Small business: Ombud with powers proposed

.……article dated 27 January 2012…..

Oversight and possible overkill…..

Khumbudzo Ntshavheni, past Minister of Small Business Development, gazetted before her transfer a National Small Enterprise Amendment Bill, which aims to further regulate the country’s small, medium and micro-enterprises (SMME) sector.

Seen as a key element in her proposal, the Bill will further provide for the establishment of a Small Enterprise Ombud Service which she hopes will act as a support function that will handle the many queries from her sector and some of the complaints.

Ntshavheni said that “Despite the critical role of small businesses in the economy and development objectives of South Africa, the SMME sector remains vulnerable to exploitation and unable to utilise available legal remedies due to the prohibitive costs.”   A warning to compliance officers countrywide.

Ambitious

In announcing the publication of a gazette with the Bill for public comment, Ntshavheni said the concept will further assist with handling complaints in a “procedurally fair, economical and expeditious manner” and will look at what is equitable in many circumstances with regard to contractual arrangements and/or legal relationships.

“The Ombud service will become a vital legal instrument to enforce SMME contracts and resolve business-to-business disputes, as well as considering and disposing of complaints by small enterprises in relation to the interpretation of the terms of agreement for procurement of goods, services or late and non-payment of amounts due and payable to small enterprises.”

Power drive

The proposals are relatively protective of small business endeavour, inasmuch that the Bill states that this ombudsman may make ruling in favour of small businesses, including monetary awards for any financial prejudice or damage suffered.  The Bill will also allow the Minister to declare certain practices in relation to small enterprises to be prohibited unfair trading practices.

What might also be debated intensely in Parliament by the relevant portfolio committee is a section of the Bill which allows the minister to make regulations requiring specified enterprises to provide information about their contracting and payment practices and policies relating to small enterprises. The Minister claims powers to react to other situations she discovers on ‘big/small’ relationships.

A bridge too far

In a country weighed down with procedures for companies to report on matters surrounding their social consciousness, their trading integrity and their abilities to behave as fair employers, this might be a step too far in the area of bureaucratic invasiveness, but it will be interesting to watch initial public sector responses, the results of parliamentary hearings and finally, debates. On these sort of subjects, the message soon comes clearly through.

Bright lady

Ntshavheni is young and has a “get to the top” background, having achieved a MBA degree from Bradford University; a BA Hons degree in Development Studies; and a BA Hon degree in Labour Relations from RAU.  She is a member of the ANC Youth League’s NEC.

She was picked by Ramaphosa to be Minister of Small Business and during her short stay she promoted this Bill. She has now been appointed by President Ramaphosa as Minster in the Presidency to replace Jackson Mthembu.

Nanny state

The Bill sets out to provide a sort of “Bill of Rights” (our words) for small business in South Africa and other than the proposed Ombud service trading practices, the proposals attempt to delineate areas of what the Minister considers unfair trading practices.

The Bill then proposes to give the Minister and ombudsman powers to further regulate small businesses in South Africa on issues of unfair trading practices, presumably as defined, and then sets out on the difficult task of identifying and defining “small business rights”.

Dreamland

The Bill specifically refers to the following:

  • The right to fair and unambiguous business contract;
  • The right to a reasonable payment date and interest on late payments;
  • The right to disclosure of information;
  • The right to fair and honest dealing; and
  • The right to accountability from large enterprises and organizations.

 What’s wrong

Minister Ntshavheni in her launch document hammered away at some of the issues  ”plaguing  the small business world “ which she identified as  ambiguous contract terms; the lack of written contracts; sudden or retrospective changes to arrangements; the transfer of commercial risk to the weaker party; the use of information outside the purpose for which the other party discloses it and sudden and unjustified termination of a commercial relationship or termination without reasonable notice.

She also mentioned as problematic the issue of long-term exclusive agreements aimed at preventing weaker parties from entering an existing market; unfair exclusionary compliance requirement practices and; unfair contract terms in retail and commercial leases for small enterprises.

Reality check

How far Parliament can assist with her list of business risk issues to be done away with in the interests of “better” business dealings remains to be seen during Committee debate and, more importantly, the briefing her replacement  gives Parliament when the Bill is tabled.

Parliament will also be calling for comment once the Bill reaches Cape Town.

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