The Department of Small Business Development conducted a comparative analysis of SMME legislation from eight countries to the National Business Act no 102 of 1996 as amended in 2003 and 2004.[1] The countries that that were studied include Brazil, India, Kenya, Malaysia, Nigeria, Taiwan, United Kingdom and United States of America.[1] The aim of the study was to better understand the legislative and regulatory measures that these eight countries have adopted in order to stimulate, support, and grow their small business sector.[1] The study was conducted with a view for South Africa to learn from best practices and innovative approaches employed by the eight countries.
In the study four questions were put forward:
- How does South Africa compare on major indicators of Small Business Act against the eight
chosen countries? - What do outcome indicators reflect about the relative strengths and weaknesses of South
Africa’s Small Business Act vis-à-vis the comparison countries? - Where are the largest deviations – positive and negative – from the benchmarks?
- How can the eight country comparisons be useful for policy purposes, in particular regarding the review of South Africa’s Small Business Act?[1]
The study utilised the Small Business Act of the European Union as a framework for analysis for the small business legislations of the eight countries as well as that of South Africa.[1] Further, on 23 July 2024, President Cyril Ramaphosa signed the National Small Enterprise Amendment Act No. 21 of 2024 into law (herein after referred to as the Amendment Act). The Act establishes a new entity called the Small Enterprise Development Finance Agency (SEDFA) which will incorporate the Small Enterprise Development Finance Agency (SEFA), the Small Enterprise Development Agency (SEDA) and the Cooperative Banks Development Agency.[2] In this article, we will be including this latest amendment to the National Business Act no 102 of 1996 (herein after referred to as the National Business Act) in the analysis.
The study found that the legislation of some countries was administrative and procedural in nature whilst others were more substantive.[1] South Africa falls in the former category wherein the majority of laws provide for the establishment of a national agency for the promotion of SMEs and the provision of guidelines for its governance and promotion. To illustrate this point, let us look at why the National Business Act was promulgated: to establish the Small Business Development Agency (today’s SEDA) and other statutory bodies; to define SMMEs; and SMME membership of business associations as a precondition for eligibility for support from government. As mentioned previously, the Amendment Act establishes a new entity called SEDFA which will incorporate SEFA, SEDA and the Cooperative Banks Development Agency. This is very similar to amendment Act of 2003 and 2004 which introduced SEDA. Unfortunately, it appears that the Act is still more administrative and procedural rather than substantive.
We will present the results of the analysis in two parts. The first set of results is shown below, and it is apparent from the results that the South African legislation is indeed administrative and procedural.
The second part of the results is presented in part two of our article and you can find it here. We hope you have learnt some valuable insights about how South African SME legislation compares to other countries.
References:
[1] http://www.dsbd.gov.za/sites/default/files/reports/report-on-smme-legislation.pdf
[2] National Small Enterprise Amendment Act No. 21 of 2024
