Red Tape Impact Assessment Bill: briefing

Small Business Development

08 February 2017
Chairperson: Ms R Bhengu (ANC)
Share this page:

Meeting Summary

Prior to a briefing on the Red Tape Impact Assessment Bill by the MP who had intoduced it, the Committee was briefed on the process to be followed in the tabling of a Private Member’s Bill, as well as the steps that the Committee would take moving forward with the Bill. A Parliamentary Legal Advisor explained that the Red Tape Impact Assessment Bill is constitutional, has procedurally adhered to all the required steps and public submissions had been received on this Private Member’s Bill. The Committee must take a motion of desirability and consider whether the Bill is necessary, as well as scrutinise the constitutionality of the Bill.

Member of Parliament, Mr Henro Kruger, informed the Committee that he had spent two and half years and his own resources to conduct a thorough research on the impact of red tape in the economy and how other countries successfully reduced and eliminated it. The Bill is indeed important for the small business sector as a report published in 2004 showed that the impact of red tape or compliance costs SA R79 billion, and the equivalent of 6.5% loss in GDP as well as 28% revenue for SARS in the preceding financial year. To address this, the Bill seeks to radically reform the regulatory environment. The Bill also seeks to assess the regulatory measures of the executive, legislatures and self-regulating bodies to reduce red tape, and the cost of red tape to business, as well as the establishment of administrative units to provide assistance.

Members asked questions on how reducing red tape in small businesses will automatically benefit big business; whether the red tape compliance unit is going to be established within the Department of Small Business Development (DSBD), how long the red tape unit should exist and whether the unit is going to comprise of DSBD officials; how to ensure that bureaucratic officials are not going to transfer that red tape to the unit; what the advantage would be of having the unit within DSBD; and would it not be more effective to have it outside the Department. Comments were made that the Red Tape Impact Assessment Bill will provide small businesses with a voice as well as provide the DSBD and the Minister with some executive power to support small businesses across the board. The Chairperson concluded that it does not matter where the proposals come from or who presents the ‘solution’. The most important thing is that it should be a solution to help the Department achieve its mandate, as well as the country at large.

Meeting report

The Chairperson requested the Parliamentary Legal Advisor outline the procedure for tabling a Private Member’s Bill, so that Members can be clear on the process going forward.

Private Member’s Bill procedures: briefing by Parliamentary Legal Advisor
Adv Charmaine Van Der Merwe, who is a member of the parliamentary legislative drafting unit, explained that the unit does not get involved in the policy of a Bill, but renders its services to advise on the practicality and technicalities of the Bill. The legislative drafting unit was established to assist Members to come up with a quality Bill and ensure that the Bill abides by the Constitution. The policy is the responsibility of the Members. She said the unit is satisfied that the Red Tape Impact Assessment Bill complies with drafting practices. The unit also assisted in the processes before its introduction and when the Bill was published there was a call for public submissions which have been received. When the Bill was introduced, it was formally referred to this Committee by the Speaker.

Rule 286(6) of the Rules of the National Assembly provides the stages in which the Committee can consider a Private Member’s Bill. The rule provides that, firstly, there must be a discussion on the Bill which will include a briefing by the Member who is introducing the Bill. Secondly, the Department must be given an opportunity to present its stance on the Bill – and how it will be implemented as well as its impact. Thirdly, the Committee must peruse the initial submissions received from the public when the Bill was published and clarify any concerns. Then the Committee must take a motion of desirability and consider the need for the Bill – does the Committee feel the Bill is necessary, as well as look at the constitutionality of the Bill. The legislative unit has already looked into this and the Bill is deemed constitutional. If the Committee confirms the Bill is necessary or desirable, then it must call for further public comments and Parliament is to facilitate a public hearing. The Committee must peruse those comments and clarify any concerns from the public

Rev K Meshoe (ACDP) asked for clarity about the two public hearing processes – the comments received from the initial public submissions and the public hearing to be facilitated by Parliament.

Adv Van Der Merwe stated that when the Rules were considered, an opportunity was given to Members introducing Bills to call for public comments, similar to the processes of a Bill from the Executive. The difference is that because it is from a Member of Parliament, the advert reads that comments must be sent to the Committee Secretary. Accordingly those comments are in Parliament which means that the Committee must consider them. This is the initial assistance to the Committee to see if the public wants the Bill. At this stage the Committee is still deciding on whether it wants the Bill. It is important to note that at this stage the Committee does not consider any technical comments because it is still deciding on the desirability of the Bill. Once the motion of desirability is adopted, the Constitution (Sections 59 and 72) requires each of the Houses to facilitate public involvement in the legislative process. The difference in the two is one is done by the Member, and the second is required by the Constitution after the motion of desirability has been adopted.

Red Tape Impact Assessment Bill: briefing by MP introducing the Bill
Mr Henro Kruger (DA) stated that after being assigned by his party to be member of the Portfolio Committee on Small Business Development, it occurred to him whilst studying the small business environment that this sector is hindered by red tape. He then took it upon himself with his own resources to travel overseas and study the impact of red tape and how it is affecting the small business sector.

The aim of the Bill is to radically reform the regulatory environment. The consequences for radical reformation of the regulatory environment involves, amongst others;
• ease of entry into the mainstream economy for small businesses because small businesses have been experiencing barriers to entry into the mainstream economy for years;
• building an inclusive society;
• guaranteeing the right to trade;
• accelerating social transformation;
• economic transformation that will see growth and job creation; and
• an Anti-Poverty Strategy that links social and economic outcomes to all three levels of government as well as assisting government to achieve its target for job creation and poverty reduction by 2030.

A 2004 report from the Small Business Project (SBP) highlighted the cost of red tape reflecting that the total compliance costs in that year in SA amounted to R79 billion which equates to 6.5% of the GDP, and 28% of SARS revenue in the preceding financial year (2002/03). In order to effectively reform the regulatory environment, reformation must be contained in the legislation, and apply the ‘broken window principle’ where necessary which provides that in resolving the smaller problems, the effect results in resolving bigger problems. Importantly, it will evaluate existing regulatory measures and reform these.

The purpose of the Bill is to assess the regulatory measures of the executive, legislatures and self-regulating bodies to reduce red tape, and the cost of red tape to business, as well as the establishment of administrative units to provide assistance. The Bill consists of five chapters, the first chapter consisting of definitions, application and object of the Act; second, the administration units; third, evaluation and new regulatory measures; fourth, evaluation of existing regulatory measures; and fifth, general provisions.

The Bill displays all ten elements of the Best Practices in OECD Countries, and it is the first step to radically ease entrance to the mainstream of our economy to guarantee an inclusive business society that will create jobs and reinstate human dignity in our communities. It is the first step towards addressing the triple challenges of unemployment, poverty and inequality. He noted that the Committee will gain the legacy of the champions that radically reformed the regulatory environment to the benefit of the poor.

He thanked the Chairperson and the Committee for the opportunity to table the Bill.

Discussion
The Chairperson asked Members to ask clarity seeking questions only as the Committee will engage and discuss the Bill in depth at a later stage.

Mr S Mncwabe (NFP) asked for clarity on how reducing red tape in small businesses will automatically benefit big business.

Mr Kruger said that it goes back to the ‘broken window principle’ which provides that fixing the smaller problems of hindrances in the economy equates to benefiting the entire economy. This principle has been proven to work in other developed countries. Some regulations drawn up by self regulatory bodies are covered in red tape for small businesses, especially businesses that are still trying to break into the market space. The red tape compliance unit will look deeper into this and then report to the Committee and the Committee will decide after careful consideration whether the red tape will benefit a few or the majority.

The Chairperson asked if the red tape compliance unit is going to be established within the Department, and how long will that be for.

Mr Kruger said it would be best the unit is in operation for at least ten to 15 years, because one could never know what might happen in the future. At the moment red tape is not an issue for big business but a big one for small businesses, and there is a need for subject matter experts in the Department to spot red tape miles away and detect it, and analyse it to come up with measures that will obliterate it from persisting and consequently affecting small businesses.

Mr X Mabasa (ANC) stated that his impression gathered from the Bill is that red tape is found only within the small business sector; and that the thrust of the Bill reflected that small businesses operate in a different space to big business.

Mr Kruger said that is not the intention. The unit will have an in depth understanding of small businesses but that is not to say that big business facing red tape will be neglected. The gist of the Bill is concentrated on small businesses to ensure the 90% job creation that is expected to be generated from the small business sector. If the government does not kick start SMMEs in the country very soon, then it will continue experiencing problems with job creation and economic growth. The Bill serves to assist government to establish a robust and sustainable business sector.

Rev K Meshoe (ACDP) asked about the composition of the red tape unit, and whether the unit is going to comprise of the DSBD officials, and how is it going to be ensured that those officials - who were perhaps part of the red tape in their sections - are not going to transfer that red tape to the unit. What would be the advantage of having the unit within the DSBD? Would it not be more effective to have people from the outside of DSBD because there is a risk of transferring some risks that already exist within the Department.

Mr Kruger said that Bill reflects that the Minister must establish the unit within a period of one year and provide the unit with human and other resources necessary to enable it to effectively execute its duties and functions. It is going to be the Minister’s duty to establish that unit and ensure that the unit comprises of subject matter experts.

Mr T Chance (DA) said the Bill will give the DSBD some power across the economy which it never had before, and that the impact of red tape is most severely felt by small businesses because 9% of their turnover is consumed by red tape. If the red tape unit is located anywhere else than in the small business sector, it is going to be ignored, because small businesses do not even have a voice that counts in many other departments and in Nedlac, and they hardly have a voice in the Department of Trade and Industry. So the Bill gives the DSBD and the Minister some real executive power to support not just small businesses but also businesses across the board. It is important that cooperatives are included because they play a significant role in uplifting communities, and are part of the mandate of the DSBD to be developed and sustained, though not forgetting cooperatives that eventually become empires and ignore social inclusivity. The Bill provides DSBD with the capacity to enact its vision to empower small businesses and create an inclusive economy. The country is nowhere close to achieving the 11 million job creation target simply because small businesses have been negatively impacted by too much regulatory overheads and red tape and the Bill does a lot to address.

Mr Kruger said that there is no doubt that the consequences of the Bill will enhance the mandate of the DSBD and it does indeed form part of it.

The Chairperson thanked Mr Kruger for the presentation, and noted that he spent two and half years using his own resources to research the impact of the red tape on small businesses. The fact is that the Bill is aligned to what the country wants to achieve and the challenges it wants to address. Mr Kruger had introspected on why there should be an intervention and what it should address. She highlighted that it has always been in the spirit of the Committee for Members to come up with solutions to assist the country to move forward and address its challenges. It does not matter where the proposals come from or who presents the ‘solution’. The most important thing is that it should be a solution to help the Department achieve its mandate, as well as the country at large.

The Committee adopted the minutes of 7 December 2016.

The Chairperson thanked the Members and once again, Mr Kruger’s efforts in presenting the Bill.

The meeting was adjourned.

Share this page: