Government’s proposed Licensing of Business Bill would provide local government officials with unconstrained discretionary power, creating massive bureaucratic empires and eroding rule of law, Free Market Foundation (FMF) executive director Leon Louw said on Wednesday.

“The powers created in this Bill for small local authorities and inspectors will enable them to shut any business or revoke their license anytime, anywhere, regardless of how big or small,” he told Engineering News Online at a media briefing in Johannesburg.

Licensing authorities would be able to impose licence conditions at their sole discretion and amend a licensee’s licence conditions unilaterally, without offering the opportunity for a court appeal, which Louw warned created opportunity for corruption.

He also questioned the practicality of the Bill’s vision of ‘deemed licences’ where the licensing authority had not issued or renewed a licence, as businesses would risk being penalised for not being in possession of an official licence, while awaiting their licensing.

The proposed Bill, which Trade and Industry Minister Dr Rob Davies gazetted in March, set out that all businesses, in basically all sectors, had to obtain a licence to trade. It applies to every provider of goods or services and spreads wide enough to cover most forms of trade.

In April, the FMF submitted comments to the Department of Trade and Industry opposing the Bill.

The FMF put forward that it believed that the Bill should be withdrawn, as it would criminalise legitimate economic activity and create and boost corruption.

“Small aspirant entrepreneurs in low-income communities will be hit hardest by these proposed licensing requirements and place them at the mercy of officialdom, just as they were during apartheid,” the FMF said in a statement.

The organisation put forward that this level of bureaucratic red tape would strangle new businesses at inception and penalise small business and budding entrepreneurs.

The FMF stated that the provisions under the Bill directly opposed the policy proposals made in the National Development Plan, which highlights the need for government to create conditions that enable a simpler business environment by cutting ‘red tape’.

“It [the Bill] will victimise especially unsophisticated people [trading], they will not be able to cope with the bureaucracy, red tape and the cost of formalities,” Louw said.

He noted that despite Minister Davies’ indications to the contrary, licensing was not likely to be easy, partly owing to the fact that as designated licensing authorities, municipalities already suffered a lack of capacity and would be overwhelmed with applications.

“We should not have this kind of licensing. The Bill has no clear objective, no purpose whatsoever,” Louw stated.

South African National Traders' Retailer Alliance spokesperson Edmund Elias noted that the Bill would have the most significant impact on the “people’s component of the economy”, referring to the undocumented small informal traders operating below the small- and medium enterprise level, including street traders, cottage industries, and other services such as informal plumbing.

He warned that the Bill entrenched what he called “already illegal” municipal by-laws, which resulted in traders’ products being confiscated by the Metro Police.

“They can take illegal substances, but not things like fruit, peanuts and popcorn. We reject this punitive measure,” Elias stated, adding that the Bill would curb Johannesburg’s status as a regional trading hub.