Parliament must urgently prioritise passing the of National Small Enterprise Amendment Bill to kick-start the revival of small businesses in these most trying of times. The bill was drafted by the department of small business development to deal with challenges facing the sector. It is timely and welcome but long overdue.
For far too long corporate SA and government in general have been able use their huge budgets to undermine the interests of small business. Yet that is the very sector expected to grow the economy and create employment. An unemployment rate of 34.4% or 12-million people without a job, is a threat to social stability.
The principles of fairness ingrained in the constitution must contribute to the country’s national objectives: the eradication of poverty, unemployment and inequality. We cannot have the best constitution and a great number of entrepreneurs who are disadvantaged in commercial activity and administrative law.
The bill provides for the establishment of a fully capacitated office of a small enterprise ombudsman to administer justice for the sector. That removes the legal costs from SMMEs to pursue fairness in contractual relationships with bigger partners. This would ensure equitable access to justice and, hopefully, the no-cost provisions of the bill will not result in mediocre legal representation for SMMEs.
The next area of interventions should now be in procurement where, again, small businesses are not only disadvantaged in the procurement of goods and services, but also in the arrangements that govern relations between the large economic actors, government and the emerging businesses sector, especially small businesses.
As a result of some of the procurement processes, small businesses find themselves in draconian contracts biased in favour of corporates and government. In this aspect of contracts the bill attempts to level the playing field by introducing a new jurisprudence to bring a semblance of fairness to the relationship between big and small business. That will make an important contribution to addressing an otherwise structural imbalance in the economy.
The referred to contracts have seen big players abuse their market position to the extent of allowing unfair business practices at the expense of smaller enterprises. They continue to pass on a disproportionate level of risk to the smaller party, which is often desperate for business; and after extracting value from the smaller party, larger organisations sometimes use prohibitive contractual provisions to pull the rug from under their feet. This is responsible for crippling many emerging businesses and contributes to the high rate of business fatalities in SA.
Further to this, the bill will allow the ombud to make determinations and rulings on payment terms and empower the minister of small business development to declare certain practices prohibited unfair business practices. Many corporates and organs of state either do not respect payment terms or withhold payment from small suppliers in the hope that they disappear or do not have the funds to pursue legal action.
Name and shame
The bill lists a number of potentially unfair business practices and is on point in identifying some of the frequent abuses of corporates and others. In particular, it mentions ambiguous contract terms and transferring unreasonable risks to smaller parties. It also covers retrospective and unilateral changes to contracts and agreements, as well as the sudden and unjustified termination of commercial relationships, and termination without reasonable notice. It affirms the rights of small enterprises to fair and honest dealings with bigger parties, and the need to hold large enterprises and organisations to account.
The bill may result in the naming and shaming of perpetrators It should, in fact, go further. There are perpetrators in these institutions that perpetuate the mistreatment of SMMEs; some even preach transformation and empowerment while maliciously needling those whose interests they pretend to advance.
On the other hand, the potential of vexatious and frivolous claims by small enterprises that could arise from the implementation of the bill should be discouraged. Safeguards are needed to avoid exploitation of the provisions of the bill by SMMEs seeking to make a quick buck.
There is criticism that the bill introduces more red tape and that it could encroach on existing laws and regulations. While other forms of red tape may be unwelcome, additional protection for small business should generally be embraced. We cannot have a situation in which small businesses generally do not have a dedicated legal support system.
The bill fills a gap that should have been addressed from the start of SA’s constitutional democracy. There are concerns about the enforceability of the rulings of an ombud, and legislators need to address this and ensure the finality of cases. This intervention is long overdue and the department should be commended for introducing what may be a game-changer for emerging enterprises.
• Hansby is executive director of Senzeni Consulting and Mazwai executive chair of Mtiya Dynamics.
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