The Business Licensing Bill Will Suffocate the Very Economy It Claims to Save

South Africa does not have a shortage of regulations, in fact we have regulation in abundance. What we have is a shortage of growth.

This simple truth is what makes the proposed Business Licensing Bill, of 2025 so deeply misguided. At a time when unemployment remains among the highest in the world with no real indication that it will change for the better anytime soon, at a time when business confidence is fragile, and when municipalities are struggling to deliver even the most basic services, the Department of Small Business Development has chosen to introduce a sweeping licensing regime that will add more bureaucracy where the country can least afford it.

The Bill is not a technical misstep. It is an economic and constitutional disaster unfolding before our eyes.

And it shows – once again – how disconnected national policy-making has become from the realities of South African entrepreneurs, municipalities, and informal traders.

A Bureaucratic Expansion in an Economy That Needs Simplicity

The first and most obvious flaw is the expansion of red tape. The Bill reintroduces licensing for broad swathes of the economy – including categories that have never required licences and for which existing laws already provide comprehensive compliance frameworks.

Health approvals, zoning, building plan sign-offs, fire safety certification, environmental compliance – these all already exist. Adding a licensing layer on top of them does not improve enforcement. It only duplicates it at additional administrative cost and effort.

For an established corporation, duplication is an irritation. For a spaza shop, mobile salon, subsistence food vendor, or township manufacturing operation, duplication is the difference between entering the economy and staying locked out of it.

In short: the Bill treats licensing as the default, not the exception, in an economy where the barrier to entry is already punishingly high.

Extraordinary Ministerial Powers – With No Democratic Safeguards

The Bill gives the Minister the sweeping power to decide – by a simple Gazette notice – which businesses must be licensed. This is legislative power, handed over in a wholesale manner to the executive, without parliamentary oversight and in violation of the constitutional separation-of-powers principles.

This is not something which should be an administrative decision. It is the ability to reshape entire sectors of the economy through ministerial discretion alone without any proper oversight or accountability measures.

It gets worse. A cluster of Ministers can, again by administrative fiat, exempt categories of business or entire industries. Whether a business becomes licensable or exempt will depend not on public debate or parliamentary process, but on executive deliberation behind closed doors.

Discretion that is ripe for abuse and corruption. A developing country with a history of regulatory abuse, political factionalism, and uneven enforcement cannot afford this level of unchecked discretionary power.

The Bill effectively says: “Trust the state.” And we have seen how that movie has played out before. South Africans – especially entrepreneurs – know better.

A Direct Assault on Local Government Powers

The Constitution reserves street trading, local business regulation, and many licensing functions to municipalities. It does so for a very valid reason: economic realities differ profoundly between communities across the country and the governments closest to the people know of these realities the best and can cater to the specific needs and wants of these local communities.

Pretoria cannot regulate informal trade in Khayelitsha. Nor can national officials set appropriate rules for rural agricultural markets, seaside tourism hubs, or the urban night-time economy.

Yet this Bill attempts to collapse these differences into a single national framework, a one-size-fits-all approach if you will. It compels municipalities and provinces to pass new laws, whether or not those laws are necessary or constitutionally permissible.

Parliament may only intrude on Schedule 5 exclusive functions of local governments in extremely narrow circumstances – none of which apply here.

Instead of strengthening the part of the state closest to entrepreneurs by empowering them to give effect to the needs of local entrepreneurs, the Bill does the opposite: it imposes national uniformity where local responsiveness is essential.

South Africa’s most successful cities – notably Cape Town – are creating jobs precisely because they have embraced decentralised regulation, digitisation, and red-tape reduction. Many municipalities, like Cape Town under Geordin Hill-Lewis, have successfully cut red tape, simplified the process of opening a business. This has resulted in Cape Town having an unemployment rate of 21.6% while the rest of the country hovers in the mid- to upper-30s.

This Bill would reverse this progress and prohibit it from happening in other places across the country.

A Blow to the Informal Economy

Perhaps the most damaging impact of this bill will fall on the informal economy, which sustains millions of South Africans. The Bill presumes that the average survivalist trader can navigate licensing applications, carry the cost of compliance, and endure lengthy processing delays.

This is a pipedream fantasy.

In reality:

• More traders will be pushed into illegality, not out of choice but out of necessity;
• Enforcement officers — empowered to confiscate goods without a warrant – will gain new opportunities for abuse and extortion; and
• Informal and micro-enterprises will face higher barriers to entry, further entrenching unemployment and deepening poverty.

South Africa cannot claim to support township entrepreneurs while designing legislation that will criminalise them and burden them with regulation.

In essence this Bill is simply a tax on the law-abiding poor. Big corporations just have an added layer of compliance and those that already flaunt compliance will continue to do so.

A Bill That Solves No Problem and Creates Many

The Bill’s underlying assumption is that South Africa lacks control over its business environment because too many activities are unlicensed. But the country’s problem is not a lack of regulation, it is a lack of state capacity to implement the regulation we already have and ensure that it is adequately enforced.

Creating an additional layer, with new forms, procedures, exemptions, appeals, inspections, and enforcement powers, will only worsen inefficiency. Municipalities, already overwhelmed, will not be able to administer the system effectively. Businesses, already burdened, will not be able to absorb the delays and will be plunged into failure which directly impacts their livelihoods.

This is not economic reform. This is regulatory inflation.

South Africa Needs a Different Path

If government is serious about small business development and allowing small businesses to thrive, it must abandon the reflex to centralise and control businesses’ every move – and embrace reforms that work:

• Reduce red tape, rather than multiplying it while simplifying existing and required regulations;
• Digitise existing approvals, rather than creating new ones;
• Focus licensing narrowly on genuine high-risk sectors, not on broad economic categories;
• Respect municipal autonomy, allowing cities to regulate according to local realities;
• Protect informal traders, rather than giving officials new tools to punish them; and
• Strengthen Parliament’s legislative role, instead of shifting power to the executive.

South Africa’s growth will not come from Pretoria-designed compliance systems. It will come from millions of small, often informal entrepreneurs who need fewer barriers, not more.

Withdraw the Bill. Start Again

The Business Licensing Bill is beyond saving even through minor amendments. It must be withdrawn in its entirety. And if any new approach is considered, it must begin from first principles: minimal regulation, decentralised authority, proportionate licensing only where necessary, and a bias toward economic inclusion. It must additionally also have proper public consultation with the very South African citizens who will be affected by this bill like informal traders and entrepreneurs stimulating the informal economy.

South Africa’s economic future depends on freeing – not restricting – the entrepreneurial energies of its citizens.

What the country needs is not more licensing. It needs more businesses.

Coetzer is the spokesman for Lead SA, a non-partisan policy research and advocacy organisation dedicated to innovative research, data advocacy and analysis that promotes freedom, prosperity and community in South Africa.