficult for non-citizens to operate small business in South Africa that they will go home. If they stay and contravene the legislation, their property and goods will be seized and they face the prospect of a heavy fine or imprisonment or both. A quicker way to criminalise hard-working small-scale entrepreneurs is hard to imagine.’
The impact on employment is also likely to be severe, for if these entrepreneurs are forced out of business, the many South Africans they currently employ will also be thrown out of work. This will worsen the existing crisis of joblessness within the country.
In addition, the Bill contradicts the National Development Plan (NDP), which sees 90% of the 11m new jobs it envisages by 2030 as arising from small businesses. The NDP thus calls for regulatory reform to encourage ‘mass entrepreneurship’ and the growth of small businesses.
The Bill instead creates major additional bureaucratic hurdles for SMEs, in particular, to surmount. In doing so, it poses a great threat to job creation, especially in the small business sector the NDP sees as vital to the attainment of its goals. The Bill thus contradicts the NDP, which is supposed to have an ‘overriding effect’ on all the ruling party’s policy choices. This conflict, in itself, provides sufficient reason for the DTI to withdraw the Bill in its entirety.
South African Institute of Race Relations 17th April 2013
