Business legislation will give govt “dramatic authority”

Analysts have expressed concern about the National SME Amendment Bill and the potentially harmful consequences it could have on South African businesses.

The bill was released for public comment on December 11 and aims to change the way governments deal with the impact of the law on SMEs.

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It also regulates the relationship between SMEs and other companies and introduces a new dispute resolution process that includes the concept of “unfairness” in contractual transactions.

This is done through the introduction of a new SME ombudsman service that acts as a support function for the minister.

In analyzing the bill, the Free Market Foundation raised concerns about this ombudsman service and the power it could have.

The bill states that the minister, based on the ombudsman’s recommendations, may ban certain practices related to SMEs as unfair, including the transfer of commercial risk to weaker parties. ..

The FMF said abstract values ​​such as “fairness” cannot constitute the substantive rules that courts use to intervene in contracts.

“If the contract is unfair, the idea that the contract does not have to be enforced creates legal and commercial uncertainty and undermines the rule of law.

“If the parties agree to the terms of the contract, the law should not be used to provide relief for unfair terms,” ​​he said.

Gary Moore, senior researcher at the Free Market Foundation, said the change was particularly problematic, as virtually any contract could be challenged in the future.

“All contracts, no matter how carefully negotiated, are subsequently unfair in some of their terms and cause immense damage to business conduct, personal trust and respect for the law. It will be opened in response to the objection.

“Imposing these notions of fairness will have the unintended consequence of discouraging large companies from dealing with small businesses, as opposed to government policy,” he said.

Moore already applies common law rules, such as interpreting ambiguous contracts as lightly as possible, coercion, excessive influence, and rules on public policy when bargaining power is found to be unequal. He added that it would be done.

Sweeping power

The Small Business Institute (SBI) raises similar concerns, with planned changes providing radical authority to both the minister and the proposed Ombud, violating the civil and contract laws already established in South Africa. , Said it could be disabled.

“Ombud’s arbitrary definition of what constitutes” unfair trading practices “and intervenes in” contractual arrangements or other legal relationships “between” SMEs “and” other parties. ” Empowering can lead to indiscriminate intervention and its potential. SBI CEO John Doldre said, “Ombedprener is unstoppable under the amendment for disgust and frivolous claims.”

He said the amended bill is unlikely to over-contribute to the “already stunning amount of bureaucratic formalism” faced by micro, small and medium-sized enterprises (SMMEs) and promote prompt payment of invoices. Added.

This is another example of a policy on hoofs, Dludlu said, without the minister’s authority to exercise and the regulatory impact assessment actually required of her fellow ministers.

Other potential issues identified in the bill include the fact that there are already a large number of ombuds already available to small business owners, and the lack of specificity regarding what constitutes “deferred payment.” Said.

Business legislation planned in South Africa will give the government “dramatic authority” over contracts: analysts


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