The state’s plans to overhaul the business licensing regime have been met with resistance from the National Employers’ Association of SA (Neasa), which represents about 7,000 businesses and says the proposed changes are “nothing but BEE in disguise”.
Some of the proposals Neasa has taken umbrage with include the proposal to empower local councils to make bylaws to provide for preferential business licensing for the small businesses owned by disadvantaged groups.
This may include shortened, simplified application and renewal processes, lower application fees and the waiver or suspension of fees, which is potentially a big ask of cash-strapped municipalities.
The organisation, not new to legally challenging SA’s race-based laws, said the draft Business Licensing Bill would devastate jobs if implemented in its current form.
“Neasa unequivocally rejects the notion that the issuing of business licences must be based on any system of preference which may unduly preclude any group of society from being eligible for obtaining a business licence or which disqualifies any group for preferential treatment as a result of their demographic, ethnic or national background,” it said in its submissions on the draft bill.
“The premise for Neasa’s contention lies in the exclusionary nature of such an intervention, which, at its core, is discriminatory and defeats the very purpose of this policy and the principles of a free market,” it said.
“Neasa notes that this preferential business licensing intervention may also snugly fit among a slew of failed affirmative action laws, which form part of the SA government’s ‘transformation’ agenda and which Neasa vehemently opposes.”
The department of small business development last week extended the extension for public comments on the proposed bill to November 28. “This decision follows heightened interest from stakeholders across the country and numerous requests for additional time to prepare and submit inputs,” the department said.
The bill, which is meant to repeal the Businesses Act 1991, also makes provision for the designation of trading areas for citizens and small businesses. To this end, municipalities, acting as licensing authorities, may, after consultation with the MEC of the relevant province, make bylaws to designate any specified area within their jurisdiction to be a trading area for the exclusive participation of small enterprises.
The bill follows the publication earlier this year of the country’s first national policy-level guidance on general business licensing, geared to cut costs and red tape associated with business licensing. The endgame is to harmonise national, provincial and municipal business licensing to ensure synergy and alignment with regulations and business licensing bylaws.
The policy document implores municipalities to recognise licensing as a “regulatory tool and not view it as a fiscal tool” to bolster the coffers of the cash-strapped councils.
Constraints
Small businesses have a high failure rate in SA, with 60%-80% failing within the first five years and sometimes within three years. Red tape, lack of financing and burdensome regulatory requirements have been cited as the biggest constraints.
Neasa said it does not support the concept of preferential business licensing, arguing that this could be further abused as a fiscal, money-collecting tool that will only overburden small businesses.
“Neasa stresses that the repeal of old legislation purportedly for purposes of emphasised ‘redress’ for past unjust licensing practices should not be read into and included in preferential licensing practices that are proposed by the bill. Preferential regulatory systems are harmful and damaging to the organic working of free market powers, which are vital for sustainable economic growth and job creation,” it said.
“Preferential business licensing must therefore be removed from this legislative scheme. Instead of encouraging diversity and inclusion, where preferential licensing can be used as a tool that promotes participation for SMMEs for certain industries, it will result in the willy-nilly exclusion of persons from the market and inevitably be to the detriment of vulnerable minorities and their businesses.”
The National Development Plan (NDP) projected that by 2030 up to 90% of new jobs would be created by small and medium enterprises, a target that will be woefully missed.
The challenge to the proposed business licensing regime comes in a year that broad-based BEE (BBBEE) has been topical in SA’s political and business circles.
The country’s second-largest party, the DA, which also forms part of the government of national unity, has stated its intention to do away with BBBEE — a mission it has made its central election campaign focus heading to next year’s local government polls.
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