BUSINESS LICENSING BILL 2025: NEASA submits commentary.

Dear employer

The Department of Small Business Development published the draft Business Licensing Bill, 2025 (the ‘draft Bill’) for public comment.

The draft Bill aims to empower local councils to make bylaws to provide for preferential business licensing for the small businesses owned by disadvantaged groups. This may include shortened, simplified application and renewal processes, lower application fees and the waiver or suspension of fees. 

The draft Bill further introduces provisions for the designation of exclusive trading areas in South Africa and, furthermore, proposes additional requirements for foreign nationals looking to obtain business licenses in SA. The draft Bill will ultimately repeal the Business Act of 1991 which currently regulates the licensing of businesses in South Africa. 

In the draft Bill, the ‘redress’ of past unjust licensing policies and procedures is listed as a primary guiding principle of this draft legislation. The National Business Licensing Policy (NBLP) has also informed the creation of this Bill. 

The Policy’s purported goals are, inter alia, the reduction of regulatory administrative burdens for small enterprises and to drive ‘transformation’ and ‘empowerment’ in the informal sector by assisting historically disadvantaged communities to participate in the economy.

In its analysis, NEASA highlights its concerns regarding some of the provisions of the proposed legislation. Apart from its ‘noble’ attempt to formalise the informal sector, NEASA seeks clarity on the vague terms used in the Bill (i.e., the usage of the phrases ‘persons and areas that were previously excluded’ and ‘disadvantaged groups and areas’) which are not defined in the Bill.  

This vague language causes suspicion and concern that this draft Bill may attempt to infuse exclusionary affirmative action imperatives into business licensing practices (similar to those requirements in the B-BBEE and PPPF Acts), especially considering the terminology used in the guiding principles and the policy document driving this Bill.

In its submission, NEASA demands that the Department provide clarity on how B-BBEE and PPPF Acts’ imperatives, as measures of differentiation for purposes of ‘redress’, find application in this draft Bill. This has specifically been articulated in the Policy document but is curiously not explicitly stated in the draft Bill itself.

Licenses should be given to any business that requires one, and no requisite as a measure for preference should be applied in determining those businesses which can or cannot benefit from being licensed.

The criteria should, for example, purely be based on a business’ financial, organisational, and technical standing. Preferential regulatory systems have proven to be harmful to the organic working of free market powers which are vital for sustainable economic growth. In any event, it is likely that this legislation will be used as a fiscal tool by municipalities to bolster their coffers at the expense of SMMEs.

NEASA, therefore, finds that the current licensing regime under the Business Act is sufficiently equipped to regulate the licensing of businesses and that the proposed interventions may counterintuitively have negative effects on the market and cause the exclusion of some persons from entering markets and infringe on their ability to trade.

Additionally, in its submission, NEASA highlights the fact of the informal economy being a critical component of South Africa’s labour market, which, according to a recent Township Informal Economy Report, accounts for nearly 19.5% of total employment as of late 2024 in South Africa. The report also revealed that estimates suggest that the township economy is valued at over R900 billion annually.

57% of these businesses have no formal accounting systems, and 77% of them manage their finances manually as a result of customer preference and limited digital literacy. Therefore, it begs the question where the Government will find the capacity to facilitate market support, operational funding, digital skills training and improved infrastructure for these businesses to be able to formalise as is also envisaged by this Bill.

Licensing requisites are difficult for governments to administer and properly enforce in general. Undoubtedly, the requisites of the draft Bill will cause a costly compliance nightmare for a majority of these businesses and will, in all likelihood, simply be ignored.

This intervention, for all the reasons mentioned above, must thus be viewed with circumspection. The draft Bill, in its current form, is vague and will prove to be impractical to implement. It must be reviewed or abandoned in its entirety.

To read NEASA’s full submission, click here.

For more information

NEASA Media Department

media@neasa.co.za

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