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This chapter presents the licensing policy of each surveyed country. Particular attention is given to any recent changes in licensing policy, and to the policy rationale for requiring some businesses to be licensed but not others.
Botswanas licensing policy has changed little since Independence in 1966. The main legislation is the Trade and Liquor Act [Cap. 43:02] which was passed by the National Assembly in 1986 in order to consolidate previous legislation rather than signal a new policy. Many other statutes also include licensing regimes such as the Industrial Development Act (regarding manufacturing activities), the Mines and Minerals Act, diamond cutting [Cap. 66:04], the provision of security guards [Cap. 21:07], the provision of road transport services [Cap. 69:03], and tourism enterprises such as travel agents [No. 22 of 1992]. As in other countries of the region, certain professions such as attorneys and public accountants may not be conducted without a practising certificate obtained from the appropriate authority.
In terms of the Trade and Liquor Act, a licence to conduct specified business operations must be obtained from either the national or local licensing authority. The Act has a very wide ambit, and effectively requires that any type of retail activity must have a licence. Aspects of the licensing regime were strongly criticised by the independent SMME Task Force (reporting in 1998) which recommended a fundamental reform of the licensing system, based on the principle that most
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businesses run by citizens should not require a licence. Government deferred a decision on this, pending a further independent review of the licensing laws, which has apparently now made similar recommendations. Government has yet to make any policy announcement on this matter, but has proposed as an interim measure that the rules applicable to certain categories of hawkers and vendors will be relaxed. Government has also decided that in future, persons running such business will be compelled to register with Government so that proper records can be maintained". At the time of writing this report, it is not clear how such business will be compelled to register, and what penalties will be imposed on those that fail to register.
1.1.2 Recent changes in licensing policy
Applications for certain licences (see below) are considered by the National Industrial Licensing Authority (NILA). Following complaints, the Authoritys procedures were streamlined in 1992, in order to improve efficiency. The effects of these changes are that:
1.1.3 Rationale for requiring certain businesses to be licensed
There is no obvious policy to explain why some businesses are required to be licensed but not others. As will be seen from the list below, the licensing laws require that manufacturing and retail businesses should be licensed, but service businesses are generally exempted from the licensing regime (other than, for example, hairdressing). This division is a historical reflection of a previous era, when virtually all business activities required a licence, and there were few service businesses then operating.
The effect of the present licensing laws is that:
In Mauritius, a person carrying on virtually any business activity is required to have a licence or other permit. For example, under the Licenses Act 1992, there is obligation on the part of every undertaking to obtain and pay for the appropriate licence. Prior to start of a business, it is necessary for the promoter to obtain a Development Permit and a Trade/Manufacturing License from the Local Authority in the area concerned. A Development Permit may relate either to an Industrial Development or for a Commercial Development. The application has to be supported with documentation, including appropriate drawings to scale, site plans, land title deeds, and no-objection certificates from the owners of the property and from immediate neighbours who may be directly affected by the proposed business. This policy is primarily dictated by the need to make optimum use of land and physical resources in a small island.
1.2.2 Recent changes in licensing policy
The most significant recent change in licensing policy was the decentralisation of responsibility for issuing licences, which occurred in 1989 when the Local Government Act was amended. This policy of decentralisation of responsibility was motivated by two objectives: firstly, to provide local authorities
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with a further source of income in order to encourage them to become financially autonomous; and secondly, to enable local authorities to become more actively engaged in the economic development of the areas under their jurisdiction.
Other changes to related laws include:
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1.2.3 Rationale for requiring certain businesses to be licensed
This issue has little significance because virtually all business activities are required to be licensed. However, some businesses - such as those of medical and dental practitioners and also those run by cooperative societies - are licensed at the national level rather than by local authorities.
In Namibia, most licensing laws were abolished in 1995. The Trades and Occupational Repeal Act, No 10 of 1995, removed the general need for all enterprises to obtain a licence. Some business activities still require a licence, although this requirement is currently under review.
1.3.2 Recent changes in licensing policy
The significance of the radical policy change introduced in 1995 can best be understood by examining the previous regulatory regime, governed by the Licenses Consolidation Ordinance, introduced in 1935
126.96.36.199 The Licenses Consolidation Ordinance of 1935
This Ordinance originally required all trades and occupations to be licensed. However, it was amended over the years and some occupations and professions became subject to other more specific legislation such as:
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Those trades and occupations which continued to be governed by the Licenses Consolidation Ordinance were subject to cumbersome and slow procedures. An application for a licence was made to a licensing court which was constituted in each magisterial district and which met between one and four times per year. An application had to be publicly advertised and referred to the police for a personal police clearance of criminal records. It was also necessary to obtain a certificate of fitness from local health officials in accordance with the General Health Regulations of 1969. Town planning and safety officials were also invited to comment on the merits of an application, before the licensing board either approved or rejected the application. In cases where the application was rejected, an appeal could be made to the licensing court. Applicants employed lawyers to assist in these applications and hearings. The application procedure was therefore not only laborious process, but also expensive.
The licensing system also fell into disrepute because of its association with the apartheid past. The requirement for a police report of an applicants good character and fitness had discriminated against persons with a police record associated with involvement in politics. The licensing system had also encouraged monopolies.
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188.8.131.52 The Trades and Occupational Licenses Repeal Act of 1995
The objective of the Trades and Occupational Licenses Repeal Act was to repeal the laws relating to trades and occupational licenses so as to give effect to Article 21 (1) (j) of the Namibian Constitution which guarantees the right for all persons to practice any profession, or carry any occupation, trade or business". The Act applies to all persons" residing in Namibia, whether or not they are citizens of Namibia.
The Constitutional freedom to practice any profession, or carry any occupation, trade or business is subject to Article 21 (2) which provides:
The fundamental freedoms referred to in Sub-Article (1) hereof shall be exercised subject to the law of Namibia, in so far as such law imposes reasonable restrictions on the exercise of the rights and freedoms conferred by the said Sub-Article, which are necessary in a democratic society and are required in the interests of the sovereignty and integrity of Namibia, national security, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence."
The effect of this provision is that the freedom to choose and practice a profession, occupation, trade or business can only be restricted or limited by a statute which imposes reasonable restrictions that are
Licensing laws were regarded as an unreasonable restriction upon the freedom to choose and practice a profession,
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occupation, trade or business, and were therefore largely abolished by the Trades and Occupational Licences Repeal Act, 10 of 1995. The Act also gave legal effect to recommendations for deregulation of SMEs contained in the Government's White Paper on Industrial Development (Ministry of Trade and Industry, August 1992).
The Trades and Occupational Repeal Act abolished the general need for all enterprises to obtain a licence. However, some business activities still require a licences, including:
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1.3.3 Rationale for requiring certain businesses to be licensed
The policy which requires the above-listed business activities to be licensed is currently under review. The existing arrangements are justified either on the grounds of public protection or protection of the environment (for example, the Constitution requires the protection of woodlands, and woodcarvers are therefore obliged to obtain a licence).
In South Africa, many of the licensing laws of the apartheid era have now been removed, although a few local authorities in the former homeland areas have retained some of the old licensing regulations in their bye-laws. A number of recent studies have suggested that the regulatory environment is no longer considered by SMEs to be a major problem area. For example, Riley's study found that " when asked to name spontaneously the most important constraint faced at the start-up of their business, only 12 percent of respondents mentioned factors related to regulation. Regulatory problems figure even less prominently in the day-to-day operations of their business: 7 percent of the respondents cited regulatory factors as their most important problem" (p. 28). The study concludes that:
If problems in these areas are regarded as relatively unimportant by most entrepreneurs, they are likely to become even less so as a result of the Businesses Act, which will abolish licensing for most categories of businesses, prohibit confiscation of traders' merchandise, and generally reduce opportunities for official harassment" (p. 28).
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A more recent study, conducted in 1997, involving businesses in manufacturing, building construction, and services, found that policy and regulatory matters did not feature as matters of concern to respondents. Instead, access to markets and raw materials, competition, and business premises ranked much more highly in the list of respondents concerns (Sheets and Bukula, 1997). This study concluded that:
Licensing was generally not viewed as a problem anymore. Most respondents said they had not experienced problems either in acquiring or operating a license, and that in this respect relations with government were satisfactory. Those in the steel fabrication industry reported that they were still unlicensed, but that their Association was working with the provincial government to get them licensed. An official in the hair and beauty association said that within the next two years permanent salon licenses would be issued" (p. 20).
1.4.2 Recent changes in licensing policy
During the 1980s, much of the legal framework that the apartheid government had used for decades to control and restrict black business activity was removed. Most municipalities introduced a less restrictive approach to street vending, some health and labour regulations that negatively affected micro enterprises were removed, and the kombi taxi was, for the first time, encouraged as an accepted mode of transport. By the end of the '80s, restrictions on urban-based black business, which had seen blacks allowed to operate only fifty-two types of trades, businesses and professions from 1976 onwards and twenty-five before then, had been removed (Riley, 1993, p. 6).
Although these changes represented a long-awaited relief to the majority of the country's small firms, there was also opposition
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to this process of deregulation from three quarters: organised labour, consumer groups and established business. Labour's opposition was based on the expressed fear that small businesses would disregard employment laws and promote poor working conditions. Consumer groups feared that consumers would be exploited by small businesses through the sale of sub-standard goods and services. Established business expressed concerns about unfair business practices.
A further development came in 1991 with the enactment of the Businesses Act, which repealed a wide range of licensing laws relating to many different types of businesses. The Act also denied municipalities the right to declare certain areas off-limits to street trading, a practice which had hitherto been common in many South African towns. The enactment of the Businesses Act permitted entrepreneurs to start a wide range of business activities without first having to obtain a licence to do so. The list of such businesses now includes: accommodation establishment, advertising agency, auctioneer, baker, barber, bicycle dealership, building contractor, butchery, cafe, cartage contractor, commercial travel, driving instructor, fishmonger, gardening services contractor, general dealership, hawking, hiring service, kennel, laundry service, livestock or produce dealership, mail order undertaking, market agency, motor garage, motor graveyard, motor vehicle attendant, motor vehicle dealership, parking garage, pawnbroker, photography, poultry farming, private investigator, quarrying, recreation ground operation, rickshaw hauling, riding school keeping, salesmanship, vending machine keeping, warehousing, and workshop operation (Moore and Davie, 1997, p. 6).
Certain business activities which still require a licence are defined in Schedule 1 of the Businesses Act, 1991, as follows:
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1.4.3 Rationale for requiring certain businesses to be
The study by Moore and Davie found that "although licensing laws relating to many different types of businesses have been repealed, the old laws still apply in certain former homeland areas" and that because of various pieces of legislation, "a wide range of businesses also still require a license in South Africa" (Moore and Davie, 1994, p. 1). These are listed alphabetically by Moore and Davie as follows: carrying on business as an abattoir, accountant, advocate, agricultural produce agent, airport, air service, air traffic control, attorney, auditor, bank, boxer, boxing official, boxing manager, boxing promoter, boxing trainer, broadcaster, building society, casino, chiropractor, cinema, clinical technologist, commissioner of
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oaths, conveyancer, correspondence college, dental technician, dental therapist, dentist, diamond cutter, diamond dealer, diamond researcher, diamond tool-maker, dietician, discotheque, dispensing optician, emergency care, engineer, estate agent, escort agency, environmental health practitioner, financial exchange, financial service, friendly society, fund-raiser from the public, health spa, homeopath, horse-racing club, hospital, infrared treatment, insurer, investment manager, keeper of three or more pinball or similar machines, keeper of three or more snooker tables, land surveyor, liquor supplier, lottery, masseur, meal provider whether from fixed premises or as a street trader, medical aid scheme, medical practitioner, medical orthodontist and prosthetist, medical scientist, medical technologist, minerals prospector, mining, municipal accountant, natural scientist, naturopath, night club, notary, nurse, occupational therapist, optometrist, oral hygienist, passenger transport by bus or taxi, patent agent, pension fund, perishable foodstuff supplier, petrol station, pharmacist, physiotherapist, place of care for children, podiatrist, postal delivery, psychologist, quantity surveyor, radiographer, remedial gymnast, sauna, security officer, school, social worker, society for the protection of cruelty to animals, speech therapist and audiologist, stock exchange, technikon, telecommunication service, telephone company, theatre, tour guide, town clerk, town planner, turkish bath, unit trust scheme, university, valuer, and veterinarian (p. 8).
Two main reasons have been advanced for requiring some businesses to obtain licenses but not others. Firstly, it is argued that this is the best way to protect the public especially in those activities where there is a high degree of risk such as air transport, medicine and banking. Secondly, it is argued that there is a need to control admission to certain activities which involve the exploitation of a scarce resource, such as broadcasting on radio waves or fishing. Other benefits of
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licensing laws are that they provide a source of revenue for government authorities, and also provide information which enables government officials to inspect businesses and enforce other laws such as occupational health and taxes.
However, Moore and Davie dispute these arguments, and argue, firstly, that " licensing laws do not guarantee that the public will be protected, and that there will be no failure in the licensed activity". Dishonesty and accidents occur even within licensed industries. The public can be protected from the loss of moneys held by others by the requirement that conveyancers, estate agents, debt collectors, and others maintain the necessary insurance or fidelity cover rather than having to obtain a prior license 'in the guise of a "fidelity certificate"'.With regard to rationing admission to certain industries, Moore and Davie argue that those carrying on business in such industries do not require any special treatment. "They can provide a service and protect existing resources simply by relying on property rights. For example, there is no need to introduce broadcasting legislation: broadcasters are able to obtain interdicts against other broadcasters who attempt to use their frequencies". The authors also dispute whether licenses are needed as a source of tax revenue. Ordinary taxation laws are adequate to raise taxes and there is no need to impose licensing burdens on particular industries. The argument that licenses provide a source of information for the government is also disputed: there are probably more unlicensed liquor sellers in the country than there are licensed ones, and in any event, government departments rarely have enough inspectors to enable them to police industries proactively by visiting all the business premises on their list.
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Of the seven countries surveyed in this study, Tanzania has the most elaborate licensing system. Any business conducted in Tanzania is required to obtain a licence, because of a catch-all provision in Schedule C of Act No 9 of 1980 (see below). The licensing system of Tanzania is based upon a threefold classification, depending on the body responsible for issuing the licence, which may be undertaken at the national level (by the Ministry of Industry and Commerce), at the regional level (by the regional Trade Office) or at the local level (by the district licensing officer, town municipal or city council).
Schedule A licences are issued by the Ministry of Industry and Commerce:
SCHEDULE B licences are issued by the regional Trade Office:
SCHEDULE C licences are issued by the district licensing officer, town municipal or city council:
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1.5.2 Recent changes in licensing policy
The licensing system in Tanzania appears to have fallen into disrepute because of bureaucratic procedures and delays. It is estimated that approximately 70% of businesses in Tanzania operate without the necessary licence. An indication of the problem was provided in November 1998, when the Tanzania Investment Promotion Agency complained publicly that Hyundai had decided not to invest in Tanzania because its licence application remained unprocessed two years after it had been submitted. The licensing procedure in Tanzania also requires the application forms to be sent to the Income Tax Authority for tax assessment (in Tanzania, the consultant reports that income tax must be paid in advance before starting a business). However, the consultant notes that the entire licensing system is now under review and estimates at the time of submitting his report (August 1999) that a different system will be in operation by early October 1999. The proposed reforms appear to be procedural rather than substantive, and will replace the three-tier licence issuing system with a two-tier system. The regional Trade Office will be responsible for issuing licences for manufacturing, transportation, hunting and tourism. All other licences will be issued either by the city or town council.
1.5.3 Rationale for requiring certain businesses to be
This issue has no relevance to Tanzania because all businesses are required to be licensed.
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At first sight, Zambia has a fairly elaborate licensing system which requires most manufacturing and trading business activities to be licensed. However, the effect of this system upon SMEs is alleviated by the Small Enterprises Development Act of 1996 which exempts small and micro enterprises from the need to obtain a licence for the first five years of operation.
The main legislation is the Trades Licensing Act, Cap 393 of the Laws of Zambia, which requires all trading and manufacturing businesses to be licensed. In terms of the Act, the following types of licence may be issued:
A licensing committee sits every month to scrutinise and consider applications before recommending or rejecting them for issue of a licence. This process can take between thirty to sixty days, in spite of recent changes which have failed to reduce the length of time involved. The main problem lies with the procedures of the Local Authorities to whom the Ministry of Commerce, Trade and Industry has delegated the licensing function. In addition to the general inefficiencies of Local Authorities, there is a lack of capacity in the licensing departments, and poor co-ordination between different
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departments of the Local Authorities and with the Ministry responsible for Trades Licensing.
The Liquor Licensing Act, Cap. 167, provides for various types of liquor licences:
The process of obtaining a liquor licence is longer than that for an ordinary trading licence in that the local authoritys Liquor Licensing Committee has to be convened to consider applications which - if approved - are submitted for further scrutiny by the Provincial Liquor Licensing Board which is supposed to sit every three months. In reality, this Board which is appointed by the Ministry of Local Government and Housing rarely sits. As at August 1999, this Board had more than four meetings pending. Applications pending are normally issued with provisional liquor licenses renewable every three months. This is an inconvenience to business in terms of both time and cost.
A further category of licences is required for any project to be located and/or undertaken in National Parks and Game Management Areas. In terms of the National Parks and Wildlife Act, Cap 201, the following licences may be issued:
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Applications for any of these licences are to be made to the Director of National Parks and Wildlife Services.
Other types of licence are required for
1.6.2 Recent changes in licensing policy
In recent years, several changes to licensing policy have been introduced, mainly with a view to improving efficiency in the licence application procedure. Over the last ten years, the following Acts have made changes to the Trades Licensing Act:
Reasons given for these amendments include the following:
1.6.3 Rationale for requiring certain businesses to be
In general terms, there appears to be no consistent policy reason for requiring some businesses to be licensed but not others. The broad effect of the licensing laws is that manufacturing and retail businesses should be licensed, but service businesses are generally exempted. This division is probably a historical reflection of a previous era, when there were few service businesses in operation in Zambia.
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The effect of the licensing system upon SMEs is alleviated by the Small Enterprises Development Act of 1996 which exempts small and micro enterprises from the need to obtain a licence for the first five years of operation. The policy rationale for this exemption is to facilitate small and micro business start-ups.
The vast majority of licensing laws have now been abolished in Zimbabwe. Although licences are required for professional activities such as medicine, law and banking which involve a high degree of trust, most general business activities no longer require a licence, except that certain types of shop require a licence under the Shop Licences Act, and anyone engaged in the business of supplying or selling of liquor should hold a liquor license.
An agents license is required where the sale or letting for hire of any particular item is effected by an agent on behalf of a principal, whether it be in a shop, store, or other fixed place of business. Trades or businesses for which such licenses are not required include letting for hire of:-
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A licence to operate a factory is required from the Ministry of Public Services, Labour and Social Welfare.
1.7.2 Recent changes in licensing policy
In the 1980s and early 1990s, the majority of controls in the Zimbabwean economy were linked to licences or some sort of permits. These controls hampered free market operations, encouraging business inefficiency and economic stagnation. The general abolition of licensing laws in Zimbabwe has taken place in the context of the Enhanced Structural Adjustment Programme (ESAP) introduced by the government in 1991 in an attempt to improve economic performance. ESAP was accompanied by a process of trade liberalisation which brought about the removal of practically all import licenses and price controls. Importation of goods was no longer subjected to foreign currency allocations and import permits. The monopolies that had previously been enjoyed by parastatals such as the Grain Marketing Board, Dairy Marketing Board, Cold Storage Commission and companies such as Zimbabwe United Passenger Company Limited were either curtailed or removed.
1.7.3 Rationale for requiring certain businesses to be
Although many licensing laws have been removed, the consultant reports that there is no apparent policy rationale which explains why some businesses are still required to be licensed in Zimbabwe.
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In most countries, the reform of licensing laws has been addressed or debated in recent years:
The study suggests that in three countries (Botswana, Zambia and Zimbabwe), there is no obvious policy rationale for the requirement that some businesses should be licensed, whilst other businesses do not require licences. In Botswana and Zambia, the licensing laws generally require that manufacturing and retail businesses should be licensed, but service businesses are generally exempted from the licensing regime (other than, for example, hairdressing). This division is a historical reflection of a previous era, when there were few service businesses in operation. In Zimbabwe, although many licensing laws have been removed in the context of the Economic
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Structured Adjustment Programme, the consultant reports that there is no apparent policy rationale which explains why some businesses are still required to be licensed.
In contrast, Namibia and South Africa both appear to have developed a clear policy rationale to distinguish between those business activities which require a license and those which do not. The policy in Namibia is applied more uniformly that in South Africa, where some local authorities of former homeland areas have retained some of the old licensing laws. In Namibia, most of the licensing requirements were removed in 1995, and those business activities that still require licences are justified either on grounds of public protection or protection of the environment (eg the Constitution requires the protection of woodlands, and woodcarvers therefore should obtain a license). In South Africa, national legislation requires some businesses to be licensed, and the rationale here appears mainly to be based on public protection (in relation to activities such as banking, medicine and transport)
Mauritius and Tanzania have similar licensing regimes which require virtually all business activities to be licensed. In Mauritius, the policy of requiring the vast majority of business activities to have licenses or other permits appears to be dictated by the need to make optimum use of land and other resources on a small island. In Tanzania, although all businesses are currently required to be licensed, the system appears in practice to have fallen into disrepute, and non-compliance is widespread.
© Friedrich Ebert Stiftung | technical support | net edition fes-library | November 2000