SMME growth may be hindered by proposed Business Licencing Bill - Van Biljon

Gerrie van Biljon

This is according to Gerrie van Biljon, executive director of Business Partners Limited, a specialist risk finance company for SMEs in South Africa, who says that adding further legislation to the already restricting system will not encourage aspirant business owners to enter the business world: "While the proposed Business Licencing Bill will result in existing businesses having to comply, it will be a further deterrent to those contemplating starting a business as a means to make a living."

He points to the 2012 Global Entrepreneurship Monitor (GEM) South Africa report, which revealed that only 14% of South Africans are intentional entrepreneurs, individuals who intend to pursue a business opportunity within the next three years. He says that this is well below the average of intentional entrepreneurs in efficiency-driven countries, which is 27%.

"This already low percentage has the potential to drop even further as fewer South Africans become interested in starting or running a business, due to the additional red tape this proposed Bill can cause for new business owners," says Van Biljon.

Additional red tape will stunt entrepreneurship

According to the draft, the purpose of the new Bill is to promote the development of the South African economy and encourage a conducive environment that promotes business. However due to a flood of complaints from the industry questioning the intent of the proposed new Bill, the draft is currently in the process of being revised.

Van Biljon says that what South Africa essentially needs is more entrepreneurs, and not laws which make it difficult to get into, or be in, business: "As SMMEs contribute about 50% of the country's GDP, and are important job creators, the country needs to promote a culture of entrepreneurship to not only ensure wealth creation and economic growth, but also to curb the level of unemployment."

He says that Business Partners Limited would instead prefer initiatives that support businesses, and in particular start-up businesses. "A system is needed that includes support services that make it easy to be in business and create an environment that is more conducive for SMMEs. Should the Bill be redrafted, more focus should be placed on the purpose of the Bill, as well as detail around who should comply, the costs around compliance and procedures involved."

A conducive environment that promotes business is necessary

Besides the obvious hindrance the proposed Bill will cause business owners in terms of red tape, there are also other considerations that make the Bill a less viable proposition.

"There are an estimated 2.8 million informal and small businesses in South Africa, and registering all of those could be an administrative challenge. This will likely have a cost implication to manage and maintain the process, and the tax payer will have to carry the cost. There are also logistical issues to consider as many informal traders often operate close to their home and do not have easy access and transport to licensing offices.

"These additional expenses, coupled with the stipulated costs for the application of a licence, will add to the existing business expenses which may result in the end user paying more for the business' product or service.

"The question remains as to what the true reason for the Bill is, as well as how easy it will be to get the licence and what the costs will be for businesses. Ultimately, if SMMEs are to flourish and continue to positively contribute towards job creation and South Africa's GDP, a conducive and compliance-friendly environment is required," concludes Van Biljon.

For more information, go to www.businesspartners.co.za.