The Business Licensing Bill Will Kill Small Business

The Business Licensing Bill adds a new layer of control in an environment that already discourages enterprise.

Photo by Hunters Race on Unsplash

South Africa does not need more regulation. We need economic reform that encourages investment and allows businesses to operate with confidence. The proposed Business Licensing Bill moves decisively in the opposite direction. It creates new obstacles for anyone trying to start or run a business, and it hands wide discretionary powers to officials who already struggle to administer the basic functions of government.

In a country with a real unemployment rate approaching 45%, we should not be toying around with regulations that threaten the livelihoods of countless South Africans. Yet, policy makers want to pettily make it even harder to run a business.

The Bill claims to modernise regulation. The current licensing framework is old and inconsistently applied. That is true. But instead of simplifying the system, the Bill does something far more intrusive. It requires almost every business in the country to apply for a licence, and to renew it every five years. This includes informal traders, independent professionals, online sellers and small service providers. Large established firms will absorb this. Small enterprises will not.

As a small business owner myself, running my business is already a tremendous task. Adding even more red-tape and regulatory hurdles doesn’t smooth things along. It just discourages me from even wanting to run my business further.

South Africa already has some of the highest barriers to entrepreneurship in the developing world. Local governments are slow, unresponsive and often corrupt. Municipalities cannot reliably issue building permits, manage electricity grids or handle basic sanitation. There is nothing to suggest they will handle business licensing any better. Promising a thirty-day turnaround is meaningless when those same institutions cannot meet simple service deadlines.

The Bill also empowers inspectors to demand proof of licensing, confiscate goods and impose penalties. In a country where enforcement is uneven and often politically influenced, this is a problem. It creates a climate of uncertainty in which small business owners become targets. People will work less and invest less if they fear arbitrary intervention. And in a country as corrupt as South Africa, these inspectors will inevitably abuse their powers to the detriment of business owners.

Business groups from across the spectrum have warned against the Bill. Their concern is not ideological; it is practical. South Africa is experiencing slow growth, high unemployment and collapsing municipal administration. The economy needs policies that remove barriers to entry and reduce compliance costs, not raise them.

The Business Licensing Bill adds a new layer of control in an environment that already discourages enterprise.

This is the central problem. Instead of focusing on enabling activity, government is constantly looking for ways to supervise it. Policymakers seem convinced that economic outcomes can be engineered through central planning.

That view fails. Countries succeed when institutions protect property rights, allow competition and limit unnecessary intervention. The collapse of every centrally planned society, and the fact that the richest countries in the world are those which embrace economic freedom and minimize regulation is testament to that fact.

If South Africa wants more jobs, more investment and more tax revenue, the solution is not to license every entrepreneur. It is to make it easier to trade. That means cutting red tape, stabilising energy supply through privatisation, fixing municipalities and ensuring that compliance systems are predictable and transparent. Trust grows when rules are simple and consistently enforced; growth follows.

The Business Licensing Bill should be withdrawn. The risk it poses to small and informal enterprises is too great, and the state has not shown the capacity to administer a policy of this scope. South Africa’s economic recovery will depend on expanding opportunity, not restricting it.

Nicholas Woode-Smith is the Managing Editor of the Rational Standard and a senior associate of the Free Market Foundation. He writes in his personal capacity.