Amendments to Enterprise Act aims to protect SMMEs

Changes to the National Small Enterprise Act will help assist SMMEs gain a stronger foothold in policy development and upscale their rights while doing business.
Small Business Development Minister Khumbudzo Ntshavheni gazetted the National Small Enterprise Amendment Bill in early December for public comment.
Changes being suggested, include making provisions for an SMME Ombudsman and defining what are unfair business practices.
The department said in a press release that an ombudsman would ensure that small businesses were no longer taken advantage of.
“Despite the critical role of small businesses in the economy and development objectives of South Africa, the SMME sector remains vulnerable to exploitation and (is) unable to utilise available legal remedies due to the prohibitive costs,” it said.
According to the amendments, the ombudsman would be allowed to investigate any alleged unfairness relating to a contractual arrangement, or other legal relationships between the complainant and any other party.
The office could also investigate the unjustifiable exercise of power, and if there was improper conduct relating to a contract.
“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,” the department said.
It said the changes ensured SMMEs would be paid on time. Small businesses often go bankrupt due to a lack of cash flow because they are paid late in South Africa.
SMMEs would have the have the right to choose, trade and transact freely, and they were not paid according to a reasonable time, they may demand an interest on late payments, and the right for information to be disclosed on the matter.
The Bill defines unfair business practices as ambiguous contract terms, no written contracts, retrospective changes to arrangements and transferring commercial risk to the weaker party.
Long-term exclusive agreements aimed at preventing weaker parties from entering an existing market also fall into this category.
The proposed law also covers unfair contract terms in retail and commercial leases for small enterprises, and the sudden and unjustified termination of a commercial relationship without reasonable notice.