Bureaucratic suffocation

THE controversial Licensing of Businesses Bill, which is to be redrafted after an outcry from business, civil society and informal traders over its potential to strangle the small business sector and increase the scope for corruption, is a prime example of the government trying to legislate its way around its own failings.

The draft bill was a mess and it is debatable whether even a complete rewrite can fix it. But the intentions behind it were not necessarily bad and Trade and Industry Minister Rob Davies deserves credit for responding promptly to the concerns. The trouble is that the government is increasingly aware that its ability to implement its policies leaves much to be desired, and the temptation is to seek easy solutions — such as passing more laws, which just tie things up in red tape.

One of the ostensible aims of the bill was to widen the tax base by bringing more informal businesses into the net. That is fine, except it is a duplication of the Tax Administration Act, which already obliges businesses to register with the South African Revenue Service.

Similarly, the bill sought to address the problem of formal busi- nesses being put at a disadvantage by unregistered operations that do not pay taxes, rates or licence fees and therefore constitute unfair competition. Beneath the surface of this is a desire to placate township business owners, who have long complained that immigrants in particular are stealing their customers by undercutting their prices.

The events of the past few days in Gauteng townships, especially Diepsloot, Orange Farm and Sebokeng, indicate that bureaucratic intervention along these lines might help to avoid xenophobic attacks in future, as it is overwhelmingly foreign business owners who have been targeted, and South African business owners who seem to be inciting the looting mobs.

But this is a simplistic approach. Wrapping informal businesses in red tape would raise the costs of far more South African-owned small businesses than those owned by foreigners. And it is naive to believe xenophobia will disappear if township businesses are formalised. The government is correct to point out that those responsible are motivated largely by criminality rather than xenophobia, but the way to deal with that is through more effective policing, not bureaucratic suffocation.