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Why you should really worry about the Business Licensing Bill

Expanding government power, potential for harassment, red tape…

The Licensing of Business Bill, which was introduced for public comment back in March and attracted a flood of criticism, is currently being revised by lawmakers at the Department of Trade and Industry (DTI). As the country waits to see the new version, which is due soon, it’s worth revisiting the provisions that make this bill such bad news.

The Bill does three deeply problematic things. First, it further increases the burden of red tape on businesses and makes entrepreneurship even less attractive in South Africa. Second, it gives sweeping powers to South Africa’s often-dysfunctional municipalities, including broad search and seizure powers and the power to impose conditions on businesses at will. Third, it seems clearly intended to make life even harder for South Africa’s immigrants, giving the Bill an ugly, populist aspect.

At its most basic, the Bill requires all businesses, from transnational mining companies to humble street hawkers, to be licensed by their local municipalities and to pay an as-yet undisclosed application fee to secure that license. This is crazy – South African municipalities don’t have the capacity to handle the flood of applications the Bill will precipitate, and the mind boggles to think of the delays, paperwork, and cost of the whole process.

While licensing hawkers and suchlike is a good idea in principle, it’s far from clear that South Africa has the capacity to administer that kind of registry – think of the disasters at CIPRO (now rebranded as the Companies and Intellectual Property Commission), which only handled large businesses. Blanket registration of business is a good long-term goal, but cleaning up the current registry and eliminating corruption in the registration process would be a more sensible immediate goal. The Bill is an overreach in this respect.

However, it’s the provisions beyond the basic that are really worrying. The bill grants astonishingly sweeping authority to municipalities and to the inspectors who are tasked with monitoring businesses’ compliance with the Bill. For example, municipalities can issue licenses with “such conditions the licensing authority deems fit.” One assumes that regulations will give more guidance than the current municipalities-can-make-whatever-rules-they-like rule, but this provision is clearly open to abuse.

In another example, inspectors (which would include everyone from police to customs officials to health and safety inspectors) are empowered to enter and search any premises where they “reasonably suspect” a business is being conducted, to question any people on those premises (about what the Bill leaves to the inspector’s imagination) and to “remove any goods on the premises and confiscate them.” The potential for abuse, corruption, and harassment should be clear.

Again, the Bill gives municipalities and inspector a lot of leeway to shut down businesses that contravene rules ranging from dealing in counterfeit goods to messing up on their tax returns, creating more space for corruption, abuse of power, and harassment (and remember, all of these things are already illegal and punishable under existing laws). And contraventions of the provisions of the Bill are punishable by up to ten years imprisonment and undisclosed fines – one wishes South Africa’s rapists were punished as severely.

What is perhaps most distasteful about the Bill, however, is its emphasis on illegal immigrants conducting business in South Africa. It seems clear that the Bill is meant to give police a good excuse to harass Somali street hawkers and immigrant spaza owners, and to be a sop to South Africans who feel they face “unfair competition” from foreigners. This is unworthy of South Africa, which should be a beacon of democracy for a troubled continent.

As we await the revised Bill, we should remember these many troubling aspects of it. The Bill represents a gross expansion of state power to harass and intrude on South Africans, and it places that power in the hands of municipalities which already display a great deal of corruption and mismanagement. It also represents a massive increase in red tape at a time when the country needs to be easing bureaucratic requirements for companies and encouraging entrepreneurship. Let’s hope that the revised version addresses these serious concerns. 

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