The government is proposing to cut costs and red tape associated with business licensing to unlock the potential of small businesses via the country’s first national policy-level guidance on general business licensing in SA.
The end game is to harmonise national, provincial and municipal business licensing to ensure synergy and alignment with regulations and business licensing bylaws.
The timing of the national business licensing policy proposal coincides with Capitec CEO Gerrie Fourie’s comments about unemployment figures, which exploded into a national conversation about the role of informal entrepreneurship in employment statistics. The proposal to cut regulatory friction could be seen as offering an institutional pathway to formalise that activity.
The national business licensing policy introduces a common licensing framework for the regulation of trade governed under the general business licence which, once approved for implementation, will guide the development and implementation of any business licensing legislation, regulations and systems.
Constraint
The policy states that weaknesses in the licensing system can become a regulatory constraint to the business-enabling environment.
“Relatedly, they may result in unnecessary restrictions to entry into the market, limit the supply of important goods and services and constrain the potential for enterprise progression from informal to formal levels,” the policy reads.
It calls for clear licence application parameters and procedures, and consistent application thereof in respect of all applications and the optimal use of digital technologies to support the implementation of licensing. It states that this must be prioritised, taking into consideration each municipality’s financial resources, e-government services should be pursued in respect of licensing, and that authorities “should recognise licensing as a regulatory tool and not view it as a fiscal tool”.
The policy states that fees should be limited to “recovering the administrative costs of licensing and not serve as instruments for revenue generation” and that licensing policies should be designed so that they lessen the burden of regulation and compliance, and contribute to the reduction of red tape.
“The policy emerges after more than three decades of the implementation of the main legislation governing business licensing, the Business Act 71 of 1991,” it states.
The policy provides a basis for the updating of the Business Act and brings the business licensing regime into compliance with the National Policy Development Framework, which requires that all legislation should be informed by policy. The proposal provides for a national policy co-ordination and integration structure to be established and be responsible for the overall development and implementation co-ordination of the policy action plan. This co-ordination is to be led by the department of small business development.
It also provides for the establishment of provincial policy co-ordination and integration structures in each province. Under the policy, the policy action plan structures must comprise relevant stakeholders, including the private sector, trading associations and public sector actors in the business licence environment.
The success of the implementation of the policy will be closely watched as the government has, over the years, called for cutting red tape for small businesses, with no notable successes so far.
President Cyril Ramaphosa in 2019 established a red tape reduction unit in 2019 to cut down the administrative burden for small businesses. He appointed Exxaro CEO and Sasol chair Sipho Nkosi to lead the unit. The National Development Plan (NDP) also identified the need to reduce red tape among other interventions in support of small enterprises.
The NDP projected that by 2030 up to 90% of new jobs will be created by small and medium enterprises — a target that will woefully be missed.
Vital component
The national business licensing policy states that the licensing of businesses is a vital component in the creation of a positive, enabling local environment for trade to thrive and for the empowerment of micro, small and medium-sized enterprises to fulfil their potential.
The policy states that through the licence to trade, these businesses can execute their business ventures, create jobs and revenue for the economy, and pursue growth and sustainability.
“Red tape arises not only from the administrative burden of the processes of the business licence but also from the dispersed nature of the delivery of the function. Over 200 municipalities are the licensing authority for the relevant jurisdiction and this has a red tape effect on enterprises,” the policy states.
“The simplification of both the content and process of licensing aims to counter this, among others, through advocating for the use of digital technologies and the implementation of e-government.”
Most of the business licensing functions are typically housed within the local economic development unit of municipalities. However, a survey by the department of small business development found that only a few municipalities — primarily metropolitan ones — reported having dedicated business licensing units. The department has also proposed to municipalities to look into the feasibility of introducing five-year validity periods for business licences.
“The majority supported this approach, citing potential benefits such as a reduction in non-compliant businesses, decreased reliance on confiscation operations by enforcement officers, and reduced administrative burdens on both business owners and municipal offices,” the department said.
SA can make a dent in unemployment if it frees the informal sector from overbearing regulations, including restrictive zoning in urban centres, a working paper from the University of Cape Town, in conjunction with Harvard University, has suggested.
The paper said the country’s high unemployment could be partly explained by informal sector activity that is abnormally low relative to its peers.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.