Will South Africa’s new Business Licensing Bill destroy entrepreneurship? Here’s what experts warn

South Africa’s proposed Business Licensing Bill has ignited national concern, with critics warning that the sweeping regulatory changes could create new barriers for entrepreneurs and slow economic growth. The draft legislation—introduced by the Department of Small Business Development and now open for public comment—seeks to overhaul the country’s business licensing framework. However, opposition from policy experts, business leaders, and the Western Cape Government (WCG) suggests the Bill may face tough resistance before becoming law.

At the heart of the proposal is a nationwide requirement for every business, regardless of size or sector, to register with its local municipality and obtain a licence valid for five years. This would apply equally to informal traders, micro-businesses, small startups, franchises, and larger enterprises. Municipalities would have 30 days to approve or reject an application, with a possible 14-day extension.

Inspectors would also receive broad enforcement powers, including the ability to demand on-the-spot proof of licensing, issue fines, and confiscate goods for non-compliance, especially in cases involving counterfeit or illegal trading. While government argues that the Bill modernises outdated law and introduces uniformity, detractors warn that its reach is excessive.

Critics Warn of Economic Consequences

The Centre for Development and Enterprise (CDE) delivered one of the strongest rebukes, calling the Bill potentially “the most anti-business and growth-retarding law introduced since 1994.” According to the think tank, the legislation appears to target foreign nationals operating within the informal sector, but ultimately risks harming all businesses.

The CDE argues that the Bill expands government control to an unprecedented degree, enabling authorities to search business premises, seize stock, and impose penalties with minimal safeguards. Instead of creating a conducive environment for investment, innovation, and job creation, the organisation believes the Bill will undermine confidence and increase the financial burden on small businesses already struggling to stay afloat.

“Entrepreneurs should not be forced to pay for the privilege of contributing to the economy,” the CDE noted, urging government to withdraw the draft and replace it with legislation that encourages growth rather than restricting it.

Western Cape Government Rejects the Draft Bill

The Western Cape Government has also come out strongly against the proposal. Premier Alan Winde described the Bill as vague, impractical, and counterproductive, warning that it introduces an unnecessary layer of bureaucracy at a time when provinces need to stimulate, not restrict, economic activity.

According to Winde, the legislation duplicates existing compliance processes and clashes with the national agenda of reducing red tape for businesses. He highlighted that municipalities—many already stretched thin—would struggle to meet the processing timeframes required under the Bill. This, he argues, would lead to start-up delays that could hinder job creation.

The WCG identified several major flaws in the draft:

• It contradicts government’s own Red Tape Reduction Strategy.

• It lacks a socio-economic impact assessment, making it unclear how small businesses will be affected.

• It intrudes on provincial and municipal powers, creating constitutional concerns.

  
  
  

• It adds new administrative burdens to municipalities that already battle capacity constraints.

• It risks postponing revenue generation, especially for micro-enterprises that rely on rapid market entry.

Winde and his team insist the Bill should not move forward in its current form and recommend that government instead strengthen existing digital compliance tools and develop a risk-based regulatory system to streamline, rather than multiply, oversight mechanisms.

Growing Public Opposition

Beyond the WCG and CDE, several organisations—including the Free Market Foundation and Sakeliga—have issued statements condemning the Bill as anti-competitive and misaligned with South Africa’s economic realities. Stakeholders fear that the proposed framework may unintentionally create fertile ground for corruption, given inspectors’ broad discretionary powers.

With public comments open until late November, business communities across the country are preparing submissions to challenge what many describe as an unnecessary and harmful policy shift.

As the debate intensifies, one question remains front and centre: Will this Bill support business development—or choke it before it can take root?

FAQs

What is the purpose of the proposed Business Licensing Bill?

The Bill aims to replace the outdated Business Act of 1991 with a uniform national licensing system for all businesses.

Who would be affected by the new licensing requirements?

Every business—from informal traders to large companies—would need a five-year licence issued by local municipalities.

Why are critics opposing the Bill?

Opponents say it increases red tape, burdens municipalities, threatens job creation, and gives inspectors excessive enforcement powers.

Does the Bill pose constitutional issues?

Yes. Critics argue that it overlaps with provincial and municipal competencies, particularly in areas of trading regulation.

Is there an alternative approach suggested?

The Western Cape Government recommends using a digital, risk-based compliance system instead of creating additional licensing layers.