Draft Framework Bill not made available to the public yet
In discussing the Committee terms of reference for its agreed inquiry into localisation of procurement for Transnet and PRASA, Memebers were asked to submit name of those who should come before the Committee. An evidence based enquiry was needed of sample transactions as well.
The Parliamentary Legal Adviser presented a synopsis of the draft Debt Relief Bill. The Bill prescribed a choice of orders, including extinguishing of debt. The Minister could prescribe measures broader than extinguishing. Criteria for once-off debt relief included persons who received no income or less than R3 500, had no realisable assets, and over-indebtedness. The debt relief also applied to a minor-headed household. There could be no application for debt relief if civil proceedings had already started in court, but the court could refer it to the National Credit Regulator (NCR). There could be an application if a debt review process had started. Credit providers could submit an affidavit stating facts that could disqualify the consumer from debt relief. The NCR could refer reckless or unlawful lending to the National Credit Tribunal (NCT). The Bill prescribed to the NCT about limiting the right to apply for credit. The consumer may not enter into further agreements until the process was finalised. However, the consumer could apply for developmental credit. but The NCT could amend or rescind once-off debt relief if the consumer's circumstances changed or if the consumer was found to be dishonest.
Discussion was limited by time constraints. Members asked about the development of the Bill within the context of a review of the National Credit Act; affidavits from credit providers; debt relief and confidence in the economy; consultation with the Minister of Justice; child headed households; the capacity of the Credit Tribunal; the in duplum rule; administrative costs; reckless lending; illegal credit, and credit market stability.
National Treasury provided an initial informal response to the provisions of the Debt Relief Committee Draft Bill. It was asked to attend the following week's deliberations as well.
Localisation of procurement for Transnet and PRASA: Committee terms of reference
The Chairperson noted that there was a short window to work in. She referred to the Committee terms of reference for localisation of procurement for Transnet and PRASA. The Committee had expressed concerns about localisation and there was agreement about this by Committee members.
She said the support staff had produced a framework of reference. There was reference to a rail sector case study, which she questioned. Oversight had a broader reference than simply to the rail sector. The framework had to agree about background, purpose and objectives. The quality of localisation and public procurement implementation could create jobs to grow the economy.
She referred to designated sectors. The question was who designated. The Minister had a say but the question was who had the power. National Treasury provided a list twice a year. Other Portfolio Committees might have to be brought in such as Public Enterprises. A similar approach as with the steel industry could be followed. At this current time of the year it was hard to arrange joint Committee meetings. She asked the Content Adviser about paper trails of sampled transactions.
Ms Margot Sheldon, Committee Content Adviser, replied that an evidence based enquiry was needed of transactions that happened.
The Chairperson said that the Committee had the authority to require information. If anyone was recalcitrant, the Committee could issue a summons, but it was better to persuade. One request could be made, and if people did not pitch, there could be a summons. Paper trails could provide evidence, as well as hearings with Transnet, PRASA, and relevant government departments or entities. Research on compliance was not to continue two years down the line. It had to be pristine, and based on site visits. There had to be broad timeframes. The Committee needed information about timeframes, invitations and research. The 1 December was the last day of session for Parliament. November had to be looked to. Resources had to be checked, and access to legal advisers. The Secretary had to start the processing access to resources. There were not enough Parliamentary Legal Advisers. The Committee had access to documentation, unless it was sitting with the judiciary.
Ms Sheldon noted that Parliament could request documentation.
The Chairperson said that the value chain had to be understood. Industry people who understood, were needed.
Mr D Macpherson (DA) noted that he had written to the Chairperson in July about this. He was pleased that this matter was being taken seriously. It had to be ensured that there was the requisite legal assistance. Complicated contracts would have to be worked through, and pushback could be expected from a number of companies. Committee members could submit lists to the Committee about people that should appear, for example Transnet executives and intermediaries between Transnet and contractors. Members had to submit a list to the Chairperson of entities, companies and intermediaries.
The Chairperson responded that Members had done so in past matters. Members had to motivate why people and entities had to appear. Motivations had to be reasonable and rational. The ANC, the EFF and the IFP had to be agreed on the approach. On the steel matter, the Portfolio Committee had stood as one. The Portfolio Committee had to stand together about whether a certain person would add value. The Transnet Number One could appear, for example. People with information had to be invited.
Ms N Ntlangwini (EFF) said that her party did not dispute the proposal, but the EFF had to consult about the people it wanted to bring in. It had opened a criminal case against Transnet.
The Chairperson reiterated that it had to be practical and reasonable.
The Chairperson asked if there were any objections. She asked the Content Adviser how long it would take to flesh something out.
Ms Sheldon replied that it could be by the following week.
Debt Relief National Credit Amendment Committee Draft Bill
The Chairperson welcomed delegates from the Department of Trade and Industry, National Treasury and the National Credit Regulator (NCR). A briefing on the Bill was received the day before. There had to be in-depth discussion amongst them for clarity.
Adv Charmaine Van der Merwe, Parliamentary Legal Adviser, gave a synopsis of the draft Committee Bill which made provision for a choice of orders, including extinguishing of debt. It made provision for the Minister to prescribe measures which could be broader than extinguishing.
Criteria for once-off debt relief included persons who received no income, or less than R3500 per month, had no realisable assets, and were over-indebted in terms of the prescribed affordability assessment. It also included a minor who headed a household. Total unsecured debt had to be no more than a certain amount. An application could not be brought if civil proceedings had started in a court, but the court could refer the matter to the NCR. An application could be brought if a debt review process had started. Affected credit providers could submit an affidavit stating facts that could disqualify the consumer. The NCR could refer reckless lending or unlawful transactions to the Tribunal. The Bill provided for a single NCT member to consider debt relief applications by motion procedure. The Bill prescribed to the NCT about limiting the right to apply for credit. The consumer may not enter into further agreements until the process was finalised. However, the consumer could apply for developmental credit. The NCT could amend or rescind once-off debt relief if the consumer’s financial circumstances changed, or if the consumer was dishonest in the application. She recommended further inputs from inter alia the NCR and NCT, deliberations, and a review of the rest of the National Credit Act (NCA), including reckless lending and the powers of the NCR and NCT.
Mr D Macpherson (DA) remarked that any review had to be based on information from the Treasury and Industry, which was why there had to be terms of reference. Information was needed so as not to make guesses. The Bill process was not to be seen as an entire review of the NCA, the process to handle the Bill was two-pronged, in that there was debt relief and the review of the NCA. It was unnecessary to duplicate what could be done in one process. The question was how to review NCR powers in terms of reckless lending. The National Payment Distribution Agency (NDPA) continued to be a quasi-juridical organisation, and a stumbling block to debt review. The two processes had to be merged.
Mr A Williams (ANC) was concerned about the clause on affidavits from credit providers. Credit providers could hire a company to object to all applications. If the maximum amount was R30 000, and someone applied, the credit provider could object. Any application could be objected to.
Mr J Esterhuizen (IFP) commented that Treasury could make provision for people to approach banks to restructure credit. Writing off small amounts through debt forgiveness could shake confidence in the economy.
Ms Ntlangwini commented that dates and timeframes had to be held off. There had to be consultation with the Minister of Justice. All departments touched by the Bill had to be involved.
The Chairperson referred to child-headed households. It implied that a child under 18 running a household would be saddled with municipal and other fees. There was an anomaly in that there were legal issues around a child getting into debt. It was important not to create brakes. The fact that the Credit Tribunal could make decisions, was problematic. The Tribunal could sit with boxes full of applications that it could not get through. She referred to the matter of the in duplum rule. She advised that it be left out. The Parliamentary Legal Adviser noted that the Bill addressed administration costs. The question was who would bear such costs.
Adv Van der Merwe replied about an entire review of the National Credit Act. The Committee Bill only focused on debt relief, separate from the greater review. The powers of the Tribunal could not be resolved in the following month. There was an urgent need for a Debt Review Bill. The Committee took the debt relief issue out of the Credit Act and made a Bill out of that. The NCA review process was under way.
She answered Mr Williams about the affidavit issue. The law required that both sides had to be heard. The credit provider could have its say, but there would be limited time for affidavits stating objections to applications. If the consumer qualified, it was neither here nor there, but a matter of ticking boxes. Turning it into a trial had to be avoided. There could be another way for the credit provider to be heard.
She answered Mr Esterhuizen about debt forgiveness. The term debt relief was chosen. The terminology was interchangeable. Extinguishing debt was part of debt relief. The Portfolio Committee had to pronounce on that. In sequestration there was the writing off of debt. Extinguishing was part of the debt relief measure. The Committee had to argue that existing measures were not sufficient, which was why there had to be debt relief. Inadvertent debt could land on a child’s shoulders. Where a child headed a household, a number of agreements would be unlawful. On the Consumer Tribunal, she had tried her best to put a process in the Bill to simplify matters. It provided a chance for a single person to hear an application, it could be on paper, boxes could be ticked. It was only when there was a dispute that a witness was needed. A Tribunal member could go through applications in the office, on paper. She had referred to the Regulator or the Tribunal, as those were the existing bodies. The Committee might find that there was not the necessary capacity for this. But it had to be the Tribunal, rather than a court. The Committee had more oversight over the Tribunal. Another body was needed to consider applications, from the body that evaluated it. The order that was given affected Constitutional rights. It could be a type of juridical body.
She said the reason for the inclusion of in duplum, was that the Act did not make provision for it. She studied Section 103(5) of the Act, which in fact covered it, and made provision for it. If implementation was a problem, it became an oversight matter.
The reason that reckless lending was not addressed, was that the powers of the NCR were already in the Act. It was not provided that the Regulator charge administrative costs. The Regulator had to advise on whether there was a different method. The idea was that costs were not to be involved. With respect to the credit bureau, she had made specific provisions that the credit bureau could not charge the Regulator for receiving information. On a debt relief application, there could be no administrative costs. The Regulator had to say if there was not another way, otherwise there was a need to amend.
Mr G Cachalia (DA) commented on reference to the terms ‘debt relief’ and ‘debt forgiveness’. He was concerned about the use of such terms, and suggested “debt responsibility intervention”.
Mr Williams asked what other countries did about affidavits by credit providers.
Mr Macpherson remarked that there had been little discussion of illegal credit. The focus was on credit where people received credit through an affordability assessment. An option for debt review was that debt through reckless lending could be extinguished. People were falling into debt traps. Miners received a few thousand rand and their ID books were taken. People were paid money that they were not supposed to get. He had doubts about one person in the Tribunal dealing with applications, as there could be thousands of applications. It was said that there were not supposed to be administrative costs, but there would be. Credit bureaus would not accept it as pro bono, as they were businesses. It was problematic that if someone was going through debt review, or was on probation, that person could still apply for a limited amount like R5000. If there was a problem, it was not responsible for a person to be granted more credit. The stability of the credit market had to be ensured. South Africans needed access to credit. The cost of access would increase if credit providers had to make up for losses.
Mr Esterhuizen remarked that R1.6 trillion was owed by South Africans. The lessons of African Bank were not to be forgotten. In SA the debt to income ratio was 74%. That did not sound too bad, as the UK figure was 145%. But the UK only had a two percent interest rate. There were job opportunities for debt councillors who took advantage of people who did not have money.
The Chairperson asked Ms Gibson of the National Treasury to comment.
Ms Katherine Gibson, Chief Director: Financial Sector Conduct, National Treasury, commented that the impact of a concrete framework had to be considered. It could not be finalised without research on impact. It was not only a matter of who were affected, but also what was affordable for consumers. It was important in shaping options, going forward. The affordability criteria might be too high. Treasury could get access to data which could be supplied to the Committee in November. Debt extinguishing versus other relief measures had to be addressed. As the Bill was part of a general review process, the scope of debt relief had to be in line with the NCA, especially in the distinction between once-off and other measures. The question was whether it was appropriate that the Bill had to be an amendment to the NCA or a stand-alone Act. Attention was given to credit providers but debt collectors were a bigger problem.
Ms Gibson said the question was when in duplum applied. The full cycle of the debt collection process had to be attended to, from origination to collection by credit providers. The question was if legal fees could be claimed for debt collection. There were declaratory orders in terms of the law. The jurisdiction of debt collectors had to be questioned. The NCA could assist with that. It could be included in the Bill. She appreciated the clarity given about once-off relief. There was a process that made assessment easier. Still it could be streamlined even more. It was not necessary to cut out checks and balances, but it had to be seen where discretion could be cut down. “May” had to be replaced with “must”, wherever possible, so that the Bill could prescribe, for instance that initially debt would not be extinguished, but the applicant could return after 12 months, and would be given another six months. It had to be very clear. The right of the credit provider to respond was important. The main issue was that the applicant had to be honest about income. There could be checking through the banks which could use an ID number to check if the applicant had a bank account. There were incentives for people to underplay their income. She was uneasy about extinguishing debt, and concerned about powers given to the Minister. Where categories were not defined, it was not possible to see what the impact could be. She supported monitoring of people over time, to see if they were substantially rehabilitated. Additional categories had to be thought of in future. How to capture the broader economic and financial effects of once-off relief had to be considered.
The Chairperson asked Ms Gibson if she could be available the following week. The Committee programme could be adjusted accordingly. She could liaise with the Committee Secretary. She thanked Adv Van der Merwe for her commitment and application.
The Chairperson continued that decisions had to be taken about the Committee Programme. The meeting with the French Ambassador would be on the following Tuesday. The French had ideas about employment. There was a sugar growers association, a group of black farmers, who were forced to pay into another association with no benefits. The ManCo would see them on Wednesday. In the past problems around horseracing had been referred to Labour. The Committee could do the industry side of horseracing, and then refer it to Labour. There would be further engagement on the draft Bill on the following day.
Committee minutes for 22 and 24 August, and 12 September were adopted without amendment.
The Chairperson adjourned the meeting.