Ann Bernstein: Business Licensing Bill unsound, disastrous and economically illiterate

Key topics:Business Licensing Bill seen as anti-entrepreneur, restrictive and harshBill grants officials vast power, risking corruption and criminal penaltiesCould stifle growth, punish small traders, and undermine inclusive economy.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Ann Bernstein*.South Africa faces a jobs catastrophe, a growth emergency and a deep, long-running crisis of governance. In such a context, any government genuinely committed to inclusive development would be doing everything possible to encourage the formation of new businesses, ease the pressures on existing ones and remove the bureaucratic obstacles that stifle entrepreneurship.Instead, the minister of small business development has produced the Business Licensing Bill — a proposal so astonishingly ill-judged, so detached from reality, and so hostile to the very idea of enterprise that one must conclude government believes South Africa suffers from a surplus of businesses.The bill does not expand opportunity; it expands paperwork, inspections, penalties and the discretionary power of officials. It will throttle what little growth South Africa can still expect, even as it criminalises people seeking to build livelihoods. It may well be the most anti-business, anti-entrepreneurship piece of legislation to emerge in decades.To understand the bill’s implications, it needs to be compared to the current law: the 1991 Business Act. This provides for licensing only in a narrow band of commercial activities, where licensing serves a clear public-interest purpose — such as ensuring hygiene standards for restaurants and mobile food vendors, and regulating “discotheques” and massage parlours..Read more:.The highs and lows of starting a business after university – SA’s young entrepreneurs speak out.The bill contains no clear definition of the types of activities that should require licensing. Instead, it grants the minister of small business development virtually unlimited discretion to designate any business activity linked to the broad functional areas in schedule 4 of the Constitution — which include everything from housing to tourism to agriculture to electricity — as requiring a licence.In practice, the bill would allow government to declare almost any form of economic activity as requiring a licence simply because the minister, a provincial MEC or a municipal council decides to do so.In practice, the bill would allow government to declare almost any form of economic activity as requiring a licence simply because the minister, a provincial MEC or a municipal council decides to do so.Ordinary commerce in South Africa is generally legal without a licence: most businesses are retail businesses, and most retailers don’t need licences. Hundreds of thousands, possibly millions, of people buy and sell goods every day without needing the state’s permission to do so. This bill could change that presumption. Indeed, that seems to be its purpose. Where most business activity was once legal unless regulated, it will now become inherently illegal unless licensed.And the consequences for failing to obtain this licence are dire, including:Administrative penalties issued directly by municipal inspectors, with no judicial oversight.Confiscation of goods, without a warrant, on the basis of an inspector’s “reasonable belief” that the goods in question were being used to facilitate unlicensed commerceWarrantless entry into private dwellings, using language borrowed from the Criminal Procedure Act, if an inspector believed that unlicensed business activity was taking place.Criminal sanctions, including up to six months in jail for a first offence and up to two years for repeated violations.This is extraordinary. South Africa struggles to prosecute corruption, violent crime and organised syndicates — but the state proposes to jail a person selling goods from their garage because they did not secure the blessing of a licensing officer.Inspectors will be empowered to check the licences of any business deemed to require one, which, it seems clear, will be almost all of them. To do this, they can enter “suspect” premises, demand documents, issue compliance notices, impose financial penalties and confiscate goods, effectively putting “offenders” out of business.In effect, they will be investigator, prosecutor, judge and enforcer. And the inevitable outcome will be a nationwide protection racket, run not by criminals but by officials who will make business owners offers that — in the words of Marlon Brando in The Godfather — they will not be able to refuse.At a time when South Africans are plagued by corruption, the bill proposes to multiply every avenue for it.All of this is wrapped in the language of “economic unity” and “equal opportunity”. This is not inclusive growth. It is economic populism by administrative means..Read more:.SA’s political monopoly has been broken, but could this help the economy?.This is not how high-growth economies behave. It is how failing states behave — states that believe order comes from control rather than dynamism, from licensing rather than opportunity.The Business Licensing Bill is not, in our view, salvageable. This is not a case of tightening definitions, clarifying exemptions or adjusting processes. The bill is conceptually unsound, administratively disastrous and economically illiterate.Government should withdraw the bill before it destroys confidence; before municipalities attempt to enforce it; and before already struggling entrepreneurs are told they must pay for the privilege of running a business and creating jobs.South Africa needs more businesses — not more bureaucrats telling them how to exist..*Ann Bernstein is executive director of the Centre for Development and Enterprise. This article is based on a submission to the small business development minister on the Business Licensing Bill

Ann Bernstein: Business Licensing Bill unsound, disastrous and economically illiterate

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