Martin van Staden | Head of Policy | Free Market Foundation | mail me |
The first notable initiative in government by the Inkatha Freedom Party (IFP) – South Africa’s second oldest existing federalist institution – has been to centralise spaza shop regulations under the central government. The xenophobic dimension is less surprising.
Tshwane mayor Nasiphi Moya, a member of the “unofficial opposition” ASA (as they insist on being called), says, “Spazas are strictly for locals!”. Meanwhile, in Soweto, “civic group” Operation Dudula has stopped foreigners from registering their businesses. One moment, the controversy is ostensibly about “illegal” immigrants. Then, we effortlessly shift, on a dime, over to foreign nationals per se being the problem.
A standard bylaw for township economies
IFP leader and Minister of Cooperative Governance in the so-called Government of National Unity (GNU), Velenkosini Hlabisa, has introduced a centralising “standard bylaw” on township economies. This measure empowers municipalities to discriminate against legal foreigners doing business in South Africa.
Notably, this bylaw was approved by the cabinet under the GNU’s rules of sufficient consensus. In other words, the “reformers” endorsed it.
Furthermore, Operation Dudula is actively preventing foreigners who attempt to legalise their businesses from doing so. Therefore, do not let anyone convince you again that this was ever about “legal” versus “illegal” immigrants.
Potential for reform under the GNU
We have published the fourth in a series of five Liberty First policy reform proposals. This edition addresses “Legal System and Property Rights“, a key area for measuring economic freedom in the Economic Freedom of the World annual report, published by the Fraser Institute.
South Africa ranks best in this category compared to others, such as Size of Government, Free Trade, Regulation, and Sound Money. However, its absolute score remains unsatisfactory.
The Liberty First initiative was launched in recognition of the potential for reform under the GNU. While this potential still exists, the spaza shop crackdown is a telling indication that the supposed reformers in the coalition are being swept up in typical African National Congress (ANC) politics. This includes centralisation, over-legislation (as Hlabisa’s bylaw merely reiterates existing laws), and an “us vs. them” mentality.
In the report I authored, four categories of reform are identified:
- Federalisation
- Rule of Law
- Private Property
- Civil Liberty
Each of these principles is already a distinctive feature of the South African Constitution.
Federalisation and centralising municipal trade
We have outlined multiple ways to better respect the federal design of the South African Constitution. However, centralising the regulation of municipal trade to the national sphere is not one of them. Instead, devolution legislation should assign many functions that the central government cannot efficiently execute on its own to lower levels of government.
Nevertheless, this cannot go unfunded. For this reason, fiscal relations legislation should be enacted. Such legislation should not only allocate more money from the National Revenue Fund to provinces and municipalities but also entitle them by law to a greater share of the taxes raised within their jurisdictions. This would encourage healthy competition between provinces and municipalities to attract high-value taxpaying businesses and individuals.
Additionally, Parliament should adopt self-determination legislation under section 235 of the Constitution. This would grant any self-defined linguistic and/or cultural community significant authority over state services in their respective areas. In particular, such legislation should enable communities to govern education, welfare, healthcare, and safety. Moreover, they should be able to provide municipal services to their paying members.
Crucially, these community initiatives must be self-funded. However, they must also be entitled to substantial tax and rate relief, as well as exemptions.
The spaza shop crackdown
The recent spaza shop crackdown is just another in a long line of “feelgood,” emotional reactions by the political elite that harms the rule of law.
Virtually everything in the Department of Cooperative Governance’s standard bylaw is already law in some form or another. Already – and predictably – township businesses are flouting these existing laws. They are not doing so because they want to, but because these first-world standards often define the precise dimensions (length and width) of trading stalls and prohibit noise or air pollution “of any kind”. These standards are wholly inapplicable in South Africa’s township reality.
What we are talking about here are invariably poor, usually informal shops. These businesses cannot afford to hire compliance officers or lawyers to help them navigate the byzantine leviathan that is South Africa’s regulatory-administrative state.
Adopting yet another law changes nothing. Instead, it encourages further disrespect for the law. This does not mean we need “better law enforcement”. Being too zealous in enforcing economic regulations like these would be very destructive. Already, the choice for informal entrepreneurs is to either remain informal or go out of business. In our high-unemployment, low-growth environment, this is not the rational or sensible way to go about solving the problem.
Spaza shop regulations – what should be done?
The answer, of course, is to deregulate and to liberalise. By reducing the compliance burden, we would incentivise informal businesses to register and operate within the bounds of the law. However, if operating within the bounds of the law is so burdensome that these entrepreneurs simply cannot do it, then we are allowing policymakers to be mischievous with our socio-economic future.
This new standard bylaw reproduces legal content that already exists, and as such, it amounts to over-legislation. However, it is not just over-legislation. It is over-legislation on something we know will not be complied with. This is not good for the rule of law.
What we have proposed in the category of the rule of law, instead, is for the courts to drop their deferential posture when they come across breaches in the rule of law – over-legislation being one such breach. The rule of law is a set of pretty much universally agreed-upon principles about the making, content, and application of law. In this respect, the courts have been very reluctant to tell Parliament or the executive when they step out of line.
Principles of the rule of law
A reformist Parliament should therefore adopt legislation that directs the courts to uphold the defined principles of the rule of law when they come across breaches in legislation or regulations. This would include directing the courts to invalidate any legislation that gives regulators or ministers an unrestrained discretionary power.
Our law is replete with discretionary powers that government officials can wield without limitation. This must be brought to an end.
The law should also make it legally compulsory for any new legislation, regulations, or policies to be subjected to neutral and high-quality impact assessments. Currently, it is only a matter of Cabinet policy that such assessments must be conducted. However, this policy is flouted more often than it is adhered to. With few exceptions, every impact assessment reads like a marketing pamphlet written by the author of the regulation that is supposed to be under scrutiny.
We cannot have departments or sponsors of regulations or legislation drafting their own impact assessments. Independent, neutral third parties must do so. Furthermore, they must do so according to a set framework that mandates looking into budgets and costs, among other things.
This is another glaring issue with the standard township economies bylaw: there is no independent impact assessment. If such an assessment did exist, it would have made clear that small businesses cannot abide any further overregulation. Moreover, even if the law were adopted, it would likely be ignored.
Private property and spaza shop regulations
Alongside a robust legal system, private property represents the other foundation of a prosperous market economy. The right to private property is already guaranteed by section 25 of the Constitution. However, many people – especially those in South Africa’s townships – still lack security of tenure.
The we have recommended that Parliament immediately abandon any legislative schemes it has undertaken to weaken this fundamental right. Specifically, the Expropriation Bill and any future attempts to amend the Constitution to undermine the property rights of all South Africans should be withdrawn.
Confiscation
The focus, of course, is specifically on confiscation. Real expropriation law knows no concept of compensation-less takings. The legal concept of expropriation, as understood around the free world, includes the payment of compensation. This is for good, logical reasons.
Unfortunately, politicians, academics, the media, and activists have engaged in misleading wordplay. They have attempted to create the illusion that there is such a thing as “expropriation without compensation” or so-called “nil compensation”. However, this notion should be put to rest.
Compensation
History shows that every country where property has been seized by the state without paying market-plus compensation has suffered economically. Such nations have become impoverished. Moreover, if Parliament continues to play this game in South Africa, investment and development will inevitably dry up.
In addition, the we have proposed that Parliament adopt new land reform legislation. This legislation should reject the paradigm of redistribution and, instead, place renewed emphasis on the principle of restitution. It is important to note that redistribution is a political, not a legal, concept. Furthermore, it is based on central planning and rigid formulas, which have no place in a free society.
Restitution
Restitution, on the other hand, is a well-established jurisprudential concept. It has deep historical roots. If someone can prove that a piece of property rightly belongs to them in particular, they must receive that property back. Alternatively, if they prefer, they should receive some other form of compensation.
Ultimately, this is a matter of justice. It is not about petty politicking or handing out random property to random friends of the state, as often occurs under the paradigm of redistribution.
Civil liberty and spaza shop crackdown
The final area of reform we addressed was that of civil liberty, which is intimately tied to criminal law.
In 2023 we launched our Section 12 Initiative. This initiative looked specifically at freedom under the law and examined how over-criminalisation and out-of-control violent crime both threaten this freedom. Now, we are putting our proposed reforms to the government once more.
Legal certainty
South Africa requires a large degree of additional certainty in criminal law. This is because much ordinary, peaceful conduct is criminalised under legislation and regulations that normal people do not even know exist.
For example, the municipal bylaw for informal trading in Johannesburg criminalises the contravention of any provision of the bylaw. This includes a prohibition on a street trader sleeping at his stall or leaving some of his property there. As a result, the trader could be imprisoned for up to three months and forced to share a cell with real criminals.
Comprehensive criminal code
In response to this, the we have proposed the adoption of a single, comprehensive Criminal Code. This would ensure that all South Africans can always determine whether their actions could land them in prison.
Secondly, South Africa requires a significant degree of decriminalisation. This step is necessary to ensure that our criminal justice institutions are not distracted by victimless crimes. Instead, they must focus on violent crimes and offenses that cause real, tangible harm.
Furthermore, the deaths that caused the uproar over the spaza shop crackdown should be investigated. Those guilty of criminal negligence should be held accountable and made examples of. Rather than targeting traders trying to eke out a living by sleeping in their own shops, law enforcement should direct its efforts toward actual criminal activity.
We have also called for widespread decentralisation of policing. This proposal aligns closely with our earlier recommendations regarding federalisation.
In our view, the other spheres of government – provinces and municipalities – must play a much bigger role in combating crime than they currently do. However, beyond government intervention, communities and commercial enterprises must also be allowed and empowered to take tangible steps toward securing South Africa against predation.
Reform off the table?
At every turn, the GNU signals that substantive reform is not a priority. Instead, it seems intent on “ANC-ing harder and better”. This is disappointing, given the immense opportunity created by the ANC’s loss of its parliamentary majority.
Ultimately, for meaningful change to occur, reformist parties within the GNU need leaders with the determination to implement policies that will drive prosperity. Until such leaders emerge, South Africans remain on their own.