Worries over new business laws planned for South Africa

The Small Business Institute (SBI) has raised concerns around the National Small Enterprise Amendment Bill which was published for public comment in December 2020.

At the time, Small Business Development minister Khumbudzo Ntshavheni said that the bill will provide for the establishment of a Small Enterprise Ombud Service which will act 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.

She said the bill will also 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.

Red flags, red tape

However, the SBI said that the planned changes will provide sweeping powers for both the minister and a proposed ombud, potentially encroaching on, and overriding, already established civil and contract law in South Africa.

“Defining arbitrarily what constitutes an ‘unfair trading practice’ and granting powers for an Ombud to intervene in ‘contractual arrangements or other legal relationships’ between ‘small enterprises’ and ‘any other party’ could well lead to indiscriminate intervention and the potential for ‘ombudpreneurs’ who would not be prevented under the amendments from vexatious or frivolous claims,” said SBI chief executive John Dludlu.

He added that the Amendment Bill would contribute excessively to the ‘already eye-watering amount of red tape’ confronting micro, small, or medium enterprises (SMMEs) and is unlikely to promote the prompt payment of invoices.

Without a regulatory impact assessment, which is in the power of the minister to exercise and indeed require of her fellow cabinet ministers, this is another example of policy on the hoof, said Dludlu.

“There is no indication of what the establishment of an ombud would cost – let alone maintain – and the proposal comes at a time when the National Treasury is forced to siphon off-budget from dozens of programmes and agencies to feed the hungry mouths of a failed airline, let alone afford a Covid-19 vaccine, arguably the most pressing problem of our age.”

Dludlu said that other potential issues identified in the bill include the fact that there are already a number of ombuds are already available to small business owners, and a lack of specificity around what constitutes a ‘late payment’.

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Worries over new business laws planned for South Africa