Gary Moore | Lawyer | Senior Researcher | Free Market Foundation | mail me |
The current Businesses Act 1991 requires a business licence to carry on essentially only two categories of business. The Act repealed prior licensing laws that had required many more types of business to be licensed. At the time, the Free Market Foundation through its Law Review Project helped persuade the government to repeal those prior licensing laws and introduce the light-touch 1991 Act.
Yet now a proposed new Business Licensing Bill, 2025 has been framed that will replace the 1991 Act with something far more extensive. There is much to criticise in the proposed Bill and in the retrogressive thinking behind it. The Bill seeks to substitute the 1991 Act with a “comprehensive” system of business licensing that “promotes social and economic inclusion”.
Gazetted – then extended
On 26 September the Minister of Small Business Development published the proposed Business Licensing Bill in the Government Gazette with an invitation to interested persons to submit written comments on the Bill by 26 October.
On 7 November, the Minister gave notice in the Gazette that she was extending the period for submitting written comments on the Bill, to Friday 28 November. The Minister’s notice states that this extension “follows heightened interest from stakeholders across the country and numerous requests for additional time to prepare and submit inputs.”
The proposed Bill published by the Minister in the Gazette has not been formally introduced in Parliament and is merely a draft or provisional Bill that is liable to be substantially corrected or amended.
What the Bill wants to scrap
The draft Bill aims to repeal the 1991 Businesses Act.
The Act requires the holding of a licence only for selling or supplying meals from fixed premises. It also requires a licence for supplying perishable foodstuffs by hawking from place to place. In addition, the Act requires a licence for providing certain specified health facilities. It further requires a licence for entertainment such as keeping pinball machines. The Act also requires a licence for conducting a nightclub or adult premises.
In 2020 the President transferred the administration of the 1991 Act from the Minister of Trade & Industry to the Minister of Small Business Development.
Foreign-owned myth
The latter Minister’s 2025 draft Bill alleges that the current business licensing legislation does not provide for the business licensing of foreign-owned businesses. That is incorrect. The 1991 Act stipulates that “no person” shall carry on a licensable business without a licence, and “any person” who contravenes that requirement is guilty of an offence. It would be highly anomalous if the 1991 Act obliges South Africans to obtain business licences but not foreign nationals.
(Ironically, and presumably unintentionally, the draft Bill itself will not apply to a non-citizen who has no visa. It states that it applies to non-citizens who comply with visa conditions. This means that the Bill does not apply to non-citizens who do not comply with visa conditions.)
Ministerial power grab
The draft Bill contemplates the licensing of business undertakings which fall within the scope of the functional areas of concurrent national and provincial legislative competence listed in Schedule 4 to the Constitution and which the Minister designates as requiring a business licence.
The Bill will thus give the Minister the powers to gazette any of the following as businesses which will henceforth require licensing:
- Agricultural and stock-herding businesses
- Private airports
- Data-backup and -recovery services
- Fire-fighting services
- Emergency medical-care services
- Emergency nursing and medical personnel
- Other disaster-management undertakings
- Kindergartens
- Primary and secondary schools
- Hospitals, clinics and doctors’ surgeries of all kinds
- Homebuilding companies
- Bus companies
- Shuttle services, taxis and other transport undertakings
- Tour operators and safari lodges
- Wholesale and retail trade of all kinds
- Road- and public-works civil-engineering and construction companies
- Preschool, daycare and other child-care facilities
These envisaged powers which the Bill would confer on the Minister would not be restricted by the mere fact that she is nominally only a Minister for “small” business. The President could change the Minister’s job title should it become inappropriate for her expanded powers, and her department’s name could be changed by statute. Or the President could after enactment of the Bill transfer its administration from the Minister of Small Business Development to the Minister of Trade & Industry.
Unconstitutional overreach
The Bill stipulates that a business must possess a business licence if it carries on a business undertaking which has been designated by the Minister as a business undertaking that requires a business licence.
This is an unconstitutional assignment by Parliament of its plenary legislative power to the Minister. The Constitutional Court has held that Parliament cannot assign plenary legislative power to a Minister. The power to determine which categories of business undertaking will require a business licence is a power that only Parliament can exercise, and not the Minister.
The Bill contemplates that a panel of Ministers acting unanimously may exempt certain industries or sectors from the requirement to obtain a business licence. This too is an unconstitutional assignment by Parliament of its plenary legislative power, in this case to a panel of Ministers. The power to determine which industries or sectors shall be exempt from the requirement to obtain a business licence is a power that should be exercised by Parliament, and not by a panel of Ministers however large and even if acting unanimously.
Forcing provinces and cities
The draft Bill stipulates that provincial governments “must” enact legislation on business licensing in the listed functional areas.
It also states that local authorities “must” enact business-licensing by-laws on the listed local-government matters in Schedules 4 and 5. In addition, the Minister may make regulations on business licensing regarding the local-government matters in Schedule 5. Furthermore, provincial economic-development MECs may make business-licensing regulations regarding the provincial-government matters in Schedules 4 and 5. However, Schedule 5 lists areas of exclusive provincial legislative competence.
The Constitution stipulates that Parliament may not pass legislation on exclusive provincial competence unless necessary for national security or economic unity. Therefore, Parliament has no authority to stipulate that provincial governments and local authorities “must” enact business licensing legislation on Schedule 5 matters. Likewise, Parliament has no authority to stipulate that the Minister or MECs “must” enact such legislation.
The Constitutional Court has ruled that Parliament’s ability to intervene in exclusive provincial fields is limited.
Search. Seize. Confiscate.
The draft Bill’s entry, search and seizure clauses violate fundamental rights of privacy.
The draft Bill also stipulates that an authorised officer may enter any premises on reasonable grounds. The officer may believe that a business is being conducted in contravention of the Bill. The officer may request the person in charge of the premises to produce a business licence. In addition, the officer may question the person. The officer may also conduct an inspection of any business on the premises.
An officer may enter a private dwelling on producing identification. However, if the owner or occupier refuses consent, the officer may enter with a warrant. A judge or a magistrate must issue that warrant. An authorised officer may also inspect the premises without a warrant. The officer must have reasonable grounds to believe that a warrant would be issued. The officer must also believe that delay in obtaining it would defeat the object of the search.
An officer who reasonably suspects a business is being conducted without a licence may confiscate goods without a warrant. The officer may also remove any goods from the premises of a business on reasonable grounds. Those goods must be utilised in a manner that contravenes the legislation. These provisions violate fundamental rights to privacy.
They also violate the rights not to have one’s home or property searched. Furthermore, they violate the rights not to have one’s possessions seized.
The draft Bill empowers officers to impose fines for non-compliance.
No benefit, high cost
The draft Bill has no redeeming social or economic benefits.
Unemployment in South Africa is today among the highest in the world. In recognition of the severity of the situation, the Free Market Foundation has launched its Liberty First initiative to offer practical solutions that would meaningfully change socioeconomic outcomes. Countries that score highly on economic freedom produce better social outcomes than countries with more interventionist governments.
To promote a dynamic economy, the government should reduce regulatory burdens. Deregulation can foster job creation and support small and medium-sized enterprises.
How to comment
Interested persons now have until Friday 28 November to submit written comments on the draft Bill.
The draft Bill may be accessed here.
Comments must include the address and telephone number of the person or body submitting them and must be addressed to the Director-General: Department of Small Business Development for the attention of Mr. Thembani Masinge. Comments may be emailed to BLBSubmission@dsbd.gov.za.
