Radical Economic Transformation

Licensing

Laws Affecting Small Business: Licensing was launched by analyst Neil Emerick on 18 October 2022. Scroll down for the full text or PDF of the booklet. View the launch here:

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SYNOPSIS

Problems

Licensing laws protect existing businesses by preventing new entrepreneurs from entering into the economy and competing with them. 

Licensing laws reduce productivity and impose financial costs and administrative burdens on small businesses. Ordinary economic activities are criminalised and opportunities are created for corruption. Although licensing laws relating to many different types of business have been repealed, it appears that the old laws are still on the statute book in the former homeland of KwaZulu. A wide range of businesses also still require a licence in South Africa. A few licensing laws allow licensing authorities to decide who is or is not suitable to be granted a licence, and disqualify applicants with criminal records. Some laws create monopolies by permitting only one supplier, others allow licences to be refused “in the public interest”, and a few expressly empower the authorities to discourage competition. Legislation often requires high qualifications or standards. Government enterprises are frequently exempted from the obligation to have a licence. Licensing laws subject business people to policing by their competitors.

Recommendations

  • No national general Business Registration Act should be introduced.
  • Limpopo’s general Business Registration Act should be repealed, except in relation to sales of meals and perishable foodstuffs.
  • Repeal trade licensing laws in the former homeland of KwaZulu.
  • Most, if not all, licensing laws should be repealed.
  • Licensing laws should entitle applicants to licences automatically, unless they will clearly violate essential health and safety laws.
  • No new licensing laws should be introduced unless strictly necessary.
  • Repeal any licensing laws that permit only one supplier and create a monopoly.
  • No licensing law should require an applicant to be “suitable” or “fit and proper”.
  • Licensing laws should not disqualify applicants who have prior convictions.
  • Licensing authorities should not have the power to refuse a licence “in the public interest”.
  • Licensing laws should not authorise the discouraging of competition.
  • There should be no special requirements for individuals or premises.
  • There should be no exemptions for government-owned businesses.
  • Licensed operators should not be disciplined by people in the same business field.
  • Municipal bylaws should not authorise the impounding of the goods of informal or street traders who fail to produce a licence to trade.
  • Legislation permitting seizure of street traders’ property should also provide for the return of property.
  • Bylaws should not require itinerant hawkers who sell goods other than meals to hold a permit.
  • The Immigration Act’s financial and staffing requirements imposed on immigrants seeking to establish a business should be relaxed.
  • Laws should not prevent refugees from starting a business.
  • An unlicensed trader convicted for a first offence should be discharged with a caution.

LICENSING LEGISLATION RESTRICTS ECONOMIC ACTIVITY

Licensing legislation requires a person to obtain a licence from a government authority before he or she can carry on a specified type of business. Anyone who contravenes the law is guilty of a criminal offence. It does not matter whether the permission is called a licence, permit, authority, consent, approval, or certificate of acceptability; the effect is the same in every case: a person is prohibited from carrying on the activity without the licence or permission.

Licensing laws prevent people from entering the economy

Legislation that requires a person to obtain a licence from a government authority before he or she can carry on a business inhibits economic growth by preventing or restricting people from entering the economy. This is especially true of people who are poor, uneducated, or disadvantaged in some way. Where no such requirement exists, people are much more likely to start a business.

Licensing laws prescribe certain requirements that applicants must satisfy in order to obtain a licence; applications that do not meet these requirements are rejected by the licensing authorities. The effect of any licensing law, therefore, is always to limit the number of people carrying on a particular business, since it ensures that not everyone who wants to carry on that business activity is allowed to do so. That, in turn, means that customers have fewer choices.

Licensing legislation reduces productivity at public expense

Because established (licensed) businesses are protected by licensing laws from free and open competition, they do not have to work as hard to satisfy their customers by improving their goods and services and keeping their prices down. If there were no entry limitations, customer dissatisfaction would encourage new entrants to open competing businesses to supply the quality of products and services that customers are seeking. Thus, whilst licensing laws are generally described as being introduced to protect the consumer, the effect is invariably the opposite. Consumers benefit most from having the greatest possible choice.

Licensing laws raise costs

Limiting the number of businesses that may participate in a sector not only reduces the level of quality and service but also raises costs. Licensees in such a sector become members of a government-created cartel. In the absence of the cartel, high returns would encourage more investors to enter the industry and prices would tend to decline. Limiting the number of competitors in the gambling business, for instance, reduces the gamblers’ odds of winning because casinos do not have to be as concerned about the frequency or number of pay-outs.

Licences enrich some people at the expense of the public and create what has been called a tyranny of beneficiaries. This phenomenon tends to favour entities with more resources over those with less, thus being most disadvantageous to entrepreneurs from poorer communities. Licences reduce the number and variety of businesses that would otherwise exist, and keep up the prices charged by the persons who are permitted to carry on the licensed businesses.

Licensing laws protect existing businesses at the cost of everyone else

The people who introduce and administer licensing laws argue that the laws are required in the public interest, and that the motives for introducing them are altruistic. In other words, they justify the laws by referring to their good intentions, and ignore the harmful effects. Noble intentions, however, are no assurance of beneficial outcomes and do not justify the infliction of harm on consumers. Moreover, hidden behind most proposals for licensing control are the vested interests of the promoters. Whatever altruistic arguments they put forward, their aim is almost always to protect the existing businesses in an industry from new competitors.

For example, businesses in a particular industry may urge that a licensing law is necessary to protect the public from dishonest and unscrupulous suppliers – they say there is a need to “clean up the industry” and “clear out the fly-by-nights”. This often occurs in regard to new and fast-growing industries. However, the people who argue for minimum entry standards tend to forget that if the standards they propose had been in existence when they started, many of them would not have been able to comply.

When a new licensing law is introduced, it usually states that existing businesses do not have to obtain a licence, or that they are automatically entitled to be issued with a licence on demand. In other words, the existing businesses are “grandfathered”. So, even though the law was proposed to remove dishonourable businesses from the industry, it is not used to remove them but is instead used to limit new entrants into the industry.

Legislation that is introduced to solve an existing problem in an industry should be used first to investigate all the existing suppliers. Instead, it focuses on anyone new wishing to commence business in the same industry. This phenomenon is extremely common, and it should be borne in mind by legislators who are asked to adopt proposals for new licensing laws.

Licensing laws criminalise ordinary economic activity and create opportunities for corruption

Licensing legislation makes criminals of ordinary small-business-people who are making a living for themselves and their families, providing goods and services, and creating employment. Their only crime is that they have not complied with the often burdensome and intensive requirements associated with taking out a licence.

Another pervasive consequence of the laws is that they create opportunities for official corruption. Dishonest law enforcement officials often use the fact that businesses are operating without licences to extract bribes from them, particularly in the case of activities such as liquor sales and gambling.

Licensing legislation imposes financial costs and burdens on businesses

Even in cases where licensing is introduced in an attempt to ensure compliance with requirements such as health standards, unnecessary costs are imposed on businesses. For example, licensing laws have sometimes required the installation in restaurant kitchens of expensive tiling, stainless steel equipment and other costly items, supposedly to ensure hygienic food handling. However, kitchen standards cannot prevent faulty hygiene habits or carelessness in the handling of food.

In addition to such compliance costs, the laws often place heavy administrative burdens on businesses. Besides the expenses and red tape involved in applying for a licence, business people are often also required to keep records, to report to licensing authorities and to apply for the renewal of their licences.

Many licensing laws once considered essential have been repealed

Some progress has been made towards repealing licensing laws. At one time it was thought necessary to require a person to hold a licence before being permitted to carry on any of a very wide range of trades and occupations. These licensing laws are no longer regarded as necessary.

As a result of the enactment of the Businesses Act, 1991, a person is free to start up a business in any of the following trades without first having to apply to a licensing authority for a licence to do so:

accommodation establishment, advertising agent, auctioneer, baker, barber, bicycle dealer, building contractor, butcher, café, cartage contractor, commercial traveller, driving instructor, fishmonger, gardening services contractor, general dealer, hawker, hiring service, kennel, laundry, livestock or produce dealer, mail order undertaking, market agent, motor garage, motor graveyard, motor vehicle attendant, motor vehicle dealer, parking garage, pawnbroker, photographer, poultry farm, private investigator, quarrier, recreation ground, rickshaw hauler, riding school keeper, salesman, vending machine keeper, warehouse, and workshop.

RECOMMENDATION 1

No national general Business Registration Act should be introduced.

There have been two attempts to impose a much wider business-licensing system than the old-order licensing regime that prevailed before the Businesses Act. One of those attempts failed, the other has succeeded.

The failed attempt was at national level in March 2013, when the national Minister of Trade and Industry published for comment a proposed national Licensing of Businesses Bill which would have prohibited any person from carrying any business whatsoever supplying any goods or any services to the public, without a licence.

After vehement opposition, the Minister withdrew the draft bill.

No general Business Registration Act should be introduced – the 1991 Businesses Act is all that is necessary.

RECOMMENDATION 2

Limpopo’s general Business Registration Act should be repealed, except in relation to sales of meals and perishable foodstuffs.

The Limpopo province has imposed a wide-ranging business-licensing system.

The province has enacted a Business Registration Act which prohibits anyone from conducting business by dealing in any goods or rendering any services whatsoever, unless he or she has applied for and obtained registration of the business.

The Limpopo Business Registration Act criminalises what should not be criminalised. A person who carries on an unregistered business commits an offence and is liable to a fine or imprisonment for up to six months. Bizarrely, the Limpopo Act states that its purpose is to “empower those previously disadvantaged through creating prompt, simplified and inexpensive access to economic activities” and to “promote trading activity”.

RECOMMENDATION 3

Repeal trade licensing laws in the former homeland of KwaZulu.

Even though the Businesses Act, 1991, repealed licensing requirements for many trades, occupations and businesses, legislation requiring licences for these businesses still existed in the former TBVC states or self-governing territories. Although these states and territories no longer exist as separate entities, in terms of the Constitution their laws continued in force until repealed by the competent authority.

In most provinces which contain territory of former homelands, steps have been taken since 1994 to repeal those laws and to enact legislation which either extended the Businesses Act to the former homeland areas and repealed the homeland business-licensing laws, or which repealed the Businesses Act and homeland laws and replaced them with a new provincial business-licensing law identical in substance to the Businesses Act.

For instance, the Eastern Cape repealed the Licences Acts of Transkei and Ciskei and extended the Businesses Act to those territories, in terms of the Businesses Act (Extension of the Application of the Businesses Act, 1991) (Eastern Cape) 3 of 1997. 

It is unclear whether the KwaZulu-Natal province has passed such a statute to extend the Businesses Act to the former homeland of KwaZulu (and repeal the KwaZulu licensing law). If it has not, the KwaZulu Licensing and Business Hours Act, 1984 is still in force in the former KwaZulu areas of the province.

It is therefore recommended that the KwaZulu homeland trade licensing law should be repealed, and that this former homeland be brought into line with the rest of KwaZulu-Natal.

RECOMMENDATION 4

Most, if not all, licensing laws should be repealed

A wide range of trades, occupations, and businesses still require a licence of some kind or another in South Africa. These include carrying on the business of:

an abattoir, accountant, advocate, agricultural produce agent, airport, air service, air traffic control, animal embryo collector, animal exporter, animal genetic material import agent, animal genetic material processing centre, animal embryo transferor, animal importer, animal inseminator, animal semen collector, aquaculture establishment, attorney, auditor, bank, bingo-game operator, bookmaker, boxer, boxing official, boxing manager, boxing promoter, boxing trainer, broadcaster, buffalo breeder, casino, chiropractor, cinema, clinical technologist, commercial fishing undertaking, commissioner of oaths, conveyancer, correspondence college, debt collector, dental technician, dental therapist, dentist, diamond beneficiator, diamond dealer, diamond researcher, diamond trading house, dietician, discotheque, dispensing optician, emergency care, engineer, environmental assessment practitioner, estate agent, escort agency, financial adviser, financial adviser’s or intermediary’s representative, financial exchange, financial intermediary, financial service, fish processor, friendly society, fund-raiser from the public, gaming machine operator, health spa, homeopath, horse-racing club, hospital, infrared-treatment provider, insurer, investment manager, keeper of three or more pinball or similar machines, keeper of three or more snooker tables, land surveyor, liquor blender, liquor distributor, liquor importer, liquor manufacturer, liquor retailer, lottery, masseur, meal provider whether from fixed premises or as a street trader, medical aid scheme, medical practitioner, medical orthodontist and prosthetist, medical scientist, medical technologist, minerals prospector, mining, municipal accountant, natural scientist, naturopath, nightclub, notary, nurse, occupational therapist, optometrist, oral hygienist, passenger transport by bus or taxi, patent agent, pension fund, perishable foodstuff supplier, petroleum manufacturer, petroleum retailer, petroleum wholesaler, pharmacist, physiotherapist, place of care for children, plant breeder, podiatrist, postal delivery, psychologist, quantity surveyor, racecourse operator, radiographer, remedial gymnast, sauna, school, security officer, security service provider, social worker, society for the protection of cruelty to animals, speech therapist and audiologist, stock exchange, technikon, telecommunication service, telephone company, theatre, totalisator, tour guide, town clerk, town planner, Turkish bath, unit trust scheme, university, valuer, and veterinarian.

Financial service representatives engaged (as independent operators or employees) by a financial adviser or intermediary to render services on its behalf to clients are subject to a “negative licensing” system. Representatives do not need to obtain a prior licence to operate, but if they are subsequently perceived to have breached rules of fit and proper conduct, the financial adviser or intermediary who engaged them must debar them from the industry.

It is proposed that most, if not all, licensing laws should be repealed.

Against this, it is often contested that a licensing requirement is the only way to protect the public, particularly in an industry that involves high risk such as medicine, banking, or air transport. It is prudent that in sectors such as these there should be a prior screening process, such as is afforded by a licensing law, before a person is permitted to embark on business.

However, licensing laws do not guarantee that the public will be protected, and that there will be no failure in the licensed activity. Dishonesty and accidents happen even within licensed industries.

It is also argued that the rationing of admission to certain industries is necessary where the industry is exploiting a scarce resource, such as broadcasting on the radio waves, or fishing.

However, people carrying on activities in these sectors do not require any special treatment. They can provide a service and protect existing resources simply by relying on property rights. For example, there is no need to introduce broadcasting legislation as broadcasters are able to obtain interdicts against other broadcasters who attempt to use their frequencies. In the same way, the right to exploit wild animals vests by common law in the person who holds the rights of property over the area concerned, and the same approach can be used in the case of shoals of fish and similar natural resources.

It is also maintained that a licensing law is needed to protect the public where the licensed businesses use moneys obtained from the public, and that it is necessary to protect these trust moneys by means of fidelity funds.

This problem can be overcome by requiring that conveyancers, estate agents, debt collectors and so on maintain the necessary insurance or fidelity cover. It is not necessary to impose the requirement that they obtain a prior licence in the guise of a “fidelity fund certificate”.

It is also asserted that licensing laws are necessary as a source of revenue, to raise taxes and licensing fees from the licensed businesses.

However, licences are not an essential tool of tax collection. The majority of taxpayers are not licence-holders, and taxes can be raised through the ordinary taxation laws without imposing licensing burdens on particular industries. It is also to be doubted whether the benefits government enjoys with greater revenue outweighs the cost to society imposed by licensing laws – less employment, decreased investment, reduced entrepreneurship, and more expensive goods and services.

It is also argued that a licensing requirement is necessary as a source of information for the government so that it can keep track of the persons active in a business sector, and to enable government officials to inspect and enforce other laws.

In fact, however, licensing laws do not meet this requirement in many cases. For example, there are probably more unlicensed liquor retailers in South Africa than there are licensed ones. Government departments rarely have enough inspectors to enable them to police industries proactively by visiting all the business premises on their list. In most cases, inspectors and police officials respond only to complaints received, and they therefore investigate breaches of rules and regulations reactively. Because most violations are brought to the attention of the authorities by a complaint received from a member of the public, licensing as a source of information about businesses is redundant.

RECOMMENDATION 5

Licensing laws should entitle applicants to licences automatically, unless they will clearly violate essential health and safety laws.

Where the legislators are convinced that the benefits of particular licensing laws outweigh their costs and that these laws should be retained, it is urged that these laws stipulate that an applicant must be granted a licence automatically on request, unless the licensing authority can show on a balance of probabilities that the applicant will probably violate essential health or safety laws, or some other legal requirement which the legislators are convinced is essential in the industry in question for the protection of the public.

RECOMMENDATION 6

No new licensing laws should be introduced unless strictly necessary.

For example, a Debt Collectors Act was enacted in 1998 which requires the registration of debt collectors. Before a new registration or licensing law is adopted, its likely effects should be carefully considered, and the costs and benefits of the law should be weighed against each other. It may be that measures other than a licensing law could prevent whatever mischiefs are considered to exist in the affected industry.

The Businesses Act, 1991 has proved to be relatively resilient in the 27 years since it was enacted.

Relatively few legislatures have to date sought to re-enact anything similar to the pre-existing licensing laws which had imposed a licensing requirement on a wide range of businesses, in order to reintroduce that old licensing regime or something wider.

RECOMMENDATION 7

Repeal any licensing laws that permit only one supplier and create a monopoly.

The threat of competition benefits consumers. And the ability to enter an industry benefits persons who are not yet carrying on business in the industry but wish to do so. Existing businesses, on the other hand, benefit from having no competitors.

The best way for a person in business to ensure that he will have no competition is to secure the enactment of a law which states that only that person may carry on that particular business. Examples of this are the business of delivering letters, and the business of providing a network of fixed lines for telephone calls and other telecommunication.

If there are to be licensing laws, then these laws should not license a single monopoly to the exclusion of competition from other licence-holders. It is consequently urged that all monopoly legislation should be repealed.

This suggestion could be disputed in particular cases. For example, it was contended that the monopoly previously enjoyed by the state telephone company in terms of the Telecommunications Act, 1996 was justified because this company was required to extend telephone services to the needy, and also because it had to be sufficiently viable to attract an investment partner.

But these narrow reasons did not justify retention of the telephone company’s monopoly rights. The needy could have been assisted by narrowly-targeted subsidies. And the economy as a whole would have benefited from the competition permitted if the monopoly had been removed. The discipline of the market would have led to greater efficiency, innovation, and variety in telecommunication services, as had been shown in countries around the world where deregulation had occurred.

RECOMMENDATION 8

No licensing law should require an applicant to be “suitable” or “fit and proper”.

Licensing laws often say that the licensing authorities may refuse to grant an application for a licence if they are satisfied that the applicant is not a “fit and proper person” or a “suitable person” to carry on the proposed business.

This power enables the licensing authority to identify any shortcoming of the applicant, whether by reason of character, previous conduct, personal cleanliness, habits or methods, as a ground for refusing the application.

A licence for a sauna, cinema, theatre, nightclub, or discotheque must be refused in terms of the Businesses Act, 1991 and its provincial successors, for instance, if the licensing authority is satisfied that the applicant or person who will be in control of the business is not a suitable person because of his character or previous conduct, or for any other reason. And the Western Cape Gambling and Racing Act, 1996, prohibits the Licensing Board from granting any licence unless the applicant is “a fit and proper person whose character, integrity, honesty, prior conduct, regard for the law, reputation, habits and associations do not pose a threat to the health, safety, morals, good order and general welfare of the inhabitants of the Province and to the provisions and policy of this Act”.

All too often, the licensing authority uses this discretion to protect existing licensees. It could also be used for corrupt purposes to elicit bribes or other favours from licensees.

It is impossible to know in advance whether or not an applicant for a licence to conduct business in a particular industry will conduct business ethically in that sector. Licensing laws should therefore not use such criteria.

RECOMMENDATION 9

Licensing laws should not disqualify applicants who have prior convictions.

Frequently, a licensing law lays down that the licensing authority must not grant a licence if the applicant has been convicted of theft or receiving stolen goods, or other offences involving dishonesty.

According to the Agricultural Produce Agents Act, 1992, for example, a certificate to act as an agricultural produce agent can be refused if the applicant has at any time been convicted of an offence involving an element of dishonesty.  The Western Cape Liquor Act, 2008 disqualifies from holding a liquor licence anyone who has been sentenced to imprisonment without the option of a fine in the preceding five years, unless the licensing authority “in exceptional circumstances” and on good cause shown determines that a disqualified person is deemed to be qualified for the purposes of a particular application.

The applicant has already been sentenced by a court of law to a penalty that the court deemed appropriate to the crime, the circumstances of the accused, and the needs of society. Nevertheless, the licensing law is used to inflict further punishment on the applicant. The convicted person, although having already paid a debt to society, is prevented from rehabilitating himself or herself by starting a business in the licensed industry.

It could be argued that to permit persons convicted of an offence involving dishonesty would be to admit undesirable people into the industry.

But a blanket disqualification for offences involving dishonesty does not guarantee that persons who are granted licences will be honest. It also prevents a convicted person from rehabilitating himself. Also, the prohibition against granting licences to persons with previous convictions would not prevent these persons from being employed by other persons in the industry who have licences. Taken to its logical extreme, a disqualification for criminal convictions would mean that people with prior convictions would be prohibited from earning their living in any industry, sector or field of endeavour. The only areas of activity that would remain open to them would be criminal activities such as theft or robbery.

RECOMMENDATION 10

Licensing authorities should not have the power to refuse a licence “in the public interest”.

Some licensing legislation empowers the licensing authorities to refuse an application for a licence if they are satisfied that it is not in the public interest that the applicant should have a licence.

This is an even more vague and general criterion than the requirement that the applicant be “fit and proper”, and allows a similar kind of corruption to take place under the table. It gives the licensing authorities an undesirably wide discretionary power to decide what the public interest is, and whether the granting of each particular application will be in the public interest.

Examples include the Gauteng Liquor Act, 2003, which states that the Liquor Board shall not grant an application for a liquor licence unless this is in the public interest. The Road Transportation Act, 1977, lays down that a road transportation authority must, in deciding whether an application for a permit to carry passengers should be granted or refused, take into consideration the extent to which the transportation is necessary or desirable in the public interest.

Objective rather than discretionary criteria should determine eligibility for licences. A power to refuse a licence application in the public interest leads to arbitrary and inconsistent decisions. The rule of law requires the laying down of clear rules and avoidance of discretion wherever possible. Licences should be granted to whoever satisfies objective criteria.

It could be argued that not every circumstance can be prescribed in advance in objective terms, and that the licensing authorities should have a discretion to refuse a licence in a particular case.

However, the uncertainty and potential for abuse that are introduced by a subjective criterion such as the “public interest” outweighs any alleged advantages of giving the licensing authorities the discretion to refuse a licence if they think that the public interest requires them to do so.

It is accordingly recommended that licensing laws should not authorise licensing authorities to refuse a licence application on the ground of the “public interest”.

RECOMMENDATION 11

Licensing laws should not authorise the discouraging of competition.

Some licensing legislation expressly empowers the licensing authorities to discourage competition in the licensed industry.

For example, the Diamonds Act, 1986 states that the licensing authority must not grant an application for a licence to carry on business as a diamond beneficiator, diamond dealer, diamond researcher, or diamond trading house, if the authority is of the opinion that a sufficient number of persons already hold that licence. And a person cannot hold a gambling licence in Mpumalanga unless the Gambling Board is satisfied that the granting of such a licence will not result in the establishment of an unduly large gambling industry in the province, in terms of the Mpumalanga Gambling Act, 1995.

It is recommended that licensing laws should not empower the licensing authorities to refuse a licence if they think that there are sufficient numbers of licensed businesses in the industry already. There should be no “need and desirability” criterion in a licensing law. Needs and desirability are determined by market forces – being the needs and desires of ordinary people and firms.

It may be argued that if too many licences are granted, the industry will become overtraded.

But it is not for a government agency like a licensing authority to determine what the optimum number of suppliers in an industry should be. This is best left to businesspeople and investors who are prepared to hazard their own efforts and finances in launching an enterprise. To give a government authority the power to decide if a particular industry is overtraded leads directly to that authority protecting the existing businesses, at the cost of the public and the economy in general.

RECOMMENDATION 12

There should be no special requirements for individuals or premises.

Licensing laws frequently require a person to comply with educational requirements or special skills before he or she will be granted a licence. For example, licensing laws sometimes provide that the person in control of the business must be able to read or write.

And the Western Cape Liquor Act, 2008, and its regulations requires liquor store licensees physically or electronically to write out records of sales and keep copies. 

Legislative requirements such as these give an advantage to business applicants with a good education, at the expense of applicants who have not been fortunate enough to receive an education at the same high standard.

Or the legislation may empower the licensing authority to refuse a licence if in its opinion the business premises will be “unsuitable” in that they will be detrimental to “amenities” of the neighbourhood.

Requirements such as these give an advantage to applicants who have more funds to enable them to build grander or more stylish premises, and place applicants of more modest means at a disadvantage.

It is therefore recommended that licensing laws should not impose special requirements with which businesspeople or their premises must comply.

It could be contended that it is desirable to impose requirements of these kinds to raise standards in the industry.

However, legislation that increases standards tends to operate to the benefit of privileged people, and to the disadvantage of the less privileged. Industrial standards are best raised through market forces, usually being the demands and preferences of ordinary consumers.

RECOMMENDATION 13

There should be no exemptions for government-owned businesses.

Licensing legislation frequently exempts businesses that are run by the government from having to obtain a licence, even though private businesses with which they compete are obliged to comply with the licensing requirements.

For example, the Businesses Act, 1991, says that the state or a local authority is exempted from the obligation to obtain a licence under that Act to keep a cinema or theatre.

Exemptions such as these do not deal with all businesses equally, and give an unfair advantage to government businesses at the expense of private enterprise. It is a trite requirement of the rule of law that the law applies equally between the governed and the governing, and this is further reinforced by section 9(1) of the Constitution.

It is therefore proposed that licensing laws should not exempt enterprises conducted by governments from the obligations imposed on private-sector businesses to obtain licences before embarking on the enterprise.

It could be said that the government can be trusted to comply with all the provisions which the law requires must be met before a licence is granted. It could also be asserted that there is no point in asking the government to apply to itself for a licence.

These arguments ignore the costs to private businesses of having to obtain a licence. If any sector is exempt from the licensing requirement, this operates unfairly against businesses that are not exempt. Moreover, experience shows that governments do not always comply with legislative requirements before exercising their powers. Licensing authorities are to some degree independent of the government, and it is not unreasonable to require the government to apply to the licensing authority for a licence, in the same way as a private business.

RECOMMENDATION 14

Licensed operators should not be disciplined by people in the same business field.

Licensing laws often subject people in business to being policed, investigated, and disciplined by their competitors.

For example, enquiries into charges of misconduct by a member of a medical or health profession are usually conducted by a board or committee which consists of members of the same profession. Thus, in terms of the Health Service Professions Act, 1974, enquiries into charges of misconduct on the part of a psychologist are conducted by a board which usually consists mostly of psychologists who can decide on what penalty to impose, including suspension of the psychologist from practice or even cancellation of the registration which entitled that psychologist to work.

A disciplinary panel which is constituted in this way is more likely to penalise that person and suspend his or her right to continue in business than a panel made up of independent laypersons might be.

On the other hand, if the panel of enquiry is too lenient, the public will have no confidence that the complaint was fairly considered and decided upon; the perception is often that the profession is siding with its member against whom the complaint is made.

It is hence proposed that, if there must be a licensing law, then the power to investigate the violation and suspend a licensee from continuing to practise his or her occupation should not be entrusted to panels drawn mainly from members of the same occupation. Panels of enquiry should consist in the main of ordinary lay members of the public.

This suggestion could be disputed on the ground that the persons carrying on business in the same field are the best judges of whether or not the member against whom the complaint is made should be penalised.

But in response, it must be remembered that a licensing law is introduced in the public interest allegedly, and accordingly members of the public would be better placed to decide whether the public has been harmed in a particular case. Persons carrying on business in the same industry could be tempted to place the interests of that industry above the general interest and impose a penalty which could be either harsher or more lenient than a penalty which would be appropriate for the protection of the public.

RECOMMENDATION 15

Municipal bylaws should not authorise municipal officials to impound the goods of informal or street traders who fail to produce a licence to trade.

The Businesses Act does not authorise municipal officials to remove or impound the goods and property of a person carrying on a licensable business who fails to produce a licence, or who carries on the business without a licence.

The Durban High Court in the Makwickana case in 2015 (rightly) declared that the sections of a bylaw of the eThekwini (Greater Durban) Municipality which authorised its officers to remove and impound the goods of an informal or street trader who failed to produce a licence to trade were invalid.

RECOMMENDATION 16

Legislation permitting seizure of street traders’ property should also provide for the return of property.

The Businesses Act does create some injustice for street traders, licensed or not. The provincial Premier can make regulations about the disposal of things impounded.

The Act should provide for the return to street traders of impounded property, or for payment of compensation.

A municipality’s indiscriminate disposal of impounded property without proper notice to the street trader dispossessed, or supervision by a judicial officer or other impartial tribunal, and without accounting to the trader, is an unjustified limitation of the fundamental rights to equality before the law, to trade freely, and to be free from arbitrary deprivation of property.

RECOMMENDATION 17

Bylaws should not require itinerant hawkers who sell goods other than meals to hold a permit.

The Businesses Act and provincial replacements of the Act state that a municipal bylaw must not require a person carrying on the business of street vendor, pedlar, or hawker to hold a licence or permit for such business.

Yet some municipalities might be applying more stringent and unauthorised rules by insisting that even itinerant (mobile, or “roving”) traders must register with the municipality, pay for the “right” to operate, and hold a permit issued by the municipality whether or not they sell meals.

RECOMMENDATION 18

The Immigration Act’s financial and staffing requirements imposed on immigrants seeking to establish a business should be relaxed.

The Immigration Act, 2002 is not supportive of immigrants hoping to set up a small business.

The Act states that a business visa may be issued to a foreigner who intends to establish a business in South Africa, but only if the foreigner invests an amount determined from time to time by the Minister of Home Affairs after consulting the Minister of Trade and Industry, the amount being currently R5 million, and only if 60% of the permanent staff employed in the business are South African citizens or permanent residents.

These requirements discourage foreign investment in small businesses in South Africa and should be done away with.

Any new enterprise established by a foreigner in South Africa would boost local economic activity, whatever the amount invested in the venture or sourcing of its staff.

RECOMMENDATION 19

Laws should not prevent refugees from starting a business.

There should be no prohibition against asylum seekers and refugees (persons who have been granted asylum) from seeking self-employment and from being granted any relevant business or trading licences.

Some provincial Businesses Actsand municipal bylaws contain wording which appears to impose more restrictive requirements on refugees.

RECOMMENDATION 20

An unlicensed trader convicted of a first offence should be discharged with a caution.

It is recommended that an unlicensed trader convicted of a first offence of trading without a licence should not be sentenced, but should be discharged with a caution or reprimand.

Select sources

Constitutional statutes and instruments

Constitution of the Republic of South Africa, 1996: Chap 2 (Bill of rights) ss 9, 22, 25, 34; Chap 4 (Parliament) s 44(1)(a)(ii); Chap 6 (Provinces) s 104(1)(b)(i); Sched 4 (Areas of concurrent national and provincial legislative competence) part A;

Proc R18 of 9 Mar 1995 (Assignment to provinces of provisions of Businesses Act, 1991);

Self-governing Territories Constitution Act 21 of 1971

National statutes, statutory instruments and notices

Businesses Act 71 of 1991;

Adjustment of Fines Act 101 of 1991, s 1(1)(a) and (2), read with Magistrates’ Courts Act 32 of 1944 s 92(1) and Govt Notice 217 of 27 Mar 2014 (monetary jurisdiction of courts);

Films and Publications Act 65 of 1996 ss 18(3)(c) and 24(3)(c);

Natal Prov Notice 23 of 24 Feb 1994, Natal Official Gazette 4952 p 131 (declaration of perishable foodstuffs for purposes of Businesses Act, 1991);

Criminal Procedure Act 63 of 1977 s 35 (Forfeiture of article to State), s 297 (Conditional or unconditional postponement or suspension of sentence, and caution or reprimand);

Refugees Act 130 of 1998 ss 22, 24(3)(a);

Immigration Act 13 of 2002, s 15(1), read with Immigration Regulations Govt Notice R413 of 22 May 2014 reg 14 and Gen Notice 560 of 15 Jul 2014 (financial or capital contribution for business in respect of business visa);

Invitation for public comment on draft Bill (Gen Notice 231 of 2013, Gazette 36265 of 18 Mar 2013), and accompanying draft Licensing of Businesses Bill, 2013 cls 3, 25(1), 27

Provincial statutes and statutory instruments and other measures

Eastern Cape Businesses (Extension of Application of Businesses Act, 1991) Act 3 of 1997;

Free State Business Laws Rationalisation Act 6 of 1997;

Kwazulu Licensing and Business Hours Act 11 of 1984;

Limpopo Business Registration Act 5 of 2003 (Provincial Gazette 971 of 14 Feb 2004), read with Limpopo Premier’s Proc 1 of 2015 (commencement of Act) and Limpopo Business Registration Regulations 2015 (Provincial Gazette Extraordinary 2492 of 2 Apr 2015);

Mpumalanga Business Act 2 of 1996;

North-West Business Act 6 of 1997

Municipal bylaws and policies

City of Cape Town: Informal Trading Bylaw [2009], as amended;

City of Johannesburg Metropolitan Municipality: Informal Trading By-Laws, 2009, Local Authority Notice 328, Gauteng Provincial Gazette No. 66, 14 March 2012;

Ekurhuleni Metropolitan Municipality: Informal and street trading policy and management framework, 17 April 2008 (esp s 2.1, s 2.2, s 3.1, s 5.4 and s 5.5);

eThekwini Municipality: Informal Trading Bylaw, 2014, s 35, s 39

Caselaw

Makwickana v Ethekwini Municipality and others [2015] ZAKZDHC 7 (17 February 2015);

South African Informal Traders Forum and others v City of Johannesburg and others; South African National Traders Retail Association v City of Johannesburg and others 2014 (6) BCLR 726 (CC) esp pars [6]–[8], [26]–[28];

Somali Association of South Africa, Ethiopian Community of South Africa, and others v Limpopo Department of Economic Development, Minister of Police, and others [2014] 4 All SA 600 (SCA) pars [29] and [30], [43] and [44];

Ex parte President of the Republic of South Africa, In re: Constitutionality of the Liquor Bill 2000 (1) BCLR 1 (CC) par [79];

Dadoo Ltd and others v Krugersdorp Municipal Council 1920 AD 530 547

Legal commentaries

Beyond Retribution: Prospects for Restorative Justice in South Africa (ed. Traggy Maepa), Institute for Security Studies (2005), chapter 9: “Alternative Sentencing in South Africa: an Update”, Lukas Muntingh;

Law of South Africa, vol 15(2) 2 ed, “Licensing” (M Dendy), par 5 (Transitional provisions);

Law of South Africa, vol 24 2 ed, “Sentencing” (A ST Q Skeen,updated by S Hoctor), par 5 (Transitional provisions)

Media reports

Independent Entrepreneurship Group, “Business Licensing Bill” (undated) http://ineng.co.za/business-licensing-bill/ (accessed 21 February 2018);

Daily Maverick, 16 May 2013, “Licensing of Business Bill: A titanic mess of admin and poor logic,” S Hlongwane;

eNews Channel Africa,21 May 2013, “Business Licensing Bill to be redrafted”