Compliance-LA

Licensing Requirements for Businesses Selling Alcohol in South Africa

Starting a business that sells alcohol in South Africa can be lucrative, but it requires strict compliance with licensing laws.

To sell alcohol in South Africa, a business needs a liquor licence, regardless of what kind of business is being conducted. It is essential for the business to understand this and ensure that they operate with the correct licence as they may face criminal charges if not.

Types of liquor licences

There are various types of liquor licences, depending on the nature of the business requiring it. The most common types include:

On-premises licence: allows you to sell and serve alcohol for consumption on your premises, such as a bar or restaurant.
Off-premises licence: allows you to sell alcohol for consumption off your premises, such as a liquor store.
Special events licence: allows you to sell and serve alcohol at a specific event, such as a wedding or festival.
Manufacturing licence: allows you to manufacture alcohol.
Wholesale licence: allows you to sell alcohol to other businesses in bulk.
Micro-Manufacture License for Both On- and Off-Site Consumption: allows for the micro-manufacture and sale of liquor for consumption both on the premises and for takeaway, such as a wine farm or brewery.

Apply for a liquor licence

The process may be complex and time-consuming, ensure you follow the necessary steps as stipulated. The fee for a liquor licence varies depending on the type of licence you are seeking and the location of the business, and other costs involved. You can submit your application to your local or provincial liquor licensing office.

1. Determine License Type: Decide between on-premises, off-premises, special event, manufacturing, or wholesale.

2. Gather Documents:

Proof of Identification: South African ID or passport for non-citizens.
Verification of Address: Municipal statements or lease agreements.
Certificate of Incorporation: CIPC documentation for companies.
Floor Plan/Site Layout: Detailed layout showing key areas (e.g. bar, seating, exits).
Zoning Certificate: Confirms the business location is zoned for alcohol activities.
Certificates of Good Standing/Compliance: Includes police clearance, health/safety certifications.

3. Obtain Application Form: Available at local liquor office or online.

4. Complete & Submit Application: Fill in business details, license type, alcohol description, and pay fees.

5. Await Review & Inspection: Authorities review application, may inspect premises, and handle objections.

6. Decision & Issuance: Receive the license if approved, or appeal if rejected.

7. Compliance & Renewals: Ensure adherence to laws, pay annual fees, and renew the license as needed.

Additional Notes

Restrictions that can be imposed on a Liquor Licence are such as operating hours, location and zoning, age, etc.
A liquor licence must be renewed annually – a month before the expiry of the registration. The renewal form must be completed and submitted with the paid annual fee.
Make sure you clearly display your Liquor License where it can be easily seen on your premises.
It is a criminal offence to sell liquor without a licence and the South African Police Service can take steps against such person, including a fine, imprisonment, closing the business, confiscating the liquor and criminal charges.

In conclusion, selling alcohol in South Africa requires strict adherence to licensing laws, and compliance is essential to avoid legal

Waste Management Requirements Under South Africa's National Environmental Management Act (NEMA)

The National Environmental Management Act (NEMA) plays a crucial role in shaping South Africa's environmental landscape. It provides a comprehensive framework for the protection and management of the environment. For entrepreneurs, understanding the waste management requirements under NEMA is critical for compliance and sustainability.

Difference Between NEMA and NEMWA

The National Environmental Management Act (NEMA) is a broad piece of legislation that provides a framework for environmental governance in South Africa, addressing various issues such as pollution control, sustainable development, and environmental protection across all sectors. In contrast, the National Environmental Management: Waste Act (NEMWA) specifically focuses on waste management, regulating the classification, reduction, recycling, and disposal of waste. While NEMA sets the general principles for environmental sustainability, NEMWA is more detailed, covering waste management practices, waste management plans, and the licensing of waste-related activities. Thus, NEMA is a comprehensive environmental framework, while NEMWA is specialised in managing waste and its environmental impacts.

Key Waste Management Requirements

Waste Classification: Under NEMWA, waste is classified into different categories based on its characteristics, such as general, hazardous, or healthcare waste. Entrepreneurs must correctly classify the waste they generate to ensure it is handled and disposed of appropriately.
Waste Management Plans: Certain businesses are required to submit waste management plans (WMP) that outline how waste will be handled, minimised, and disposed of. These plans must be in line with NEMWA’s objectives of reducing environmental harm and conserving resources.
Environmental Impact Assessments (EIAs): Under NEMA, in some cases, and depending on the scale of the operation, businesses may need to conduct an EIA, especially if their operations have the potential to generate significant waste. The EIA process assesses the potential impact of business activities on the environment, allowing businesses to take preventive measures.
Licensing and Permits: Businesses engaged in waste management activities, such as waste treatment or disposal, must obtain the necessary licenses and permits. NEMA requires businesses to comply with local environmental regulations, ensuring that waste is managed in a way that protects public health and the environment.

Penalties for non-compliance

Penalties for non-compliance can include administrative fines, fines of up to R5 million, imprisonment for a period of up to 10 years, or both, depending on the severity of the violation. Sometimes even personal criminal liability for directors, employees and agents depending on the offence. Certain sections of NEMA potentially provide for different maximum fines and imprisonment terms depending on the offense involved.

Applicability to Small Businesses

While small businesses may face fewer requirements compared to larger companies, they are still obligated to follow NEMA’s waste management principles and regulations to ensure environmental protection and sustainability.

Practical ways to reduce waste generation

Digitise processes to minimise paper use.
Prioritise reuse, recycling, and reduction of single-use items.
Conserve and recycle water resources.
Establish designated recycling stations within the office.
Educate staff on environmental issues.
Provide environmental awareness workshops and training.
Enforce staff adherence to environmental policies.

Under NEMA, responsible waste management is both a legal and ethical duty for South African businesses. Prioritising these practices is crucial for compliance, environmental protection, and business sustainability.

FAIS Act and FSPs (Part 1): Understanding the FAIS Act and Who Needs to Register as an FSP

The Financial Advisory and Intermediary Services (FAIS) Act 37 of 2002 regulates the provision of financial services in South Africa, ensuring the industry operates fairly, transparently, and professionally. This legislation mandates that any entity providing financial advice or intermediary services must be registered as a Financial Services Provider (FSP) with the Financial Sector Conduct Authority (FSCA). Operating without such authorisation results in sever non-compliance penalties.

Who Needs to Register as an FSP?

Any individual or business that provides financial advice or intermediary services in South Africa must be registered as an FSP with the FSCA. This includes a wide range of services such as:

Offering investment advice
Selling insurance policies
Acting as a broker for financial products
Providing financial planning and retirement advice

Small businesses such as funeral parlours selling funeral policies and retailers offering cell phone insurance need to be registered as an FSP.

The FAIS Act and Its Purpose

The FAIS Act aims to protect consumers by regulating the provision of financial advice and intermediary services. An FSP is defined as an entity that offers financial advice or intermediary services and is regulated by the FSCA. The goal is to ensure that these entities are competent and act in the best interests of their clients.

Registering as an FSP

To operate legally, an FSP must register with the FSCA and meet certain Fit and Proper requirements. The key requirements include:

Honesty, integrity, and good standing
Competence, which involves minimum qualifications, experience, regulatory exams, and product-specific training
Continuous professional development
Operational ability and financial soundness

FSP Categories for Licensing

FSPs are categorized based on the services they offer, and their licensing requirements depend on their category. The categories include:

Category I: General FSPs
Category II: Discretionary FSPs, making investment decisions on behalf of clients
Category III: Administrative FSPs, offering support services
Category IV: Assistance business FSPs, administering funeral insurance policies

Key Individuals and Representatives

A Key Individual (KI) is a senior manager responsible for overseeing representatives and ensuring regulatory compliance. Representatives interact directly with clients, providing financial services under the KI’s supervision.

Conclusion

The FAIS Act ensures that businesses offering financial services operate fairly and transparently. Small businesses like funeral parlours or retailers selling insurance need to register as FSPs with the FSCA to comply with the law and avoid penalties. Understanding these requirements is crucial for ensuring consumer protection and maintaining the integrity of the financial services sector. In the next article, we’ll walk you through the process of registering as an FSP and meeting the necessary requirements.

FAIS Act and FSPs (Part 2): Steps to Register as an FSP and Key Requirements

Now that you understand the importance of registering as an FSP under the FAIS Act, let’s look at how to complete the registration process. This article will guide you through the essential steps, from creating a business plan to meeting legal and financial requirements, to help you successfully apply for your FSP license and operate legally in South Africa.

Guidance on the licence application process

Pre-licencing steps

Create a Business Plan: Include business strategy, services, target market, financial projections, and risks. This helps with both your application and business roadmap.
Assess Finances: Ensure sufficient capital to cover licensing fees and sustain your business during the startup phase.
Evaluate Operational Ability: Ensure reliable communication tools, CRM, and a suitable workspace for client meetings.
Complete Business Setup: Decide on legal structure (e.g. sole proprietorship, partnership), register with CIPC, register for tax with SARS, and open a business bank account.
Understand Key Individual (KI): Requirements: Appoint a KI who meets the FSCA’s "Fit and Proper" standards, has required qualifications, training, and is actively involved in business management.

Application Process

Understand Licensing Categories: Identify the correct FSP category for your services, ensuring KI is licensed for the relevant product subcategories.
Review Application Forms and Guide: Familiarise yourself with required forms and gather necessary documents (e.g. financial statements, risk management policies).
Prepare Documentation: Prepare documents like business address, KI details, compliance plans, financial statements, etc.
Register on FSCA Portal: Register if applying online (not required for email applications), and follow up on application status.
Submit Application: Upload/email the completed application and supporting documents.
Pay Application Fee: Pay the licensing fee and submit proof of payment to the FSCA, using the application reference number provided.

Required application documents

For the Business Entity:

Completed Application Form from the FSCA: The official application form from the FSCA, specific to the FSP category.
Detailed Business Plan
Company Registration Documents
Proof of Address
Tax Clearance Certificate
Financial Statements and Projections
Compliance Policies and Procedure
Risk Management Framework
Proof of Professional Indemnity Insurance

For Key Individuals (Representatives, Key Individuals, and Management):

Completed Personal Questionnaires
Certified Copies of Identity Documents
Proof of Qualifications
Proof of Experience
Criminal Record Checks
Fit and Proper Declarations

Ongoing Compliance Obligations

After registration, financial services providers have several ongoing obligations to ensure continued compliance with FAIS. These include:

Continuing Professional Development (CPD): FSPs must ensure that their representatives and key individuals keep their qualifications up to date.
Annual Financial Statements: Businesses are required to submit annual financial statements to the FSCA.
Compliance Monitoring: FSPs must have a compliance officer who monitors and ensures the business adheres to FAIS regulations.

Failure to comply with the ongoing requirements can result in fines, penalties, or the revocation of your FSP license.

Penalties for not being registered / licenced

If someone who is not exempted acts as a financial services provider (FSP) or offers to do so without being properly licensed, or if an FSP or representative does business with an unlicensed person providing financial services, they can be found guilty of an offence. If convicted, they may face a fine of up to R1 million, imprisonment for up to 10 years, or both.

Registering as an FSP under the FAIS Act is a legal imperative for anyone offering financial advice or intermediary services in South Africa. The severe penalties for operating without a licence highlights how critical it is to adhere to FAIS regulations to protect consumers and ensure the integrity of the financial services sector.

Penalties for Late VAT Payment

The Government generates revenue by requiring certain businesses to register for Value-Added Tax (VAT), to submit returns and pay over the VAT. Failure to comply with the deadlines set by the South African Revenue Service (SARS) for payment can result in significant penalties. Understanding these penalties and how to avoid them is crucial for entrepreneurs to maintain good standing with SARS.

The Importance of Timely VAT Payments

VAT is a tax added to the value of goods and services sold within South Africa. Entrepreneurs who are registered for VAT are responsible for submitting regular returns and making payments to SARS by the stipulated deadlines. Timely payment ensures that your business remains in good standing with SARS, avoiding unnecessary fines and interest charges.

When to submit VAT returns and make payments

In South Africa, VAT returns are typically submitted on a bi-monthly basis (every two months). Businesses must accurately report the VAT they have collected from sales and the VAT they have paid on purchases. This ensures that SARS can calculate the amount the business owes or the refund it is entitled to.

A vendor must submit VAT returns and either make a payment or claim a refund by the 25^th day, or the last business day of the month (only if registered for eFiling), following the month of the vendor’s tax period. If the 25^th falls on a non-business day, the deadline for submitting the return and making payment will be the previous business day. Late VAT payments will incur penalties and interest.

No Penalty for Late Submission of VAT Returns

Currently, there is no penalty for the late submission of a VAT return in South Africa.

However, businesses are still encouraged to submit returns on time to avoid other penalties related to outstanding VAT payments.

Penalties for Late Payment of VAT

Failure to pay VAT on time triggers a range of penalties:

1. Percentage-Based Penalty

o A penalty of 10% is applied to the outstanding VAT amount.

2. Interest Charges

o Interest is charged on the overdue VAT from the due date until full payment is made.

o The interest rate is set by SARS and can fluctuate, compounding the total amount owed.

3. Consequences of Persistent Non-Compliance

o Repeated late payments can lead to additional penalties.

o In severe cases, businesses may face criminal prosecution.

o SARS may issue a "final demand" and initiate legal action to recover outstanding amounts.

Audit Risk and Investigations

Continual late submissions or non-payment can increase the risk of a SARS audit.
Audits may result in further penalties, interest, and prolonged investigations, which can be costly and time-consuming for the business.

Mitigating Penalties

To avoid penalties, it is important for businesses to establish a system to track and manage VAT return deadlines. Entrepreneurs should also ensure that returns are accurately completed and submitted on time. If a mistake is made, it is advisable to correct it as soon as possible to prevent further complications.

By staying compliant with VAT regulations, entrepreneurs can avoid unnecessary financial burdens and protect their business’s reputation.

Business Licences and Permits

Starting and running a business in South Africa requires compliance with various regulations, including obtaining the necessary business licences and permits. Ensuring your business is legally registered helps you avoid legal troubles, builds trust with customers, and allows you to access financial opportunities.

Importance of Business Licences and Permits

A licence or permit is an official document issued by the government that grants authorisation to perform a specific activity within legal boundaries. Depending on the industry, some businesses may require specific operational permits, such as liquor licences or health permits.

A business must ensure that it complies with all applicable laws and regulations, including proper registration, obtaining the correct licences, and following industry-specific rules. Securing the correct licences and permits ensures legal operation, maintains credibility, and supports long-term sustainability.

Different Types of Obtainable Licences & Permits

Some SMMEs in South Africa may need various permits or licences depending on their specific industry, activities, and location – while others may not.

General Business Licence:

Business Licence/Trading Permit: Most businesses operating from a physical location require a general business licence or trading permit from their local municipality.

Industry-Specific Licences and Permits:

Liquor Licence
Food Handling Permit
Health Permit/Certificate of Acceptability
Environmental Permits
Transportation Permits
Import/Export Licences
Financial Services Licences
Construction Permits

Licence and Permit Issuing Authorities

The business location and type of licence required determine the specific authority responsible for issuing the licence/permit. Some key authorities include:

Local Municipalities: General business licences, trading permits, food handling permits, health permits, zoning permits, signage permits, etc.
Provincial Governments: Liquor licences, certain environmental permits, etc.
National Government Departments: Import/export licences, certain financial services licences, specific environmental permits, etc.

How to Obtain a Business Licence

Ensure Your Business is Registered – Register with the Companies and Intellectual Property Commission (CIPC) if operating as a company.
Identify the Correct Licensing Authority – Determine which government body is responsible for issuing your required licences or permits.
Gather Required Documents – Collect necessary paperwork as per the licensing authority’s guidelines.
Submit the Application – Apply online or in person and pay the applicable fee.
Processing and Approval – Authorities review the application, conduct inspections if necessary, and issue the permit upon approval.
Renew Licences Regularly – Many permits and licences require renewal every 12 months.

Residential Premises for Business Zoning

SMMEs operating from a physical location in South Africa need to comply with local zoning regulations. A Business Zoning Application is required to operate from a premises that receives suppliers, clients, and staff, particularly in residential areas. Certain businesses, such as manufacturing or agriculture, can only operate in specifically zoned areas.

Risks of Operating Without a Valid Licence or Permit

1. Legal Penalties

Operating without the necessary licences can result in fines, legal action, or even business closure. Municipalities and regulatory bodies have the authority to shut down non-compliant businesses.

2. Financial Losses

Fines and legal fees can be costly, and operating without permits can lead to loss of business opportunities, loans, or partnerships.

3. Damage to Reputation

A business found to be non-compliant can lose customer trust, impacting its reputation and long-term success.

SMMEs must identify and obtain all necessary licences and permits before starting operations to avoid legal penalties, business disruptions, closures, and other potential issues. Consulting with government departments, business support organisations, or legal professionals is advised to determine licensing and permit requirements.

Cost of Compliance Versus Cost of Non-Compliance for Businesses

Business compliance is a crucial tool for businesses not only to be successful, but also to be competitive. It is important to note that non-compliance with the legal framework regulating commercial activities results in businesses facing legal and financial penalties. It is essential for businesses to be cognisant of the advantages and disadvantages of complying with legislation and policies. The purpose of these laws is to ensure that commercial entities act in a reasonable and responsible manner.

For any business to trade legally and be afforded legal protection in South Africa, it should be registered with the Companies and Intellectual Property Commission (CIPC) and complies with this Act.
The Companies Act deals with issues ranging from ownership, registration, management, and dissolution of companies.
Chapter 2 of this Act further requires businesses to be transparent, accountable, and of high integrity.
The Companies Act also regulates the duties of directors, shareholders, company secretaries, and the roles of auditors to give effect to the notion of transparency.
Furthermore, Chapter 6 of the Act provides procedures for businesses to comply with when conducting business rescue plans when a company is in financial distress, and where there is a possibility that such a company can be rehabilitated. Companies undergoing a business rescue plan are also obligated to comply with the Act.
Chapter 7 outlines the specific remedies that can be afforded to businesses. Non-compliance with the Act may result in punitive fines, criminal proceedings (imprisonment), and suspension or termination of the business. These penalties may damage the reputation of the company, and action may be instituted against the directors of the company for failing to fulfil their fiduciary duties.

Every business that operates in South Africa is liable to taxation under this Act, which is known as the Corporate Income Tax (CIT). Additionally, it is not considered whether the business derives its income from within the Republic or outside.
The Income Tax Act provides, for example, deductions permissible, income taxable, rate of tax, determination of tax payable for companies that operate outside South Africa, and compels businesses to submit annual returns.
When a company fails to comply with the Income Tax Act, the South African Revenue Service (SARS) is authorised to impose penalties in the form of fixed amount penalties and percentage-based penalties.
Payment of these penalties and fines could have a catastrophic impact on the company’s revenue.
Non-compliance with tax regulations engrained in the Tax Act may also result in the deregistration and closure of the business. The legal effect of the deregistration process is that the juristic personality of the company can be withdrawn, and the company ceases to exist.

The CPA provisions are applicable to all industries except those explicitly exempted by the Act, such as banking institutions and insurance companies.
The CPA is mandatory for businesses offering goods and services to consumers within the Republic.
The CPA mandates companies that offer goods and services to provide consumers with a warranty for defective goods and prohibits them from misinforming consumers about products and engaging in unfair marketing practices.
The Act also mandates businesses that supply services and goods to consumers to disclose prices and relevant information about the products.
Due to the modern use of technology, these obligations are also extended to suppliers who sell goods and services online.
Businesses that comply with the CPA are afforded protection under the CPA. Non-compliance with the CPA results in penalties, including a fine of up to a maximum of 10% of the supplier’s annual turnover for breaches.
While this sanction is probably reserved for more severe contraventions, the reputational damage flowing from a lesser sanction outweighs the cost of ensuring compliance from the onset.

In terms of the Labour Act, companies should respect employees right to freedom of association, and give recognition to trade unions, bargaining councils, and strikes.
On the other hand, the BCEA requires companies to comply with the minimum wage, working hours, leave days of employees, prohibition of children and forced labour, and termination of employees’ services.
Non-compliance with the provisions in the BCEA may result in penalties ranging from a fine to imprisonment for a period not exceeding three years.
The EEA compels businesses to provide employment equity. Companies are prohibited from engaging in unfair discrimination and are thus, compelled to adopt an employment equity plan that gives effect to this.
Employers therefore need to be attentive when it comes to complying with their employment equity plans.
Recently, a major airline was fined R900,000 for failing to comply with the Employment Equity Act (EEA). The EEA sets out applicable fines depending on whether the company has had previous contraventions. The fines applicable range from 2% to 6% of the company’s turnover or an amount not exceeding of R2 700 000.

PAIA- Section 83(4) Report due 30 June 2023

A recent notice published by the Information Regulator to 7 May 2023 relates to section 83(4) of the Promotion of Access to Information Act (PAIA). This notice requests, for the first time ever, that heads of private bodies submit a section 83(4) report in terms of PAIA by 30 June 2023.

Although the notice “invites” private bodies to submit a report, the Information Regulator has indicated that submission is compulsory. Failure to comply with the notice may result in an investigation of your compliance with PAIA by the Information Regulator in terms of section 77H(1) of PAIA.

Application of Section 83(4)

Section 83(4) of PAIA allows the Information Regulator power to request that heads of private bodies submit reports about requests received for access to records held by the private body. The Information Regulator can then use these reports to prepare an annual report to be presented before the National Assembly.

If you or your business fits into the definition of a private body in PAIA, section 83(4) and the Information regulator’s notice applies to you. A “Private Body” is defined by PAIA as:

- A natural person carrying on any trade, business, or profession, but only in such capacity;

- a partnership which carries, or has carried on, any trade, business, or profession; or

- any former or existing juristic person,

but excludes a public body.

How do you submit the Report?

Your report must be submitted at the Information Regulator’s portal. To submit your report, you must be registered on the portal.

Ensure that you fill in the details requested completely. Once registered, there will be a button referring to “PAIA Annual Reporting”. Select this and provide the necessary responses in the form provided. Make sure that your responses are detailed and correct to avoid follow-ups from the Information regulator.

Remember to submit your report by 30 June 2023.

Thank you!

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