Few pieces of legislation have drawn such fire as Minister of Trade and Industry Rob Davies’ Licensing of Businesses Bill – and with good reason. Contrary to some commentators’ view that it is a “useless” piece of legislation, it demands to be taken very seriously indeed.

For the benefit of our international readers we should explain that the bill requires the licensing of every business – yes, every business - in South Africa by the municipality in which it is based. The size and nature of the business does not matter, and the licensing process will obviously involve a massive increase in bureaucracy. Free Market CEO Leon Louw in Business Day describes the consequences:  “Nothing, absolutely nothing, will escape the clutches of the bureaucracy which the bill will require. The country will be deluged by wall-to-wall apartheid-style bureaucrats, who will control everyone who supplies anything --from the little old lady selling corncobs under a tree, to foreign multinationals, from subsistence farmers with their donkey carts, to escort agencies, from part-time ballet teachers, to alternative theatre."

To illustrate Leon’s point, the bill and specifically (section 25) even provides for hawkers who could face extraordinary penalties for seeking to ply their trade. Under the bill any person who carries on business as a hawker without a valid license will be guilty of an offence and liable to a fine of an unspecified amount or imprisonment for up to 10 years or both. According to Lawrence Mavundla,  outgoing President of the National African Federated Chamber of Commerce and Industry  (NafCoC), the bill will take informal traders back to the worst days of apartheid when "government bureaucrats had  the power to inspect the books, search the premises, shake down the owners, and shut up the shops of so-called- undesirable elements .”  For a thoroughly competent dissection of the proposed law – the ministerial intentions, the scope, the power, and the damage it will cause – you could not do better than visit *Dr. Anthea Jeffery’s analysis on the South African Institute of Race Relations website (www.saiir.org.za ).

Some idea of this legislation's sweeping authority is expressed in section 42, which provides that "Every municipality will be empowered (in consultation with the Minister of Trade and Industry, the Minister of Local Government, and the relevant member of the Executive Council) " to make by-laws regarding licensing of businesses in any substantive or procedural matters connected there with".  In other words, any number of onerous requirements could be added under the authority of this blanket provision and the justification for this bill.

What is the DTI’s rationale for this legislation?  “The Licensing of Businesses is intended to promote the right to freedom of trade, occupation and profession".  It is also supposed to "encourage a conducive environment that promotes compliance and sustainability of businesses”. These might be the intentions behind the bill, but in practice the proposed measure is sure to have the opposite effects - a point publicly made by at least a dozen commentators and editorial writers.

Aside from the purely practical aspects (the fact that many municipalities are notoriously inefficient and incompetent), this added red tape inhibits the emergence of small business and entrepreneurship --growth areas where South Africa already lags other similar countries - and restricts informal business, a major source of employment

The DTI also claims that it is important for each municipality to “know who is conducting business within its area of jurisdiction, so that it can curb the illegal ones that often sell dangerous and hazardous or counterfeit goods ".  As the Institute points out the selling of dangerous or counterfeit goods is already prohibited by other laws.  In addition, it remains uncertain what benefit, if any, municipalities will in fact derive by demanding details of local business operations in the way the bill requires.

The reasons offered for this bill simply do not add up. The costs in terms of red tape – both increased bureaucracy and business and the cursory rationale only become intelligible if an ideological element is injected, namely the determination on the part of the state to control all business in this country.

Bearing out this interpretation of the legislation are policy decisions and developments in other areas. The Government's decision to terminate all bilateral investment treaties (BITs) is a case in point. BITs are binding international treaties between two states under which each country undertakes certain reciprocal obligations in respect of any investments made within its territory by nationals of the other state. These treaties generally oblige each state party to provide "prompt, adequate and effective compensation", usually at market value, if the state expropriated property in its territory, of a national of the other state. In other words, it is a kind of insurance policy for investors in another state and is obviously an incentive to foreign investment. The South Africa government, one has to assume, because it doesn't want its power to expropriate limited in any way, has chosen autarky in preference to encouraging international economic involvement.

Outside of the BITs issue, three examples of the trend of concentrated control are the Government’s rescinding of TELKOM's decision to sell 20% of the companies’ equity to South Korea's KT Corp - a company which played a pivotal role in providing the necessary ICT backbone for South Korea to become one of the eight richest economies in the world. We accept that Government did this because the involvement of the South Koreans would complicate Telkom’s nationalisation. Very similar sentiments apply to the Government's approach to financially struggling South African Airways. British Airways and Lufthansa were both in serious financial trouble, but their governments decided to privatise them -- BA in the mid - 1980s and Lufthansa in 1997 - and both have done relatively well since then notwithstanding difficult times for airlines in general. Neither have received state funding. Their diplomatically expressed message as recently as last year to the South African Government and SAA is to do the same - privatise. But it is not going to happen because it is actually a dilution of state power and that is not what this Government is driving for. It is going for a concentration of power. The third expression of the same sentiment is the vigorous and embarrassing opposition by three Cabinet ministers - including Minister Rob Davies - to the merger of Wal-Mart and Massmart - an action which not only caused concern and embarrassment among potential foreign investors but raised questions  about the nature of Cabinet solidarity and governance in South Africa.

What this essentially amounts to is that the ANC government or elements within the government have an agenda of concentrating state power over the economy. The drive to state centralisation is evident also in legislation amending the Universities Act which gives the Minister of Higher Education, Blade Nzimandi, powers that clearly undermine the concepts of university autonomy and academic freedom. This legislation shocked the higher education sector because neither Higher Education South Africa (HESA), which represents the Vice Chancellors of the country’s 23 universities, nor the statutory advisory Council on Higher Education (CHE) were consulted, both entities having made presentation to parliamentary bodies, arguing that the amendments will affect their autonomy. The only response now to restoring full university autonomy and academic freedom is to resort to the Constitutional Court.

It doesn’t stop at the universities.  Minister of Justice Jeff Radebe has announced that he will proceed in the coming session with the Legal Practice Bill which is already before Parliament. This legislation has been authoritatively described as the biggest single threat to an independent legal profession, and thereby to the courts, in South Africa's history. As one authority has said, the allure of a government -controlled legal profession (like controls over the media, universities and even churches), is as old as power itself.   In South Africa, the National Party government flirted with the notion but, fearing an international outcry, drew back. If Minister Radebe is to be believed, this is not something that bothers the ANC.  If this legislation is passed it will destroy the legal profession and reduce it to an agency of the state.

How do we respond to this? One response is to insist on the implementation of Cabinet responsibility and solidarity. Starting with the Licensing of Business Bill, the question is whether this legislation was before the cabinet? Does it carry cabinet approval? Until now Rob Davies, a perfectly likeable man, has been catching all the flak. We think he deserves it - because we don't think a majority in Cabinet can possibly support such an extraordinarily foolish measure.

After that, there needs to be a powerful campaign demanding the government come clean on just what its agendas are. This is not some sort of favour that ministers would be doing. The people of this country have a right to know just where the ANC government is taking this country.

This is an opportunity to pay tribute to Anthea Jeffery for the quality research she does and has done down the years.

Three months ago, Department of Trade and Industry Minister Rob Davies released a bill requiring the licensing of every business in South Africa. The response to this proposed legislation was universally critical and Omega produced an Insight wherein we raised several really serious issues. However, we were informed in a passing discussion with the Minister that he would be withdrawing the bill and modifying it very considerably. A fortnight ago, he again announced that he was pursuing the legislation and went to some length at a press conference in justifying it.

We are republishing that Insight because we believe the issues it raises are of critical importance and we have advised the Minister that we would welcome him responding to the Insight to deal with the points that are made.

Editor – Dr Denis Worrall

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