The new code of practice on dismissals, under the Labour Relations Act, which makes it easier for small businesses to dismiss underperforming employees is welcome news, but the withdrawal of credit regulation reforms that would have helped small businesses access loans more easily is a setback, says business organisation Business Leadership South Africa CEO Busi Mavuso.

The new code of practice on dismissals, which was gazetted by Employment and Labour Minister Nomakhosazana Meth last week, is based on draft codes published in January that had been developed through an extensive National Economic Development and Labour Council (Nedlac) process, Mavuso points out.

The new code will make it easier to run a small business in this country and cheaper to manage a workforce, which will make it more desirable to hire people, she says.

The new code is a good example of how progress can be made when social partners work together, Mavuso states.

“Positive reforms are essential to turning around our poor economic growth and tackling our unemployment crisis. Through Nedlac and initiatives like Business For South Africa, we work extensively to help develop proposed policy changes that can contribute to improving the business environment.”

Meanwhile, the Department of Trade, Industry and Competition (dtic) last week also withdrew draft amendments to the regulations under the National Credit Act, which had previously been published for public comment. The draft regulations included important changes to enable lenders to more easily assess small businesses for new loans.

The current regulations had not been changed since 2013 and apply to consumers and include small business borrowers by default and require them to pass an affordability test.

“For example, in the case of an entrepreneur who worked to develop a business idea over the past six months and needs a small loan, no lender can legally lend to the entrepreneur because her or his bank statement history would show she or he couldn’t afford to repay the loan, as she or he hadn’t been working,” says Mavuso.

The new draft rules, among other things, would have enabled lenders to determine affordability by assessing how likely a business idea was to succeed. For startup businesses, this could improve their access to loans, she highlights.

However, in a setback, Trade, Industry and Competition Minister Parks Tau withdrew the draft credit regulation rules on the same day that public comments would have closed, without waiting for the process to conclude and reviewing the comments prior to taking further steps, Mavuso says.

“The draft rules had emerged from a long process, including substantial work by the business-government partnership on employment and its attempts to improve access to credit for small, medium-sized and microenterprises,” she points out.

“It appears that the 20 000 submissions received in opposition to the amendments are not relevant to the proposed amendments, as these emerged on the back of a campaign to encourage students to write in about the fact that the regulations currently in place include educational institutions among entities that can be sources of credit information that is sent to credit bureaus.”

This has been in the regulations since 2006, and the proposed amended regulations made no reference to this. The withdrawn regulations mean that the clause, which the negative submissions received were in opposition to, remains the status quo, she emphasises.

“This is an irrational way to form policy. The Minister should have rationally considered the comments received during the consultation period. Then, if he agreed with concerns about the existing regulations, he should have considered further amendments,” says Mavuso.

“In summarily withdrawing the proposed amendments, before the consultation period had even concluded and the inputs been assessed, the Minister has ended a detailed and careful amendment process,” she says.

The Labour Minister has taken a step forward in easing the burden on small businesses, but the Trade, Industry and Competition Minister has taken a major step backwards, she states.

“I strongly urge [Tau] to reconsider his actions and restore credibility to the policy process by reintroducing these amendments, or he will have to explain to struggling entrepreneurs why politics matters more than their livelihoods,” Mavuso says.