Small Business Amendment Bill; Liquor Bill: Briefing

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Trade and Industry

01 April 2003
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE
2 April 2003
LIQUOR BILL; SMALL BUSINESS AMENDMENT BILL: BRIEFING



Acting Chairperson: Ms C September (ANC)

Documents handed out
 

Presentation on Small Business Amendment Bill
Presentation on Liquor Bill
Briefing Notes on Liquor Bill (Appendix 1)
Department's 2003 Legislative Programme (Appendix 2)
National Small Business Act of 1996
National Small Business Bill [B20-2003]
Liquor Bill [B23-2003]
Liquor Act of 1989

SUMMARY
The National Small Business Amendment Bill repeals all provisions referring to the National Small Business Council (NSBC) and establishes a voice for small business. During the discussion on this Bill the following concerns were raised: the reasons for the liquidation of the NSBC, Ntsika's role in creating a voice for small business and whether it has sufficient funds to achieve this.

The presentation on the Liquor Bill outlined the background to the Bill, the principles of the liquor policy and the objectives of the Bill. The Bill seeks to give effect to the Constitutional Court judgment dealing with the respective competencies of national and provincial spheres of government on liquor policy. The following matters were raised during the discussion: clarity was sought on the new three tier system, whether exemptions from adherence to it would create a monopoly, whether sidestepping this structure via cross-shareholding arrangements would be tolerated, the definition of "concoction" in Clause 5 seems to include traditional mixtures and does not include all harmful alcoholic substances, and Clause 5 has to include a reference to "drunkenness".

MINUTES
Introduction by the Acting Chairperson
The Acting Chairperson noted that this Committee will probably no be able to host public hearings on the National Small Business Bill before the Easter break. The Liquor Bill will be introduced in Parliament on Monday 7 April, and the following two-and-a-half weeks will be set aside for public response to the newspaper advertisement.

Briefing on National Small Business Amendment Bill
Mr Lionel October, Deputy Director-General: Enterprise Industry Development Division, conducted the presentation (see document). The National Small Business Amendment Bill (the NSBA Bill) contains essentially institutional changes that are aimed at creating a voice for small business. It also seeks to align the focus of the Department to deal with small businesses via Ntsika and aims to remove any duplication of functions between the Department and Ntsika. The presentation outlined the object of the amendments in a clause-by-clause fashion.

Discussion
Prof B Turok (ANC) stated that, firstly, there are a number of spelling errors in the presentation. Secondly, during its presentation to this Committee last week Ntsika indicated that it is receiving reduced funding and that its mandate is uncertain. The Director-General had conceded that the presentation delivered by Ntsika was a bit unbalanced, especially the emphasis it placed on exports Now the problem with the SBC was that manipulation of resources and mismanagement of funds was taking place. Prof Turok requested assurance from the Department that it is ensuring that Ntsika is being made central to small business, and that it is being addressed properly.

Mr October replied on the role of Ntsika. If one reviews the performance institutions set up in terms of the principal Act and the key role of Ntsika as a central agency, one would find that there are other institutions in the field that provides the same type of service. There is thus a real need for a dedicated institution that is directly involved with small business. The NSB Bill seeks to remove Ntsika's general and broad mandate to conduct research, and now provides a more focused mandate on service delivery. The aim is to look to combine Ntsika and the National Coordination Office of the Manufacturing Advisory Centre (NAMAC) further down the line, but the process will begin with the repositioning of Ntsika.

Mr P Smith (IFP) asked why the National Small Business Council (NSBC) is defunct. The SBC provided an important function in the sector and steps could have been taken by the Department to ensure it operated properly, instead of allowing it to collapse.

Mr October replied that he is not sure why the NSBC failed.

Ms Wawa Damane, Chief Director: Enterprise Industry Development Division, added that the NSBC was liquidated due to mismanagement of funds, but conceptually it was a body that focused on capacity building and had advisory and advocacy functions. A separate body should have been established to provide the capacity building function, and the NSBA Bill attempts to introduce this separate body in order to ensure this autonomy.

Mr October then said that the primary reason for the demise of the NSBC was mismanagement and maladministration of funds and over-bureaucratic structures, but if it were to be a body that focuses solely on providing a voice for small business, it would be more successful.

Ms B Ntuli (ANC) stated that she was aware of the fact that the NSBC was experiencing many problems, but sought clarity on the actual duties of that agency.

Mr October responded that its role was to provide advice and advocacy.

Ms Damane added that it was learnt that there was a need to make its advocacy role more inclusive, as this function cannot be limited to merely furthering the interests of its members. Section 18 of the principal Act, dealing with the implementation strategy, authorises its advocacy functions via the Minister of Trade and Industry's guidelines.

Mr P Nefolovhodwe (AZAPO) referred to Clause 5 of the NSBA Bill and asked why it would be "cumbersome" to advertise in the Government Gazette.

Ms Damane replied that the timeframes are a problem regarding the provision of a smooth transition from one system to another.

Mr Nefolovhodwe contended that monetary provisions are problematic, and they should instead be defined so that they are not dependent on monetary exchanges.

Ms Damane responded that the framework currently being used is very useful, and other jurisdictions define it in terms of the number of historically disadvantaged people employed. It has to be remembered that these only serve as broad guidelines, and therefore the monetary aspects are not only focused on but the broader factors as well.

Adv Johan Strydom, the Department's Senior Legal Advisor, added that Section 20(2) of the principal Act provides that the Minister can amend the Schedule, which deals with the monetary classification, in order to reflect the fluctuation. This can be done without following the legislative route.

Mr D Lockey (ANC) stated that it appears that the Department has now taken the consultative route by repealing all reference to the NSBC but expressed his reservation with the extent to which the consultative bodies can actively promote the cause, and proposed that it would help if these consultative bodies have statutory force.

Mr October replied that the Department was faced with two choices here: firstly, the establishment of non-rigid advisory bodies or, secondly, very rigid regulatory bodies. Members are assured that Ntsika is not toothless merely because it is not a statutory body, as it can devise regulations.

Mr Lockey stated that during Ntsika's presentation delivered to this Committee last week, it indicated that it is currently working with a budget of R40m, and with the R25m received from donor funding the total budget stands at R65m. The Department is now giving Ntsika the additional task to promote small business in South Africa. Does Ntsika have sufficient funds to deliver effectively on its tasks?

Mr October responded that if resources can be combined then small business can be better catered for. Ms Damane added that Ntsika is more successful in some areas than others, and an area of success is its tender advice centre. The intention is for it to be a focal point to provide business development services. It has to be consolidated with existing business development organisations and programmes that are located in various places, but which are all funded by the Department.

Prof Turok stated that he does not have a problem with the idea of creating a voice for small business as it may even prove more successful than the NSBC, but stated that he does have a major problem with the role of Ntsika. Ntsika has to release a document that sets out clearly what it does and how it operates, in practical terms, because merely detailing the philosophy behind Ntsika and its research on small business does not work. Of more importance to Members is what it actually does on the ground, and it appears that its efforts in this regard are not even sufficient. Members have to know whether the NSBA Bill will actually benefit small business, because at the moment this does not seem to be the case.

Mr October replied that providing a voice is fundamental to the key strategy. Ntsika was created as a mother body with research and policy functions. It was also a service provider, and this changed the manner in which Ntsika dealt with service provision, and this institutional problem is being addressed in the NSBA Bill.

Mr Nefolovhodwe sought clarity on the extent to which it is a voice for the people rather than involving the people themselves.

Mr October responded that small business does have a powerful voice and they do not need legislation to confirm this.

Mr Smith requested a document detailing the history of Ntsika. The new Chapter 2 in the NSBA Bill provides that it aims to "establish a voice" for small business, yet the actual provisions of that chapter suggest that this "voice" will only be established when a group of small businesses is found. This suggests that if no such group is found then small business will not be given a voice and they will not be consulted. Is this not a question of the tail wagging the dog?

Ms Ntuli asked how the provincial and local government SMME structures fit into the aim to provide a voice for small business, because one of the primary problems with the NSBC was that it did not deal with the ground level.

Mr October replied to these questions by stating that the Minister has been granted the power to setup a body that must represent the interests of small business, and the decision was taken to provide a more flexible formulation in the NSBA Bill because specific detail that seeks to spell out every possible circumstance would not be beneficial. It is believed that this is the best arrangement.

Prof S Ripinga (ANC) contended that the key issue here is whether the council has the necessary capacity to properly execute the aspirations of giving a voice to small business.

The Acting Chairperson stated that the Committee appreciates the intention behind the NSBA Bill to "close down one chapter" in the form of the NSBC and to create a new body, and the legislation plans to lock these two together. Members are more interested in the broader debate regarding the new structure, and have also expressed their discomfort at how Ntsika will fit into the new legislative dispensation created by the NSBA Bill.

Mr October responded that this matter does have to be revised, especially the lack of an advisory body and the institutional problems.

Liquor Bill
The Acting Chairperson stated that the Liquor Bill aims to "fix up the constitutionality" of the Liquor Act of 1989, as the Bill has to comply with the recent Constitutional Court judgment on this matter.

Briefing by Department on Liquor Bill
Ms Astrid Ludin, DDG: Consumer and Corporate Regulations Division, conducted the presentation (see document) and focused on her Briefing Notes (see Appendix 1), which provides an overview of South Africa's liquor policy, the objects of the Bill and outlines the structure and content of each clause of the Bill. Additional comments made were:

- Chapter 2: Public Interest Prohibitions
Those prohibitions in red may be varied by the provinces as the regulations published by the Minister sets only the minimum standards.
- Chapter 3: Registration of manufacturers and distributors
This chapter essentially provides that a person may not be both a manufacturer and a distributor or all three for that matter, but can only be one. This is referred to as the prohibition on vertical integration.
- Chapters 2 to 4 really form the core of the Bill.

Discussion
The Acting Chairperson noted that because this is a Section 76 Bill, this Committee has to work with the NCOP.

Mr C Lowe (DP) sought clarity on how exactly the Department will police the "three tier system" to guard against vertical integration. Furthermore, what is the point of these regulations if South African Breweries (SAB) essentially has a monopoly over the market because they both manufacture the product and distribute it directly to the retailer?

Dr Rhoda sought clarity on the reason for the decision to separate the functions into the three tier structure.

Mr Nefolovhodwe referred to the Chapter 4 exemptions that can be granted to persons which essentially allow them to sidestep the vertical integration prohibition, and suggested that this might not be healthy for competition.

Ms Ludin replied that the intention behind the separation was to remove the concentration in certain areas of the sector, which prevented market entry. This concentration did not only occur at the manufacturing level, as there are only about five manufacturers in South Africa, but also controlled the distribution networks. The separation was thus aimed at those corporations that used their position at one level to purposefully exclude others.

There is a danger in granting exemptions and perhaps the example of SAB used earlier was not ideal, as a typical example would be an exemption granted to a wine farm to sell wine on the premises. Yet the terms and conditions included in the licence would guard against any unfair competition. The Bill has to ensure that the inequalities that currently exist are not perpetuated, and the costs involved in ensuring this also has to be considered, as the Minister has to consider the efficiency created and the need for transparency in making the decision. The industry is dynamic and thus the legislation has to provide a degree of flexibility as well, and has to accommodate dynamic changes such as the influential role the Internet has in the distribution of liquor.

Mr Lowe asked to what extent to which the smaller retailers are protected, and will the SMME's be best represented on the National Liquor Policy Council (NLPC), or will it serve only the interests of the big industry players.

Ms Ludin replied that the NLPC will not have any representatives from the business sector, but will only have members from the provincial and national structures. The aim is for the NLPC to consist of representatives from liquor authorities, and serves as a forum for the national and provincial structures to provide input on government policy and regulation of the industry. The NLPC therefore serves to give expression to the principle of co-operative governance.

Mr Nefolovhodwe referred to Clause 5 of the Bill and asked whether the term "concoction" has been adequately defined. This is especially important in view of the recent battle between western and traditional medicine, because traditional medicine has always been classified as a mixture or concoction.

Ms Ntuli referred to the definition of the term "concoction" in Clause 5 of the Bill and contended that homebrewed traditional remedies that have healing properties are not recognised in that provision. This is a problem, especially in view of the recent cases in which the large corporations take these traditional recipes and use them for gain. This has to be addressed.

Dr Rhoda expressed concern with the inclusion of the term "fermentation" as a defining characteristic of a "concoction" in Clause 5 of the Bill, because there are several substances that do not involve a fermentation process that have to be included as "prejudicial to the health and well-being of the population". Dr Rhoda stated that he is aware of such substances that include methylated spirits and even battery acid. Furthermore, the reference to the term "alcoholic substance" has to be inserted in this clause, because non of those listed includes a reference to an "alcoholic" substance.

Mr Smith contended that the term "concoction" is troubling, especially the phrase "prejudicial to the health and well-being of the population", and stated that he does not see the purpose of the definition because alcohol itself could be defined as harmful.

Mr Jeremiah Mela, Director: Licencing and Inspection, responded to the questions dealing with "concoction" by stating that there other types of brewed liquor but it is not the intention of the Bill to classify any homebrewed mixtures as "concoctions". Instead the aim is to classify only those that are "prejudicial to the health and well-being of the population" as "concoctions", and the Department will be looking at accommodating other mixtures that are prejudicial but which have not been included in the Bill as a "concoction".

Ms Ludin added that, with regard to the questions posed by Mr Nefolovhodwe and Ms Ntuli, that the intention in the clause is to exclude from the definition of a "concoction" any traditional beer of mixture that is not is not "prejudicial to the health and well-being of the population". This provision is aimed at prohibiting mixtures such as those referred to by Dr Rhoda that include substances such as battery acid, for example.

The definition of the phrase "prejudicial to the health and well-being of the population" has to be redefined because its current meaning is not sufficiently clear, and Dr Rhoda's concern regarding the use of the term "fermentation" has to be considered as well.

Ms Ramodibe (ANC) [NCOP] sought clarity on who appoints the inspectors in Chapter 5 of the Bill.

Mr Mela replied that the Bill provides that the Minister would appoint the inspectors and also provides that the Minister can delegate this power to a departmental official. The MEC also has this power in terms of the provincial structures. Inspectors would be appointed at different levels within both the national and provincial structures. Most will be appointed at the retail level, and the provincial structures would probably be better able to explain this further.

Mr Smith stated that jurisdiction of the national government has been explained in the Briefing Notes, but asked whether the Department has ensured that all the provisions in the Bill do not fall foul of the Constitutional Court judgment.

Mr Smith stated that if SAB is exempted from the vertical integration prohibition, he questions the very purpose of the Bill. How does the Bill deal with a corporation that performs both the manufacturing and distribution functions simply by having subsidiary companies that perform these functions/

Adv Strydom replied by referring Members to Clause 12(2)(a)(i), which essentially outlaws the cross-shareholding situation sketched by Mr Smith, as that situation would defeat the intention of the Bill. The intention is to formulate a clause that sets out the circumstances and disqualifies cross-shareholding, but it was then discovered that it would be difficult to define all cases of cross-shareholding and the slippery-slope argument was raised against it. Clause 14 sets out the definite requirements to be met.

Mr Smith sought clarity on the slightly different position in which a holding company has to subsidiaries that are totally separate and do not share any cross-shareholding, and asked whether this sort of arrangement would be allowed?

Adv Strydom responded that the same principle would apply here because Clause 14 provides that the Minister would have the discretion to decide whether this is justified or not, and he would have to observe the constitutional principles of administrative justice when making such a decision.

Ms Ludin added that Adv Strydom is saying that, in both the situations sketched by Mr Smith, the regulations regarding the application process require all such information to be disclosed by the applicant, and will be considered by the Minister in accordance with the principles of administrative justice. The intention behind the provision is not to specifically spell out each and every possible factual scenario in the Bill because this would in fact be unduly restrictive, but rather to state the principle of law that has to be applied to every case.

Mr Smith stated that the South African Police Service (SAPS) always complain that the lack the resources needed to police the Liquor Act, and the Bill now aims to introduce inspectors as well. Is the introduction of these inspectors aimed at freeing up SAPS so that it can focus on other areas within its mandate?

Ms Ludin responded that SAPS does not have general powers in terms of national legislation, but it could be granted powers via a provincial Act.

Ms Ntuli stated that Clause 34(1)(b) provides that an inspector may not enter a premises without a warrant more than six times in one year, but that clause then also provides that the premises may be inspected more than six times in one year. How can this contradiction be explained?

Ms Ludin replied that this provision corresponds with the Financial Intelligence Centre Act which also sets a limit at six times in one year.

Mr Mela added that it is only the registered premises that may be inspected a maximum of six times per year, and the other provision referred to by Ms Ntuli that allows more than six inspections deals with other premises.

Ms Ntuli sought clarity on Clause 35(3).

Ms Ludin responded that this deals with the situation in which an inspector enters the premises but no-one is there. In this case, as is the case under Clause 18 of Schedule 2 of the Bill dealing with MEC's, the Minister would then be liable to compensate that person for the damage caused by using force in entering the premises.

Ms Ntuli suggested that Clause 45(5) essentially means that the Minister will be kept in court all the time, because people will constantly be challenging the fines they receive.

Ms Ludin replied that this would not necessarily be the case, because the Minister would have to observe the principles of administrative justice whenever he makes such a decision.

Mr Lockey stated that he welcomes the public interest prohibitions in the Bill, but contended that the Bill does have loopholes. One such loophole would be the use of the term "drunk" in Clause 9, yet drunkenness is not defined in the Bill. This also creates a contradiction because Clause 9 allows the sale of alcohol on the premises "but does not want the person to get drunk on the premises". How can levels of drunkenness be established.

Ms Ludin replied that she agrees that this term has not been defined in the Bill. She stated that she is not of the opinion that it needs to be defined, because it could be difficult to define it exactly without creating further problems.

Adv Strydom added that he agrees with Ms Ludin that this is a difficult matter to define. The specific circumstances that would constitute "drunkenness" have not been included because the intention is to determine this objectively and on the basis of the power of reason, to which others in the bar can testify. The Bill also introduces liability for the owner of the premises if s/he allows such conduct, in full knowledge.

Mr Lockey stated that Clause 7 under Schedule 2 of the Bill deals with the ownership of liquor retail outlets and now allows supermarkets to sell all kinds of alcohol, hard liquor included. One of the stated objects of the Bill is to ensure the diversification of ownership of retail outlets, but this provision does not allow this because it essentially allows the big outlets and corporations to completely monopolise the market.

Ms Ludin responded that the grocer's licence does allow supermarkets to sell liquor, and this matter has been the subject of long debate. The intention at some stage was to withdraw these licences, but this will have to be considered further.

Dr R Rhoda (NNP) referred to the minimum distances for the proximity of a shebeen to a school, and contended that the inspectors will have their hands busy here because many of these are very close to schools.

Ms Ludin responded that the Bill sets only the minimum distances between a shebeen and a school but, because this Bill deals with matter of concurrent jurisdiction, the provincial structures could decide to increase this distance, but they cannot lower them.

It will not be constitutionally sound to simply remove the licences of those shebeens that are operating within the prohibited distance from schools if it has already been granted a valid licence. Furthermore, a provision is needed in the Bill that deals with the situation in which a school itself moves to within the prohibited distance from the shebeen. This would probably be dealt with at a provincial level with the particular licencee.

Prof Ripinga asked whether the Bill impacts any other existing laws. For example, would the provisions of the Companies Act dealing with the redistribution of companies' equities have to be reformulated? If this is to be done, would it really be practical, especially the aims to control such movement of money?

Ms Ludin replied that the Bill does not impact on the Companies Act, and if it does affect any other legislation this will be dealt with by the provincial structures.

Prof Ripinga asked whether local government bodies will be represented on the NLPC, because the restructuring into three tier system does impact local government.

Mr S Rasmeni (ANC) stated that he welcomes the introduction of the Bill, especially the diversification of ownership provisions and the entry of new participants into the market. Can the Department provide the assurance that these provisions are not merely lip service but that something is actually being done to address the situation, and also how it plans to ensure the entry of new participants into the market.

Ms Ludin responded that the Department has various programmes aimed at dealing with Black Economic Empowerment (BEE), and the Department does monitor the progress made in effecting BEE within the sector.

The Acting Chairperson asked the Department to explain the extent to which the provincial structures have been involved in the formulation of the Bill, apart from the workshops that were held, because some of the provinces have expressed strong views on the Bill.

Ms Ludin replied that some provinces had a problem with only two of the final provisions in the Bill, and when the MEC's decided that supermarkets would be dealt with at provincial level the provisions in Schedule 2 of the Bill dealing with the grocers licence were removed.

The Acting Chairperson requested the Department to submit written answers to those questions that it has not been able to answer to Members before the next meeting.

Ms Ntuli stated that South Africa seems to be very apologetic and far too lenient when it comes to incidences of drunkenness and the crimes committed by persons when in that state. This matter has to be taken seriously, especially in the rural areas, and this Bill has to be used to make a difference.

In conclusion, the Acting Chairperson stated that the issues of gender sensitivity in Chapter 2 of the Bill has to considered as well, and perhaps the Joint Monitoring Committee on Quality of Life and Status of Women has to be included in these discussions.

The meeting was adjourned.

Appendix 1: Briefing Notes on Liquor Bill
BRIEFING NOTE ON THE LIQUOR BILL, 2003

1. BACKGROUND
Previous efforts to draft new liquor legislation commenced in 1994 with an extensive review of existing liquor legislation regulating the manufacture, distribution and sale of liquor for consumption by the dti together with the provincial departments responsible for liquor licensing matters. Further analysis of liquor legislation and research into the state of the liquor industry was carried out in 1996. In July 1997, the dti published a Liquor Policy Document and a draft bill for comment. There was extensive consultation with stakeholders at national and provincial level. In August 1998, the Liquor Bill, 1998, was tabled in Parliament. The Bill was approved on 2 November 1998 and was referred to the President for his assent. The President had reservations about its constitutionality and accordingly referred the Bill to the Constitutional Court under section 84(2) of the Constitution.

The Constitutional Court held that the Bill was unconstitutional in certain respects. In particular, the Constitutional Court was of the view that national government had the power to regulate the liquor industry but not liquor licensing, an exclusive provincial legislative competence, unless it was necessary to do so under section 44 of the Constitution. Accordingly it was constitutional for the national government to regulate the manufacture and distribution of liquor by establishing a single system of registration nationally. On the other hand, the regulation of the micro-manufacture and the retail of liquor was, it held, the exclusive preserve of provincial government unless there were compelling reasons for national government to intervene under section 44 of the Constitution. The new draft bill, the Liquor Bill, 2003, was drafted with a view to complying with that judgement.

2. OVERVIEW OF THE LIQUOR POLICY
The Liquor policy developed in the process referred to above embraces the following:
- recognising liquor as a potentially harmful substance and accordingly in need of strict regulation;
- prohibiting certain activities in the public interest;
- regulating the manufacture and distribution of liquor;
- ensuring that the retail sale of liquor is regulated;
- ensuring compliance and the imposition of severe penalties for violations;
- correcting the inequities of discrimination through empowerment of the previously disadvantaged;
- restructuring the industry by implementing a three-tier system to ensure the effective regulation of the liquor industry, the empowerment of the disadvantaged and the creation of employment;
- promoting co-operative government in the regulation of the liquor industry.

3. OBJECTS OF THE LIQUOR BILL, 2003
In line with the stated liquor policy, the objects of the Liquor Bill, 2003, are-
- to reduce the socio-economic and other costs of alcohol consumption by-
= setting essential national norms and standards in the liquor industry;
= regulating the manufacture and wholesale distribution of liquor;
= ensuring that the retail sale and micro-manufacture of liquor is regulated;
- to maintain economic unity in the structure of the liquor industry; and
- to promote-
= the entry of new participants into the liquor industry;
= diversity of ownership in the industry; and
= an ethos of social responsibility in the industry.

4. STRUCTURE AND CONTENT OF THE BILL
The main body of the draft Bill is structured to incorporate the objectives of the 1997 published policy document. In particular the draft Liquor Bill addresses the following policy objectives:
- Prohibitions on public interest grounds and of cross-sectoral holdings between the three tiers of the liquor industry;
- The establishment of uniform conditions, in a single system, for the national registration of liquor manufactures and distributors, in a further attempt at establishing national uniformity within the liquor trade.
- The provision for minimum standards in the sphere of retail trade and the prescription of detailed mechanisms to provincial legislatures for the establishment of retail licensing mechanisms on a default basis i.e. it would be applicable to a province only if it has not passed provincial legislation regulating retail sales

Chapter 1 of the Bill contains definitions, the objects of the Bill and its application. Chapter 2 of the Bill defines the public interest prohibitions. Chapter 3 outlines the requirements for registration of a manufacturer or a distributor of liquor. These are the core national licensing functions. Chapter 4 establishes the principles and national standards for the regulation of liquor in general. This chapter sets out the principles of a three-tier system and requires all industry participants to be registered. Chapter 5 establishes the inspection powers in terms of licenses issued by national government, while chapter 6 outlines the penalties and offences. Chapter 7 provides for the establishment and functions of a National Liquor Policy Council. Chapters 8 and 9 make provision for the issuance of regulations and notices, as well the limitation of liability, delegation and transitional arrangements.

Four schedules are attached to the Bill. Schedule 1 deals with national norms and standards applicable to provincial legislation. Schedule 2 sets out default provincial legislation. Schedule 3 elaborates the transitional arrangements, dealing in particular with exemptions, licences and approvals issued before the commencement date, the disposal of interests in other tiers of industry, as well as liquor boards. Schedules 4 and 5 deal with the repeal of laws and the details of the transitional arrangements.

5. PUBLIC INTEREST PROHIBITIONS
Chapter 2 sets out the public interest prohibitions. These prohibitions include
- a general prohibition on the unlicensed manufacturing, distribution or sale of liquor;
- a prohibition on the manufacturing, possession, sale, supply or consumption of concoctions, which are defined as substances, which could be prejudicial to health and well-being;
- prohibitions on the sale of liquor to minors, to persons under the influence of alcohol and within a prescribed distance of schools;
- prohibitions on the employment of minors in bottle-stores and on drunken and disorderly behaviour in public places or on registered premises.

These prohibitions fall within the legislative competency of national government or are necessary to ensure essential minimum standards. Provision is made for a province to determine its own age limits for minors provided that it is not below the national minimum standard. Provision is also made for a province to permit the sale and consumption of liquor on sports grounds.

6. REGULATION OF THE TIERS OF THE INDUSTRY
The Bill structures the liquor industry into three tiers: manufacturing, distribution and the retail sale of liquor. The principal tool of regulation of the liquor industry is the registration of those who make, distribute and sell liquor. Accordingly, the Bill requires all manufacturers, distributors and sellers to be registered.

Chapter 3 provides for the registration of manufacturers (other than micro-manufacturers) and distributors and sets out the eligibility criteria for registration and the application process. Licenses for manufacturers and distributors are issued by the Minister, who may to delegate his powers to issue licenses to an official of the Department, subject to an appeal to the Minister against a decision made by that official. The courts have the power to review the Minister's decision. The application and evaluation processes outlined provide for a great deal of consultation and opportunity for public input. For example, in the case of registration as a manufacturer, the Minister must publish a notice in the Government Gazette and in a newspaper with wide circulation in the area where the applicant intends to establish its manufacturing premises.

Chapter 4 sets out the general provisions relating to the regulation of the manufacture, distribution and sale of liquor. No person may be registered in respect of more than one tier and no registered person in one tier may hold an interest in a registered person in another tier. The principal reasons for this policy are the dilution of the concentration of power in manufacturing, limiting the vertical integration of the industry, and the creation of opportunities for new entrants to the industry, particularly those drawn from the historically disadvantaged groups.
The Bill further regulates the transactions between the tiers. According to the provisions in chapter 4, a manufacturer may only sell to a distributor. A distributor may only sell to a retailer (a tavern, bottle-store, hotel or restaurant). A retailer may only sell to a consumer. The Minister may permit a manufacturer to distribute its own products to retailers in limited circumstances - if it serves economic efficiency.

The Bill, in line with the decision of the Constitutional Court, divides responsibility for these tiers of industry between national and provincial government. It treats the manufacturing and distribution of liquor as national issues. The registration of manufacturers and distributor is a national competence. The Bill recognises the micro-manufacture and the retail sale of liquor as a provincial competence. The distinction between a manufacturer and a micro-manufacturer is determined by volume of liquor manufactured.

The registration of micro-manufacturers and retail sellers of liquor is dealt with by provincial liquor authorities established under provincial legislation or, in the absence of such legislation, the provisions of default legislation. Pending the appointment of the members of these provincial liquor authorities, the liquor boards established under the Liquor Act, 1989 are deemed to be the authorities contemplated in the provincial legislation or the default legislation, as the case may be.

7. COMPLIANCE
Chapter 5 provides for the Minister of Trade and Industry to designate any person as an inspector and requires such inspector to be issued with a certificate. The chapter further outlines the functions and powers of an inspector, including the power to issue compliance notices. Those notices may include administrative fines. A person served with a compliance order may lodge an objection with the Minister. If the Minister does not uphold the objection, the objector may appeal to the High Court.

In Chapter 6, two systems to deal with offences are outlined, namely criminal penalties and administrative fines, exclusively. The Minister must prescribe the fines and may increase the fines for repeated contravention. An administrative fine may only be imposed if no prosecution has been or will be instituted against the person.
In the absence of a criminal penalty, a person may be liable for an administrative fine. The Bill establishes a hierarchy of penalties, in terms of which contravention of its provisions may lead to a maximum of 5 years' imprisonment.

8. NATIONAL LIQUOR POLICY COUNCIL
Chapter 7 provides for the establishment, composition and function of the National Liquor Policy Council, an inter-governmental forum headed by the Minister and constituted by the Member of the Executive Council responsible for liquor licensing in each province. In addition, a representative from each provincial liquor authority may attend the meetings of the Council as a non-voting member.

The Council's functions are to consult on -
- national norms and standards for the liquor industry;
- national policy in respect of the liquor industry;
- liquor licensing and regulations, including the promotion of uniform national and provincial legislation in respect of liquor norms and standards;
- any matter concerning the liquor industry within the national and provincial spheres of government;
any matter concerning the management and monitoring of the liquor industry or licensing in any province or provinces;
- the resolution of any dispute that may arise among any provincial licensing authorities, or between a provincial licensing authority and the Minister, regarding the regulation and control of the liquor industry
- any other matter that may be referred to it by a member of the Council;
- to promote and facilitate intergovernmental relations in respect of the liquor industry
- to facilitate the settlement of intergovernmental disputes concerning the liquor industry.

9. REGULATIONS AND TRANSITIONAL ARRANGEMENTS
Chapter 8 empowers the Minister of Trade and Industry to issue regulations in respect of public health notices to be displayed on premises and to make general regulations. Chapter 9 limits the liability of government in the implementation of the Bill and provides for the Minister to delegate his powers. The details of the repeal of laws and transitional arrangements are set out in Schedules 3, 4 and 5.

Schedule 4 repeals the whole Liquor Act, 1989, as well as the Liquor Amendments Act, dated 1993 and 1995. In addition, certain section with respect to the Liquor Products Act and the Airports Company Act are repealed. Schedule 5 sets out the conversion of exemptions, licenses and approvals granted in terms of the Liquor Act, 1989 into new classification in terms of the Liquor Bill, 2003.

Schedule 3 sets out the transitional arrangements. The transitional arrangements related to the conversion of exemptions, licenses and approvals in force before the commencement date, which are outlined in Schedule 5 and, more controversially, the disposal of interests in other tiers of industry. The time frame granted for disposal is three years. The Schedule also provides for Liquor Boards to be deemed to be provincial licensing authority in terms of Schedule 2.

10. NATIONAL NORMS AND STANDARDS AND DEFAULT LEGISLATION
In line with the Constitutional Court judgement, the Bill does not seek to regulate the micro-manufacture or the sale of liquor for consumption except by default. Schedule 2 of the Bill provides a set of default provisions consistent with the provisions and structure of the new Bill ensuring the provincial regulation of the micro-manufacture and retail sale of liquor until the provinces enact their own legislation. These provisions are necessary, as the whole of the Liquor Act, 1989 will be repealed, because of its very different and complicated structure of regulating the liquor industry. The repeal of the Act will create a vacuum in respect of the regulation of micro-manufacture and the retail sale of liquor.

The provisions of Schedule 2 are only applicable to provinces with no legislation in place at the commencement date or thereafter. The Bill outlines national norms and standards in Schedule 1 for those provinces that enact their own laws. These provisions are minimalist in content and require each province to have legislation regulation the sale and the micro-manufacture of liquor, places restrictions on persons who may be registered in line with the principles of a three tier system, imposes an obligation to have independent licensing and enforcement capacity, to keep a register of licences, determine office hours for the sale of liquor and to provide the Minister of Trade and Industry with information. These provisions, though minimalist, are necessary to maintain economic unity, essential national standards, and minimum standards required for the rendering of services.

Appendix 2: Department's 2003 Legislative Programme


DEPARTMENT OF TRADE AND INDUSTRY - 2003 LEGISLATIVE PROGRAMME

CCES : Cabinet Committee for Economic Sector
PC/NA : Portfolio Committee on Trade and Industry (National Assembly)
SC/NCOP : Select Committee : National Council of Provinces
SLA : State law advisers


SHORT TITLE


MEMO TO CABINET


SUBMISSION TO SLA


 

ANTICIPATED
DATE OF INTRODUCTION


CURRENT STATUS


LINE MANAGER
RESPONSIBLE

National Small Business Amendment Bill
 

3 December 2002

13 December 2002

February 2003

Certified on 27 March 2003 and to serve before PC/NA on 2 April 2003

Mr Lionel October

  1. Black Economic Empowerment Bill

19 March 2003

 

 

May 2003

To be resubmitted to Cabinet on 2 April 2003

Mr Lionel October

Co-operatives Bill
 

16 April
2003

 

June 2003

Finalisation of draft

Mr Lionel October

  • Liquor Bill
  • 19 November 2002

    13 December 2002

    April 2003

    To be certified on 28 March 2003 and to serve before PC/NA on 2 April 2003

    Ms Astrid Ludin

  • National Gambling Amendment Bill
  • 19 April 2003

     

    July 2003

    Consultations on draft

    Ms Astrid Ludin

  • Manufacturing Development Amendment Bill
  • May 2003

     

    June 2003

    Research and initial drafting

    Dr Mohale

    Usury Amendment Bill
     

    18 September 2002

    20 September 2002

    January 2003

    Adopted by PC/NA. To serve before SC/NCOP on 28 March 2003

    Ms Astrid Ludin

     

  • Lotteries Amendment Bill
  • May 2003

     

    June 2003

    Finalisation of draft

    Ms Astrid Ludin

  • Intellectual Property Laws Amendment Bill
  • June 2003

     

    August 2003

    Research and drafting

    Ms Astrid Ludin


    Kindly refer to Annexure A for a brief synopsis on the objects of the respective bills. PREPARED BY PARLIAMENTARY OFFICE

    DEPARTMENT OF TRADE & INDUSTRY LEGISLATIVE PROGRAMME FOR 2003

    1. NATIONAL SMALL BUSINESS AMENDMENT BILL
    The National Small Business Council (NSBC) was liquidated in 1998. It is, therefore, necessary that all references to the NSBC in the National Small Business Act be deleted and that a provision providing for alternative means for achieving the aims of the NSBC be inserted in the Act. Additional smaller amendments to the Act are also necessary to refine and clarify the role of Ntsika vis-a-vis the Department of Trade of Industry.

    2. BLACK ECONOMIC EMPOWERMENT BILL
    The bill will empower the Minister to issue codes of practice on Black Economic Empowerment and will authorise government to enter into sectorol charters. It will furthermore clearly define the relevant policy objectives and will establish an empowerment reporting and monitoring system for the public and private sector.

    3. CO-OPERATIVES BILL
    To provide for the formation, registration and winding up of co-operatives and for matters incidental thereto.

    4. LIQUOR BILL
    This Bill is a new draft encapsulating the policy principles previously agreed to with stakeholders, but addressing the constitutional matters raised by the Constitutional Court in its judgement on the Bill. In particular, the Bill does not seek to regulate matters in the exclusive jurisdiction of provinces, such as the licensing of the retail and micro-manufacture of liquor, although it does set out matters of principle. It further creates a national licensing function for the manufacture and wholesale of liquor, in line with the Constitutional Court judgement, and sets out national norms and standards. Finally, the new bill provides for a policy formulation and coordination mechanism in the form of a Policy Council, which consists of the Minister of Trade and Industry and the Members of the Executive Council of the provinces, giving expression and content to the concept of co-operative governance.

    5. NATIONAL GAMBLING AMENDMENT BILL
    To enhance co-operative management of the gambling industry between national and provincial government.

    6. MANUFACTURING DEVELOPMENT AMENDMENT BILL
    To review the necessity for the Board and its functions and to accommodate the new industrial needs in terms of incentives.

    7. USURY AMENDMENT BILL
    A lack of capacity results in very few inspections being performed on the large number of unregistered micro-lenders. This lack of action is leading to increased resistance amongst registered lenders and is increasingly pushing lenders from the regulated market into the unregulated market. The Bill proposes to rectify this problem through widening the scope for inspectors considerably.

    8. LOTTERIES AMENDMENT BILL
    To make provision for natural persons to be entitled to receive funds.

    9. INTELLECTUAL PROPERTY LAWS AMENDMENT BILL
    The respective principal Acts directly and indirectly regulate how state emblems should be used or be registered as part of trade marks. However, the Draft Policy on the use of State Emblems will necessitate amendments to these Acts. There is a need to amend the Intellectual Property Laws Amendment Act, for example, to provide that the use of the national flag is subject to the Minister's consent. As the Act stands, the national flag is in the public domain.

     

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