The government is proposing preferential business licensing for small businesses in a move that might see municipalities lower application fees and reduce municipal rates for small enterprises — in the biggest push yet to unleash the potential of small outfits since the early 1990s.
The draft Business Licensing Bill of 2025 says local councils may make bylaws to provide for preferential business licensing for small businesses and these may include a shortened and simplified application and renewal process, lower application fees and the waiver or suspension of fees.
The bill, which is meant to repeal the Businesses Act 1991, also makes provision for designation of trading areas for citizens and small businesses. To this end, the municipalities, acting as licensing authorities may, after consultation with the MEC of the relevant province, make bylaws to designate any specified area within its jurisdiction to be a trading area for the exclusive participation of small enterprises.
Define exclusive trading zones and support
Authorities will have to define the boundaries of the exclusive trading area and determine how the designated trade and commercial areas and zones may be supported through various interventions.
The bill, which is out for public comment, says the interventions may include, but not limited to, reduced municipal rates and fees, financial incentives and grants, advice and training for small enterprises. The mooted law says any business may seek an exemption from the requirement to obtain a business licence by submitting, in writing, an application for exemption to the relevant licensing authority.
However, such an application must meet certain criteria, which includes home-based businesses with minimal customer traffic, small-scale artisans or craftspeople operating from home and freelancers or independent contractors working from home.
A business that is a start-up or small enterprise that requires temporary relief from licensing requirements to establish itself, may also apply for exemption. For foreign nationals looking to register a business in SA, the bill says such an application must have a valid visa or permit authorising the applicant to operate a business in terms of the Immigration Act; or an asylum seekers visa or refugee visa in terms of the Refugees Act.
The bill also provides for the appointment of inspectors to enforce business licensing laws. Some of the powers of the inspectors would include conducting inspections, monitor and enforce compliance with the act and investigate complaints submitted to the licensing authority, among other powers.
The proposed Business Licensing Bill of 2025 could be a game changer for small businesses in SA. By simplifying licensing, cutting application fees and creating exclusive trading zones, the bill aims to lower barriers for small enterprises — a sector seen as key to job creation and economic growth. With up to 90% of new jobs expected to come from SMEs by 2030, these reforms could be important in unlocking their potential and reducing red tape.
The department of small business development said the implementation of the bill, if it becomes law, will not have financial implications envisaged for the fiscus. The department said it will establish this function by either incorporating it into its “regional and local economic development co-ordination” directorate or by restructuring this directorate to provide for a new business regulation directorate.
“Additional funding would be needed for the development of a national computerised business licensing system that would have functionality and operating rights for provinces and municipalities,” the department said.
“Provincial and local government economic departments that have already implemented business regulatory services and structures would not face any significant changes and additional costs.”
“Those that had not implemented the appropriate systems would have to streamline and further increase their organisation from the current approach of combining business regulation with LED [local economic development] to fully fledged business regulation and consumer protection directorates.”
The bill follows the publication earlier this year of the country’s first national policy-level guidance on general business licensing in SA, geared to cut costs and red tape associated with business licensing. The end game is to harmonise national, provincial and municipal business licensing to ensure synergy and alignment with regulations and business licensing bylaws.
Regulatory tool
The policy document implores municipalities to recognise licensing as a “regulatory tool and not view it as a fiscal tool” to bolster the coffers of the cash-strapped councils.
Small businesses have a high failure rate in SA, with 60%-80% failing within the first five years and sometimes within three years. Rate tape, lack of financing and burdensome regulatory requirements have been cited as the biggest constraints to small businesses.
President Cyril Ramaphosa in 2019 established a red tape reduction unit in 2019 to cut down the administrative burden for small businesses. He appointed Exxaro CEO and Sasol chair Sipho Nkosi to lead the unit. The National Development Plan (NDP) also identified the need to reduce red tape among other interventions in support of small enterprises.
The NDP projected that by 2030 up to 90% of new jobs will be created by small and medium enterprises — a target that will woefully be missed.
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