Major new laws planned for small businesses in South Africa

Small Business Development minister Khumbudzo Ntshavheni has gazetted the National Small Enterprise Amendment Bill, which aims to further regulate the country’s small, medium and micro-enterprises (SMME) sector.

Ntshavheni said that the bill will further provide for the establishment of a Small Enterprise Ombud Service which will actor as a support function to the minister.

“Despite the critical role of small businesses in the economy and development objectives of South Africa, the SMME sector remains vulnerable to exploitation and unable to utilise available legal remedies due to the prohibitive costs,” Ntshavheni said.

“The Ombud service will become a vital legal instrument to enforce SMME contracts and resolve business-to-business disputes as well as considering and disposing of complaints by small enterprises in relation to the interpretation of the terms of agreement for procurement of goods, services or late and non-payment of amounts due and payable to small enterprises.”

Ntshavheni said the bill will further assist with handling complaints in a ‘procedurally fair, economical and expeditious manner’ – which will look at what is equitable in all the circumstances, with due regard to the contractual arrangement or other legal relationship between the complainant and any other party to the complaint.

The bill states that this ombudsman may make ruling in favour of small businesses, including monetary awards for any financial prejudice or damage suffered.

Unfair trading practices 

The bill will also give the minister and ombudsman powers to further regulate small businesses in South Africa in issues of ‘unfair trading practices’.

On recommendation by the ombudsman, the bill will allow the minister to declare certain practices in relation to small enterprises to be prohibited unfair trading practices.

The minister may also make regulations requiring specified enterprises to provide in the prescribed manner, information about their contracting and payment practices and policies relating to small enterprises.

Additional rights and responsibilities 

The bill also sets out the following rights and responsibilities for small businesses in the country, including:

• The right to fair and unambiguous business contract;
• The right to a reasonable payment date and interest on late payments;
• The right to disclosure of information;
• The right to fair and honest dealing; and
• The right to accountability from large enterprises and organizations.

However, the bill also states that businesses face additional clamping down on:

• Ambiguous contract terms;
• Lack of written contracts;
• Retrospective changes to arrangements;
• The transfer of commercial risk to the weaker party.
• The use of information outside the purpose for which the other party discloses it;
• Sudden and unjustified termination of a commercial relationship or termination without reasonable notice;
• Long-term exclusive agreements aimed at preventing weaker parties from entering an existing market;
• Unfair exclusionary compliance requirement practices; or
• Unfair contract terms in retail and commercial leases for small enterprises.

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