Anthea Jeffery: Licencing Bill slams the brakes on already stalled SA economy

Key topics:

• Bill mandates municipal licences for almost all businesses, raising costs.

• New powers for officials may fuel corruption, fines, and licence abuse.

• BEE rules could expand to family and small businesses, hurting growth.

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By Anthea Jeffery*

The Business Licensing Bill of 2025, an initiative of the Department of Small Business Development, is exactly the opposite of what South Africa needs to increase investment, raise the growth rate, curtail corruption and tackle the unemployment crisis.

At the very least, the Bill will require most businesses, whether big or small, to obtain a general municipal licence to operate. This will be in addition to whatever other sectoral licences or permits these enterprises might already require.

At worst, the Bill will also be used to impose binding BEE obligations on family-owned businesses and other small enterprises currently outside the BEE net. This will greatly increase the heavy costs of BEE rules and make it harder still to generate the growth and jobs vital to upward mobility.

The Bill seeks to replace the Businesses Act of 1991 (“the 1991 Act”), under which the National Party government belatedly repealed the many discriminatory laws that had long prevented black people from doing business in supposedly “white” central business districts and other areas.

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The 1991 Act also repealed 18 statutes and a host of provincial ordinances requiring business licensing. In doing so, it established an important new principle: that no business should need a municipal licence, except in the limited circumstances it set out.

Hence, the only businesses needing municipal licences under the 1991 Act are those:

• selling or hawking meals or perishable foodstuffs; or

• providing certain types of health services (Turkish baths or massages) and entertainment (night clubs and theatres, for example).

Now, however, this sensible statute is to be replaced by the Bill. This will establish a different general principle: that all “designated” business undertakings must obtain a municipal licence unless they are expressly exempted.

What businesses are likely to be “designated” as needing the new licences? The key criterion will be whether an enterprise’s business activities fall within “the functional areas listed in Schedule 4” of the Constitution.

This criterion is irrational. Schedule 4 lists a host of governmental functions over which the Constitution gives concurrent legislative powers to the national government and the nine provincial administrations.

Businesses clearly cannot engage in many of these functional areas, which include “language policy” and “population development”. However, other listed functional areas – such as “agriculture”, “education”, “health services”, “tourism” and “trade” – could be seen as being open to business operation.

The Schedule 4 list is lengthy. Moreover, since it includes “trade”, virtually all businesses will qualify for designation and hence for compulsory municipal licences. This will apply even where their activities pose no risk to society or are already adequately regulated – and the government has no rational reason to demand their licensing.

The new municipal licences will remain valid for a maximum of five years. Many may be granted for shorter periods. This will add enormously to the bureaucratic burden of the Bill, along with the costs of implementing it.

The burden of doing so will primarily fall on largely dysfunctional municipalities that are already unable to fulfil core functions such as the distribution of electricity, the treatment of sewage, and the maintenance of essential infrastructure. Instead of being able to focus on these important needs, struggling municipalities will have to put major resources into repeated rounds of business licensing and renewal.

The Bill is silent as to what is to happen to businesses that have applied for renewal, but have not yet received it when their current licences expire. Are they to cease operating until their licences come through? What then is to happen to their employees? Or to their customers, including other businesses that depend on what they supply?

The Bill will encourage even more corruption than South Africa already suffers. Municipal officials will be able to act as gatekeepers in denying business licences unless bribes have been paid; in granting licences illegally where bribes have been provided; and in slowing down approval processes until bribes have been promised.  

Enforcement is to be entrusted to new “authorised officers”. These municipal officials will have extensive powers to enter and inspect premises (including private dwellings), question people, demand the production of documents, and issue compliance notices requiring specified actions.

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Under three particularly draconian provisions, authorised officers will also be able to:

• “Close any premises pending further investigation”;

• “Without a warrant, confiscate and remove any goods from the premises of a business” reasonably believed to be operating without a licence; and

• impose administrative fines – without the need for a court order – on businesses that fail to implement compliance orders.

Again, the impetus to extortion, corruption and other abuses under these extensive powers is obvious.

As regards BEE, the minister will have wide-ranging powers to introduce additional application requirements, over and above those expressly included in the Bill. According to the Bill, “the  Minister must issue regulations through the Government Gazette pertaining to the application requirements which must be in line with all relevant National Legislation, Provincial legislation and Municipal By-Laws” (emphasis supplied by the IRR).

What national, provincial and municipal laws might be considered “relevant” is impossible to tell. Clearly, however, this broad wording will empower the minister to make BEE compliance an additional requirement for the granting of the new municipal licences.

This is also what the National Business Licensing Policy of 2025 seeks to achieve. This Policy – which was approved by the Cabinet in May 2025 to help guide the drafting of the Bill – speaks of the need to “incorporate…transformation in business licensing policies” via laws such as the Preferential Procurement Policy Framework Act (“PPPFA”) of 2000 and the Broad-Based Black Economic Empowerment Act (“BEE”) Act of 2003.

The licensing requirements under the Bill are thus likely to be used to demand that family businesses and other small enterprises comply with unrealistic racial targets on BEE ownership, management and procurement.

The National Business Licensing Policy claims that BEE is needed for redress. In practice, however, BEE rules have greatly enriched a small black elite while greatly harming the black majority by choking off investment, curtailing growth and worsening the unemployment crisis.   

Even if the Bill is not used to magnify the already heavy costs of BEE, the measure remains the exact opposite of what South Africa most needs. In 2012 the National Development Plan stressed the importance of raising fixed investment to 30% of GDP so as to increase the economic growth rate to 5.4% a year by 2030 and reduce the unemployment rate to less than 10%.

Instead, fixed investment has been hovering around the 15% mark for many years, the growth rate has stagnated at around 1%, and the joblessness rate has risen to 32% in general and to more than 60% among young people aged 15 to 24.

Against this background, the Bill is one of the worst policy interventions that could be made. It has been roundly condemned by a host of civil society organisations, including the IRR, which made a detailed submission calling for the Bill to be withdrawn.

The government should be taking the brakes off the economy, not adding more. If it persists in enacting the Bill into law, the business environment will become yet more hostile to private enterprise – and the disadvantaged will find it harder still to escape from destitution.

*Dr Anthea Jeffery holds law degrees from Wits, Cambridge and London universities, and is the Head of Policy Research at the IRR. She has authored 12 books, including Countdown to Socialism - The National Democratic Revolution in South Africa since 1994, People’s War: New Light on the Struggle for South Africa and BEE: Helping or Hurting? She has also written extensively on property rights, land reform, the mining sector, the proposed National Health Insurance (NHI) system, and a growth-focused alternative to BEE.

This article was first published by Daily Friend and is republished with permission