SBI concerned with overreach and lack of transparency, urges minister to withdraw certain provisions in proposed National Small Enterprise Amendment Bill

January 31 2021

In December, the National Small Enterprise Amendment Bill (not a ‘draft’, as is customary) was gazetted for public comment. The SBI has submitted a response to the minister.

Of most concern to the SBI are the provisions in Chapter 3A, which lay out sweeping powers for both the minister and a proposed ombud, potentially encroaching on, and overriding, already established civil and contract law in South Africa.

“Defining arbitrarily what constitutes an ‘unfair trading practice’ and granting powers for an Ombud to intervene in ‘contractual arrangements or other legal relationships’ between ‘small enterprises’ and ‘any other party’ could well lead to indiscriminate intervention and the potential for ‘ombudpreneurs’ who would not be prevented under the amendments from vexatious or frivolous claims,” said CEO John Dludlu.

In addition, as envisioned, the Amendment Bill would contribute excessively to the already eye-watering amount of red tape confronting a micro, small, or medium enterprise (SMME) and is unlikely to promote the prompt payment of invoices. This was initially to be the purpose of the ombud when the DA originally proposed the idea in 2018 (which we also opposed).

Without a regulatory impact assessment, which is in the power of the minister to exercise and indeed require of her fellow cabinet ministers, this is another example of policy on the hoof, said Dludlu.

“There is no indication of what the establishment of an ombud would cost – let alone maintain – and the proposal comes at a time when the National Treasury is forced to siphon off budget from dozens of programmes and agencies to feed the hungry mouths of a failed airline, let alone afford a Covid-19 vaccine, arguably the most pressing problem of our age.”

The SBI would also have expected to see the following in the Bill:

• A business case for legislative intervention;
• Fact-based reasoning to support the interventions contained in Chapter 3A;
• That the interventions are proportionate to the problem and minimise consequences;
• Expected costs for the proposed ombud;
• Whether other measures were considered;
• A list of all affected parties consulted, their responses, and how concerns were addressed.

Dludlu also pointed out that a number of ombuds were already available to small business owners, including the Tax Ombudsman, the Consumer Protection Commission, the Banking Ombudsman. Such institutional overlaps cannot be justified, nor can any potential interference in international trade agreements, treaties, or tribunals.

There is no specificity in the Bill in respect of late payments, not even how ‘late’ should be defined, leaving yet more room for interpretation. While there are no data available about how ‘late’ small firms are paid by big businesses, we do know that the average delay in payment from government ranges from 90 to 181 days and more, according to the DPME. And we all know how many measures, mandates, and ‘units’ have been established to address the problem. In fact, it is not legislative guidance that is lacking, but administrative competence. Citing this, small businesses surveyed by the DPME studying late payments last year, the owners surveyed rejected the proposal to include legislation in the NSEA.

Instead, the SBI proposed the following considerations in its submission to the minister:

• Increase the R15 000 threshold for Small Claims Court (SCC) and allow for juristic persons/small businesses to approach the court for dispute resolution;
• Direct more resources to the DPME Special Unit to help small businesses receive payment on their invoices;
• Strengthen monitoring processes and better enforcement of payment policies within government. At the very least, develop a log-in system for invoices to track payments in government, benefiting both government departments and small business suppliers.
• Government should consider finding ways to partner with business in voluntary campaigns such as #Payin30 to institutionalise a culture of 30-day payment to small businesses amongst the broader business community.

The mandate SBI has from its chamber and business forum members is to positively influence the environment in which South Africa’s micro, small and medium enterprises are struggling to start, run and grow. Instead of layering legislative interventions on top of others that fail to create a nurturing ecosystem that supports enterprises of all sizes, we implore the minister to reconsider and withdraw the ill-advised Chapter 3A of the Amendment Bill.

Ends.

For enquiries, please contact: John Dludlu – 083 676 1881.