Economists, business groups and employers’ organisations have warned that the new business licensing laws proposed by the government are unworkable and potentially damaging for jobs and investment in South Africa.

The draft Business Licensing Bill, gazetted for public comment until 28 November, aims to introduce a national registry of every business operating in the country.

The Department of Trade and Industry said the Bill is intended to modernise outdated legislation and create a uniform system where all businesses register with and obtain licences from their local municipalities, replacing the current Business Act of 1991.

Under the proposed law, every business would need a licence valid for five years. Municipalities would have 30 days to grant or reject an application, with the option of extending this by 14 days in certain cases.

Inspectors would gain broad powers to demand proof of a licence at any time, issue fines, or confiscate goods if operators are found to violate the Bill or other laws, including those dealing with counterfeit or pirated products.

The government argued that the Bill will introduce a simple process with a set of norms and standards intended to support better governance.

However, many stakeholders disagree. Critics argue that the legislation is likely to increase bureaucratic red tape, create opportunities for corruption, and impose new burdens on businesses already struggling to survive.

Dr Brian Benfield, a retired professor at Wits University and board member of the Free Market Foundation, called the Bill “dangerous”, warning that its real impact would be devastating.

“Beneath its euphemistic promises lies a blueprint for bureaucratic domination, one that will make starting, running, or even maintaining a business in South Africa more difficult, more uncertain and more perilous than ever,” he said.

He argued that the Bill gives sweeping, vague and discretionary powers to officials at all levels of government.

According to Benfield, the inevitable result will be arbitrary enforcement, rent-seeking, corruption and an ever-deepening atmosphere of uncertainty that chokes investment and suppresses job creation.

Bill risks pushing South Africa in the opposite direction

The National Employers’ Association of South Africa (Neasa), which represents roughly 7,000 businesses, has also condemned the proposal.

Neasa noted that elements of the Bill amount to discrimination by introducing preference systems that could influence who qualifies for a licence.

In its submission to comment, Neasa said the provisions are nothing but BEE in disguise and warned that they preclude any group of society from being eligible for obtaining a business licence based on demographic or national background.

The organisation said the approach is exclusionary and defeats the very purpose of this policy and the principles of a free market.

Business Unity South Africa (BUSA) takes a slightly different view. The organisation acknowledged that there is merit in the government’s goal of improving oversight and supporting business growth.

However, it also warned that the Bill risks pushing South Africa in the opposite direction. BUSA said the proposal is yet another piece of legislation adding to an already heavy compliance load for small businesses.

It believes the Bill in its current form will unintentionally impede the growth and development of small and medium enterprises, the sector widely regarded by economists as the main engine of job creation.

BUSA noted that this conflicts with the National Development Plan, which anticipates that 90% of all new jobs by 2030 will come from small businesses.

Business group Sakeliga is similarly concerned. While it said it would support any policy genuinely aimed at reducing licensing burdens, Sakeliga argued that the new Bill does the opposite.

In its comments, the organisation warned that the legislation will undermine economic growth through regulatory overreach and complex, multi-layered bureaucratic hurdles.

Sakeliga also criticised the inclusion of “socio-political objectives” in the licensing system. It said that measures such as preferential licensing and designated trading zones show the state is prioritising political goals over market principles and basic constitutional rights.

Given the intensity of the reaction and the large volume of submissions, the Department of Small Business Development has extended the deadline for public comment. (BUSINESS TECH)