Proposed bill would compel larger enterprises to deal with small businesses

The draft National Small Enterprise Amendment Bill which the small business development Minister gazetted in December 2020 for public comment would give an envisaged Small Enterprise Ombud and the Minister an array of powers which they and small enterprises as defined in the Act could use in combination to compel larger enterprises in effect to enter into supply and other commercial transactions with small enterprises.

The Bill would amend the 1996 National Small Enterprise Act to authorise the Minister to appoint a Small Enterprise Ombud who would have power, on receiving a complaint by a small enterprise against a larger business, to investigate any alleged "practice, act or omission which results in unlawful or improper prejudice to a small enterprise".

If the parties do not settle the matter or accept the Ombud's recommendation for resolving it, the Ombud would be obliged either to dismiss the complaint, or to uphold it, award the complainant compensation and direct the other party to take steps deemed appropriate by the Ombud.

The Bill would also authorise the Minister, on recommendation by the Ombud, to prohibit as being "unfair" any trading practice which is indirectly "likely" to have the effect of harming the sustainability and competitiveness of small enterprises or of unfairly affecting "any small enterprise" (including the practice of executing long-term exclusive agreements aimed at preventing "weaker" parties from entering an existing market, or of imposing "unfair" exclusionary compliance requirements).

The Minister would also be empowered to issue regulations which require larger enterprises to make available and publish information about their contract practices regarding small enterprises.

The Bill stipulates that small enterprises would enjoy the rights to choose, trade and transact freely, including the entitlements of disclosure of information, fair dealing and accountability from large enterprises.

These "rights" and entitlements proposed in the National Small Enterprise Amendment Bill would not be true rights, but privileges. They would go further than merely requiring larger enterprises not to impair, diminish or interfere with the enjoyment of a fundamental right, which is legitimate in terms of the Bill of Rights in the national Constitution.

The Bill of Rights binds a natural or juristic person if applicable, but this only protects fundamental rights negatively. The Bill of Rights does not impose on a large enterprise (or other private person natural or corporate) the duties of the state in protecting rights in the Bill of Rights.

These rights proposed in the National Small Enterprise Amendment Bill to disclosure, fair dealing and accountability from large enterprises purport to go further and impose positive duties on larger enterprises, albeit in unduly vague terms.

The doctrine of vagueness is founded on the Rule of Law and requires that laws be written in a clear and accessible manner. A law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly.

All these powers and privileges in the draft National Small Enterprise Amendment Bill, vague or otherwise, would give the Ombud and the Minister an array of powers which they and small enterprises could use in combination to compel larger enterprises to enter into supply and other commercial transactions with small enterprises.

The Minister could prohibit a particular trading practice on the ground of its deemed unfairness to small enterprises (such as a larger enterprise's preferred commercial practice of purchasing from third parties in bulk quantities which may be beyond the capacity of small enterprises to supply), and could make regulations requiring larger enterprises to publish sensitive commercial information about their bulk-purchase preferences. A small enterprise could then complain to the Ombud that this larger enterprise’s practice of purchasing in bulk from third parties is prejudicial to that small enterprise.

The purported rights conferred on small enterprises by the Bill to disclosure, fair dealing and accountability from large enterprises impose positive duties on larger enterprises, albeit in vague terms.

In effect larger businesses will be at the mercy of small enterprises seeking to exact a favourable deal.

This article was first published on City Press on 11 March 2021.