How deregulating courts and the legal profession in South Africa could help small business


Martin van Staden | Executive Committee and Rule of Law Board of Advisors | Free Market Foundation | mail me |

It is particularly costly for small businesses in South Africa to access justice. Without access to justice, these businesses cannot resolve important disputes or see their rights or interests vindicated in a legally recognised fashion. There are certain things Parliament can do to make the courts accessible to small enterprises.

The Small Claims Court should be opened up to incorporated businesses (presently only unincorporated – non-companies – entities may approach the court), alongside a substantial increase in its monetary jurisdiction (from R20,000, to R150,000). Litigants should also be able to consent to a higher monetary jurisdiction. Defamation, malicious prosecution, wrongful imprisonment, and wrongful arrest must also fall under the court’s jurisdiction.

Furthermore, the Magistrates’ Courts are costly to approach – despite being an inferior court – for small businesses. The procedure and red-tape associated with approaching these courts should be replaced with short-process courts. This was recognised as necessary in 1991 but never implemented.

In a short-process court, the presiding officer may dispense with certain rules of evidence and procedural requirements or formalities in consultation with the parties appearing before them. What is saved in time in court, is necessarily saved in money, as the biggest expense for parties in a case are their legal representatives, who charge by the hour.

The State, and therefore the taxpayer, could also save substantially when it is participating in court proceedings under a short-process regime.

Most controversially, perhaps, there is a need to allow persons other than legal practitioners to represent their peers in court. The State has long acted as a gatekeeper, ensuring that only those who have obtained an LL.B. at university, been an articled clerk for two years at a law firm, or a pupil for one year under an advocate, may practice as lawyers. While this is nice to us in the legal profession – we are granted a monopoly – it is prohibitively expensive for those outside the profession.

Nothing stops an ordinary South African from familiarising themselves with the law and becoming an expert in a given field of law, without an LL.B. and without having gone through the rigmarole of being a licenced practitioner. Such people should be allowed to represent their fellows in court. This would hugely expand access to justice not only for small businesses who might have in-house staff who are legal experts in all but formal qualifications, but also for disadvantaged South Africans.

There is, naturally, the risk of fly-by-night operators who will provide bad or no service, but this is also true among legal practitioners.

An LL.B. and some experience has not stopped many practitioners from misbehaving. In other words, it is not the degree, or the time spent getting licensed, that protects the public from unscrupulous lawyers, but rather personal integrity and the public’s ability to use common sense in judging the character of those they choose to represent them.

The LL.B. and law licences, unfortunately, represent nothing more than a false sense of security to the public.

The above recommendations are provided by the authors of Laws Affecting Small Business: Justice, which is part of a series of research booklets published by the Free Market Foundation. The LASB booklets cover eight areas of government legislation and regulation that harms and hinders the establishment and growth of small enterprises in South Africa.

The authors also recommend that South Africa should adopt legislation similar to those adopted in the United States that minimise the economic impact of laws and regulations on small businesses by subjecting the process to adopt those laws to judicial review. This would ensure that independent agencies or the courts could stop Parliament or executive departments from burdening small businesses with too much red-tape and costs.

This would be particularly useful today, as businesses, large and small, struggle to keep their heads above water.

The LASB booklets represent one-third of the Free Market Foundation’s book, Radical Economic Transformation: The Legal Route to Economic Freedom, which proposes a comprehensive reform package that will get the South African economy prospering.

The book contains another recommendation: the Promotion of Economic Activity Bill, which would allow the President to suspend laws and regulations that are too much of a burden on economic growth and job creation, or to exempt certain industries from their application. Such an intervention might be just what the doctor ordered for an economically contracting South Africa.

Liberalisation is as important today as it was in the 1990s when Apartheid’s economic inefficiency was biting South Africans’ wallets. The government liberalised radically back then, leading to a decade of economic and job growth. It is time to liberalise again.


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