Licensing of Business Bill 2013 – Another bull riding experience for SMEs?

On 18 March 2013, the new Licensing of Business Bill was published in the Government Gazette, together with an invitation from Dr Rob Davies, Minister of Trade and Industry, for interested public to comment on the draft Licensing of Business Bill, within 30 (thirty) calendar days.

Considering that the time has now elapsed for interested members of public to comment on this proposed new Bill, what implication does this have on SMEs should this Bill proceed to pass as an Act, and become enforceable against all SMEs?

The Bill starts off by suggesting positive objectives. The Bill’s main objective is to support the South African Constitution provides for every citizen to have the right to choose their trade, occupation or profession freely. The practice of trade, occupation or profession may be regulated by law. The purpose of the Bill is to provide for a simple and enabling framework for application procedures of business licences by setting national norms and standards. The Bill also uses phrases in its preamble like “harmonising of standard procedure” and “framework for support monitoring and standard setting”.

If one digs a little deeper and analyses exactly what powers the Bill provides to “licensing authorities” it is questionable whether the practical implication of the Bill on the SME sector will be an easy “harmonising experience” or a “support structure for standard setting”.

The Bill specifically states that the Act applies to any person carrying on business or who seeks to carry on business within the Republic. This covers the majority of the business sphere. The problem is that major business giants already have the infrastructure and departments making sure that it complies with all new legalisation. What about the SMEs that don’t necessarily have the manpower and capital to ensure compliance with all relevant new laws.

As a start-up business, or growing SME, there are already various overwhelming factors which must be considered daily. These include heavy obligations of the new Companies Act, IT governance structure, proper book keeping, SARS, protecting your brand in this competitive era, websites and its strict Consumer Protection compliance etc. The list goes on and on. And now, also the new Licensing of Business Bill to consider.

A proposed application for a licence will include an application at the relevant licensing authority’s office, in the prescribed manner and form, in compliance with the Act, paying a prescribed fee (the prescribed fee has not been clarified yet) and thereafter the licensing authorities may issue a licence. So even after all the administration and frustration the licence may not be guaranteed. If the licensing authorities require further or additional information, and it is not provide to them within the prescribed time, an application will be deemed to be abandoned and the application must be applied afresh. The licence will furthermore only be valid for 5 (five) years and must after this period be renewed again.

Attending to the application renewal every 5 (five) years may not seem that bad, but the discretion and wide authority the Bill gives the licensing authorities are worrisome. Any licensing authorities will have the authority; right and power, on its own initiate, to revoke suspend a licence or close down licensing premises. In addition, if any person contravenes sections of the Act, is thus guilty of an offence, the licensing authorities may further upon conviction of such person,, ensure payment of fines or imprisonment of the business owners, or both, a fine and imprisonment.

The Bill also refers to “inspectors” who may conduct inspections, enter any premises and have the power to close any premises.

The Bill further proposes that there will also be a Business Registry for the listing of all licensed businesses. Just as there is no cross-referencing between the Trade Marks Register, Companies Register and relevant Domain Name Register, there will also be no cross-referencing between these Registries and this proposed Business Registry. Due to this factor, disputes are likely to arise, if different traders use and register their names on the different Registers concerned.  Such disputes could cost start-up businesses dearly in time and money, and many start-up businesses do not have sufficient funds to start over with a new business name, if they have to change their names due to a name conflict on any of these relevant registries.

We as attorneys, who represent and assist start-up businesses, SMEs and franchises, are concerned that the Licensing of Business Bill will place numerous additional pressures on our clients. We are concerned that additional regulations for small businesses will delay trade and thus affect cash flow and marketing strategies.

However, a possible benefit of the Licensing of Business Bill includes that it will prevent illegal foreigners of obtaining a licence and conducting business in South Africa. The Bill will further assist in protecting consumers against counterfeited goods.

If there is great public interest in the Bill, the Portfolio Committee may organise public hearings to allow interested parties to submit written comments and sometimes make oral representations on the provisions of the Bill. The members of the relevant Portfolio Committee are then tasked with considering and debating the Bill in order to determine whether they are satisfied with the provisions of the Bill. If the Portfolio Committee is not satisfied with the provisions of the Bill, the Bill is amended to reflect the version which the Portfolio Committee prefers. At the conclusion of its work the Portfolio Committee submits the Bill, together with a report, to the National Assembly for debate and a vote. If the National Assembly passes the Bill, it is referred to the National Council of Provinces for its consideration.

On 15 May 2013, Dr Rob Davies indicated at a media briefing ahead of his budget vote speech, that the current draft Bill is too blunt and would significantly be redrafted, but the content concerning the government’s intention to reduce the illicit economy, would fundamentally remain unchanged.

We will continually provide feedback on developments herein, and report any possibility of further public comments.

Yolandi Wolmarans from De Kock Attorneys can be contacted at info@dekock.co.za, or www.dekock.co.za.

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