Yash Ramkolowan
Two bills published for comment this year paint a highly contradictory path of economic development policy in South Africa – or may actually point to where the government’s real interests lie.
On the one hand the Special Economic Zones Bill aims to replace the stunted Industrial Development Zone programme in an attempt to foster growth and development. The bill develops a framework for the creation of special economic zones (SEZs) to facilitate the creation of an “industrial complex” with a number of incentives to encourage investment and development within these zones. These incentives include funding schemes, financial (tax) incentives, reduced red tape and other business support services.
On the other hand, the Licensing of Businesses Bill (replacing the Businesses Act of 1991) proposes adding another layer of administration and business regulation on firms. The enactment of this bill would require all businesses to apply for a license to the relevant municipality in order to legally continue (or start) operations. This bill is intended to apply to “any person carrying on business in South Africa” and would include hawkers with no fixed premises to conglomerates with operations and offices across the country.
Leaving aside the fundamental flaws in the Licensing Bill (including the contradictory objectives of the bill, the significant susceptibility to corrupt practices, the huge administrative burden it will place on already struggling municipalities and the addition of red tape for businesses) and the fact that the introduction of SEZs do not necessarily guarantee economic development, looking at who the bills are likely to benefit (and harm) is instructive.
The Business Licensing Bill is most likely to disadvantage small and, especially, informal businesses where the relative cost of regulation is likely to be particularly burdensome and punitive. Larger firms and corporates will find compliance much less challenging; in fact, the bill might act as another hurdle for new competitors to established businesses.
SEZs effectively target larger companies and multinationals willing to make significant investments within those zones and it is generally bigger companies that are able to take advantage of the incentives offered. Special zones are less likely to welcome smaller firms and informal businesses unable to make sizeable investments or demonstrate an ability to employ thousands of people.
The introduction of these two bills strongly suggests that despite continued rhetoric around the development of SMMEs (and the informal sector) it is often big business that is favoured by government policy, with small firms often paying a higher cost for the unintentional consequences of business regulation and policy.