Question NW739 to the Minister of Small Business Development

Reply:

I have been advised that:

The DSBD is the custodian of red tape reduction (RTR) as it relates to SMME and co-operatives. The Department has been working collaboratively with Salga, COGTA and the Presidency since the 2017/18 financial year to implement measures to address the legislative and administrative burden faced by SMMEs and co-operatives, more specifically at the municipal sphere of government. These interventions have been primarily aimed at awareness raising, capacity building and commissioning research that:

• Investigates sector and sub-sectors wherein the influence of red tape is unpacked, to develop strategies and interventions that circumvent the negative effects of red tape.

The Department commissioned a study on Regulatory impediments affecting SMME growth and development in South Africa: Findings and Action Plan to investigate the regulatory environment and related legislation and compliance for SMMEs in the 2023/24 financial year. The report identified 29 pieces of legislations that act as primary inhibitors of business start-up and growth. These pieces of legislation were identified as either having a direct impact on SMMEs, whilst the impact of others relate primarily to the administration of the regulation rather than the regulation itself.

Excessive red tape with regards to compliance with labour laws, human and industrial relations, tax and tax-related issues, legal requirements, municipal regulations, and support for business start-ups are key obstacles experienced by SMMEs.

What are the relevant details of the progress that has been made in (a) reducing the regulatory impediments for small, medium, and micro-enterprises and co-operatives?

Through the initial regulatory impediments affecting small businesses and co-operatives in South Africa research work, to improve rates of SMME establishment and performance, the department has undertaken extensive consultative measures to review and critique the initial work on government-wide restrictive regulations and to seek, through its intergovernmental relations and ease of doing business initiatives, resulting in a Regulatory Impediments Implementation Plan.

The making of a Regulatory Impediments Implementation Plan has been conducted in the 2023/24 financial year involving consultations conducted with key stakeholders on regulatory impediments to SMME growth and report produced in quarter 1 and 2, where stakeholders such BUSA, NEDLAC, Chamber of Businesses (South African Chamber of Commerce and Industry, The Afrikaanse Handelsinsituut, NAFCOC, National Small Business Chamber, BUSA, Black Business Council (BBC), Business Leadership South Africa (BLSA), Business unity South Africa (BUSA), Small Business Institute, NEDLAC) include full list) were consulted. Report on inputs and feedback from key stakeholders incorporated into a prioritised Regulatory Reform Implementation Plan in Quarter 3 and the department is finalising a Regulatory Reform Implementation Plan to be submitted to Minister in Quarter 4.

The making of the Regulatory Impediments Implementation Plan which is planned to be concluded in the end of this financial year (2023/24), is a result of the relatively extensive consultations conducted with key stakeholder SMME and Coops sectors which regarded compliance with regulatory requirements as one of the primary impediments to their growth than the actual regulations and legislation. Relative to these small businesses’ turnovers, the cost of compliance was also noted as onerous as they often do not have employees or the internal capacity to attend to these - and that it is expensive to outsource such functions.

(b) implementing remedies to address the 29 major regulatory barriers identified through research?

To address the regulatory impediments affecting SMMEs and Co-operatives through the 29 pieces of legislation across the three spheres of government to support SMME growth and development, the department is establishing a comprehensive legislative framework for small businesses and co-operatives. The department has also identified priority legislation and sectors to address regulatory impediments impacting SMMEs and Co-operatives in the new MTSF period, including Economic Reconstruction and Recovery Plan and other priority government interventions. This will be achieved through a revised Regulatory Reform Implementation Plan to be concluded at the end of 2023/24 financial year.

The DSBD’s Regulatory Impediments Implementation Plan is a strategic tool to assist it in carrying out ongoing legislative review and development of the regulatory framework falling within its purview, in a strategic and focused manner. The Implementation Plan is, however, a rolling plan and will be reviewed and revised periodically to ensure that it remains up to date, effective and continues to align to the DSBD’s broader strategic objectives, also considering emerging risks and developments.

The results of the Regulatory Impediments Implementation Plan were subject to rigorous planning, prioritisation, and internal and external consultation. The considerations and approach undertaken in developing the revised Regulatory Implementation Plan included the approach to prioritisation. Therefore, the original recommendations of the regulatory impediments research work were updated as follow:

1. Category 1: Regulations and Legislation under DSBD Control –

The revised recommendations have reaffirmed the initial recommendations that DSBD to use its Mandated Legislative Powers, by using Section 18 of the National Small Business Act 102 of 1996 (NSBA) Chapter 4, General Provisions, Sections 18 2 (b) - (e) and 3 by notice in the National Gazette guidelines to address identified DSBD’s controlled legislations causing barriers to SMMEs and Coops by conducting further consultations and impact assessment as shown such as - National Business Act 71 of 1991 and the Businesses Amendment Act 186 of 1993, National Small Enterprises Act 102 of 1996 (and as amended in 2003), National Small Enterprise Amendment Bill 2021/22, and Cooperatives Development Act No 15 of 2005, Business Licensing Bill, 2023, and agencies related regulations, legislation, and procedures. The immediate work of the next financial year will on the engagement of State Attorney, the SA Law Reform Commission; formulation of new technical working groups, and participation in the existing committees such as the department’s Intergovernmental Relations (IGR).

2. Category 2: Economic Cluster Departments Control and Influence

DSBD to use advocacy by working with national departments, provinces and local governments on administrative inefficiencies related specific regulations and legislation impacting negatively on SMMEs and Co-operatives, requiring close involvement and consultation on: National Liquor Act 59 of 2003 & Liquor Amendment Bill of 2023, the National Road Traffic Act of 1996 & Traffic Regulations, National Environmental Management Act 107 of 1998, Companies Act 71 of 2008, Preferential Procurement Policy Framework Act 5 of 2000, Broad Based Black Economic Empowerment 53 of 2003, National Land Transport Act 5 of 2009, Labour Relations Act 66 of 1995, and related regulations, legislation and procedures.

3. Category 3: Local Governance, Development and Planning

Spatial Planning and Land Use Management Act 16 of 2013, Local government legislation such Municipal System, Property Rates, Municipal Finance, related provincial legislation and regulations, by-laws and procedures, related Agencies policies, regulations, processes, and procedures.

It is important to note that not every instance of “red tape” is a regulatory reform priority, we should look at educating our populace in the intent of the law, look to our capacity to administer the law and finally, ensure that our laws are aligned with the economic and social challenges we face as a country.

Inter-governmental Relations Framework

In advancing its advocacy and coordination role for the economic sector, the DSBD is in the process of developing an IGR Reporting and Monitoring Tool which forms part of the IGR Framework for SBD. The Tool introduces indicators for Ease of Doing business that stakeholders in Government that relate to number of legislations reviewed by National departments that affect SMMEs and Co-operatives as well as measures put in place to promote administrative simplification of such legislation. The department, in collaboration with National Treasury, Salga & COGTA, is investigating modalities to deploy the Reporting and Monitoring tool for adoption through the three spheres of government.