The Parliamentary Legal Advisor explained that technical amendments had been made to the Copyright Amendment Bill as some terminology was incorrect and was not conveying the policy intention. Public submissions had made a lot of noise about terminology but this was not a policy issue; it was simply the terminology used. The drafting team had been enlarged with a trade law drafting expert, a State Law Advisor, plus two people who could advise on policy direction and two experts from the Committee. As they worked through the Bill, more and more questions arose. The Committee experts were going to research the meaning of several phrases, in particular Open Licence and Public Licence. The policy in the Bill had not been changed but notes had been made where discussions affected policy. Policy discussions could continue. By the 17 October, a copy of the amended version will be available.
Some Committee Members expressed concern about the length of time that the Bill was taking. The Chairperson requested that a schedule be drawn up for the completion of the Bill.
In response to the Debt Relief Committee Bill, the National Consumer Tribunal explained how the Tribunal dealt with debt re-arrangement cases and how mediation was built into the process. He suggested that consideration be given to the creation of a debt relief officer to facilitate the process. He reminded the Committee that the audi alteram partem rule would apply to all affected credit providers and that they would have to be given an opportunity to make representations. The Tribunal had the necessary internal processes to deal with debt relief applications.
The Chairperson noted that all courts were adversarial in nature as South Africa uses Roman-Dutch law. The Committee did not want an adversarial approach to debt relief. She said the Committee was concerned that there had not been much engagement between National Credit Regulator and Tribunal.
National Treasury noted that the Committee was looking at the most indigent and that the focus was to find a way to relieve really strained households, but which did not lead to unintended consequences. They were looking for a swift and seamless way of helping those people. It was noted that it was debt collectors who held most of the debt owed by the people that the Bill intended to assist. National Treasury was engaging in research into the target audience and felt that a monthly income of R7 500 seemed a reliable figure for the target audience. Treasury strongly supported a mechanism for changing financial behaviour.
In discussion, Members suggested that a mechanism for tracking the ongoing financial impact on recipients of debt relief would be important. The Chairperson said that the Committee had taken a decision to have a Debt Relief Bill, initially Debt Forgiveness, and it was on that basis that the Committee was given permission by Parliament to draw up a Bill. It had to be restricted to debt relief only.
The CEO of the National Credit Regulator suggested that the “missing group of consumers” should be included, that is, consumers who do not qualify for debt review and consumers who qualify for debt review but whose credit agreements do not solve. There will always be consumers who find themselves over-indebted because of circumstances beyond their control and therefore some of the measures that will be introduced to provide redress aimed at alleviating over-indebtedness by consumers should be ongoing, and not once off. NCR recommended that an impact assessment be conducted once the present measures that will be introduced have been implemented. The Debt Counselling Rules System agreed upon between the credit industry and the NCR should have a binding effect and be enforceable.
The Committee noted that South Africa was an over-indebted country because credit providers had continued to provide credit. Credit providers have extended total debt of R1.6 trillion.
The Department of Trade and Industry understood that the Committee was looking for an additional measure within the arsenal of measures to deal with debt. The current measures, even when implemented 100%, were not sufficient to deal with the particular problem and therefore another measure was needed to give additional relief to certain sectors of the community. The constituency or sector of the population to be targeted had to be determined. It warned that writing off debt impacted on other people’s assets so there had to be a balance. The person to whom the debt was owed also had rights. The Minister’s power could, therefore, not be unfettered. In the same way that the Minister’s powers were limited, so must the categories of those who could get relief, be limited. One category was people who had been retrenched. The Committee had to look at the practice of retailers and banks in selling off their debt to debt collectors who then pursued the debt ruthlessly.
The French Ambassador to South Africa, Christophe Farnaud, acknowledged the importance of globalisation, which meant more connections, more open markets, more competition, more opportunities but also more risks. Opportunities meant future growth but competition meant that there were more risks. It was that interconnection that should be discussed. He believed in collective answers. The answers were to adjust nationally, and to build strong long-lasting partnerships through government relations and new business models. Business models were no longer about buying and selling but about building long-lasting partnerships. The strong commitment of the companies was essential. With every product, there had to be localisation to some extent. Localisation was well understood and strongly supported by France. The 3 600 train carriages being built in South Africa would bring 20 000 jobs for five years. The Ambassador mentioned that about 400 French companies active in SA had already employed about 37 000 people.
The Chairperson commented that she had met a number of people, even from the informal settlements, who had been watching the parliamentary channel and knew that something was coming that would be able to help them. The Committee should not underestimate the importance of the work on the Debt Relief Bill.
Copyright Amendment Bill status report
Adv Charmaine van der Merwe, Parliamentary Legal Advisor, noted that there had been a number of technical amendments to the Bill as some of the terminology used was incorrect and was not conveying the policy intention. Submissions received made a lot of noise about terminology but it was not a policy issue; it was simply the terminology used. The drafting team had been enlarged with a trade law drafting expert, a State Law Advisor attended, plus two people who could advise on policy direction and two experts from the Committee. As they worked through the Bill, more and more questions arose. The Committee experts were going to research the meaning of several phrases, in particular Open Licence and Public Licence. The policy in the Bill had not been changed but notes had been made where discussions affected policy. Aligning Part A with Part B was a big job they were working on. They were looking at exceptions and ensuring that the Amendment Bill read logically and was not too difficult to understand. Policy discussions could continue. By the 17 October, a copy of the amended version will be available as well as a clean version indicating insertions only. Anything outstanding would be added in textboxes.
Mr J Esterhuizen (IFP) was concerned about the length of time that the Bill was taking. The Bill had to help not only the performers, but also the industry. The amendments should not make it possible for people to abuse original work or make it seem to do so. That was what the Committee had to protect.
The Chairperson agreed that the Committee needed to ensure a balance.
Ms S Van Schalkwyk (ANC) referred to the concerns from stakeholders about a poorly drafted Bill. She needed to know whether those concerns had been taken into consideration.
The Chairperson said that a schedule was needed by the following week. The Committee Whip, Ms Theko, should consult with Adv van der Merwe to determine what remained to be done and then draw up the schedule.
The Chairperson announced that the Committee had extended a blanket invitation to the DTI and its relevant entities to attend the meetings on the Debt Relief Bill so that they were present and note if something affected them. There had been many items that affected the National Consumer Tribunal but the entity had not attended meetings regularly. She was glad that they were present.
National Consumer Tribunal (NCT) response to draft framework of Debt Relief Committee Bill
Prof Joseph Maseko, NCT Executive Chairperson, agreed with the Chairperson that the NCT had inputs to make. He would deal with only those aspects of the Bill that impacted the Tribunal. He would indicate its agreement or apprehensions on those matters pertaining to the Tribunal.
NCT dealt with debt re-arrangement (DRA) cases, i.e. those experiencing difficulties with paying debts. The Tribunal dealt with thousands of DRA cases. The debt counsellors evaluated the debt situation and drew up DRA agreements and mediated with the credit providers. The mediation process was built in and DRA decisions were confirmed by the NCT so that the agreement could be enforced. Those who were over-indebted were sent to the courts. The Tribunal did not deal with lawyers in the DRA process. A much smaller number of cases were defended at the Tribunal. They were usually between Regulators and respondents and vice versa. Those cases were very expensive and took a long time to process and finalise. However, the debt relief cases would not fit into that scenario.
Prof Maseko suggested that the NCR could perform a function similar to that of the family advocates and maintenance officers whose investigations were treated as prima facie evidence and who acted in the interest of the minor child. No further proof was required, unless vigorously challenged with compelling proof of inaccuracy or inauthenticity. The Debt Relief Officers could be designated under the NCR. The Tribunal agreed that it would be useful to allow the Tribunal to declare credit agreements unlawful. He stated that the Tribunal had the necessary internal processes to deal with debt relief applications.
Prof Maseko reminded the Committee that the audi alteram partem rule would apply to all affected credit providers and that they would have to be given an opportunity to make representations and cautioned the Committee that debt relief seemed to favour the consumer It was necessary to consider the position of micro-lenders and other small SMME providers who might lose their businesses as a result of granting debt relief. Questions of justice might require that that matter be considered.
The Chairperson indicated that she wanted the “what” and not the “how”.
Prof Maseko explained that the NCT had difficulty in presenting specifics as there were so many options. He suggested asking for public comment.
The Chairperson explained that the Committee did not want an adversarial approach. They did not want a boxing ring.
Mr Esterhuizen stated that the Bill process had been going on too long. In the current financial climate, people were desperate and were driven towards very expensive money such as overdrafts. There was already legislation allowing consumers to have debt written off. He was concerned that if Parliament allowed easier debt write-offs, the banks would start charging higher interest rates and the poor would continue to subsidise the rich.
Mr D Macpherson (DA) suggested that the Committee needed to do an exercise. It seemed as if there had not been much engagement between NCR and NCT. The NCR’s job would be only to look at the application and forward the case to NCT. He agreed that it should take place as a motion-type process. Because NCT was a quasi-legal body, the credit provider would always arrive with a legal advisor and the case would have to be postponed for the debtor to get legal support. The NCT would have to deal with hundreds of lawyers and the process would be too slow. There would be hundreds of cases. He suggested that the process should be like a CCMA process where decisions were taken on the basis of paperwork but that would require that the NCT would have to be reconstituted. He was not comfortable for a single person to adjudicate as it broadened the margin of error. Two or three adjudicators would ensure greater fairness. The big questions were around capacity and funding. Who was going to bear the costs? He thought that NCT was supposed to be fighting for the consumer and not supporting the credit provider so he was worried about NCT’s concern about the credit provider.
Mr A Williams (ANC) thought that the NCT response was putting the cart before the horse. They did not have the final understanding of what the Bill was about and the NCT was going on about how it was to be done. It had not addressed the Bill itself. The NCT response seemed to address what powers the NCT would need to do it. He was worried about the concern of the NCT for the credit provider and it seemed as if the NCT had been lobbied before coming to the meeting.
The Chairperson appreciated that the NCT had been very clear about the issues on which it was commenting and had given one or two innovative ideas, such as a debt relief officer who could check the tick boxes. However, she was worried as all courts were adversarial in nature as South Africa uses Roman-Dutch law. The NCT Chief Executive had focussed on how it was to be done. A motion process would be the fastest but the Committee was not looking at adding powers unless it was essential. The Committee had made it clear that that was for the Minister when he reviewed the National Credit Act. She was troubled by the NCT’s concern for the credit provider. Looking at the Constitution, she felt that people needed to be treated with dignity and respect. The NCT had talked about the credit provider getting justice but if people were treated without justice, those demanding the money could not expect something back. The Bill was intended to be in the spirit of the Constitution. The Bill was intended to assist those that were not getting justice and earned less than R10 000. She asked for comment on that rather than how it was going to be achieved.
Prof Maseko responded that he was used to dealing with legal counsel and negotiating an understanding. The family advocate was an example of the format in which matters could be expedited. Credit providers would still have rights but if those with money utilised legal services, those without money would suffer. It had to seem fair to both sides. He was trying to see how things could be speeded up but the solution should not allow those with money to dominate the process. The Tribunal Members could not be lobbied as it could not engage with the public or anyone who wished to lobby. NCT tried to conciliate – almost like an out of court settlement. Someone needed to mediate and conscientise them. Litigation caused everyone, except lawyers, to lose. The CCMA model was an informal process and would allow for a panel where they could operate as a small focus group. It was an attempt at conciliation and to broker a deal that would prevent people from fighting it out. If one member dealt with 5 to 6 cases a day, the numbers could be handled. On capacity, the NCT had almost doubled its numbers and debt counsellors were not bringing in as many cases as expected. They had also put in an IT system which enabled them to do it online. They could only speculate as to how many people they would have to deal with. The appeal process would have to be included, but legal teams might get involved in bigger cases.
Prof Maseko stated that the adversarial reference had probably triggered negative memories. He was trying to suggest that the people would be bringing different interests and there had to be a mediation of the problems that existed. NCT did not want an adversarial approach, but an investigation or an inquiry which started with a clean slate, and could allow other approaches. It should not be inquisitorial.
The Chairperson suggested that the NCT continue to follow the matter. It was important for the NCT to follow the progress of the Bill. The NCR frequently attended meetings so that it understood what was happening with the Bill. The Committee would welcome more input from the NCT in response to questions.
National Treasury response to draft framework of Debt Relief Committee Bill
Ms Katherine Gibson, Senior Advisor of market conduct and financial inclusion at National Treasury, noted that the Committee was looking at the most indigent, but the conversation had seemed to move to other issues instead of remaining on the focus which was to relieve really strained households in a way that did not lead to unintended consequences. They were looking at a swift and seamless way of helping those people. As they moved forward, more questions seemed to arise. The focus seemed to be on credit providers, who were relevant, but it was debt collectors, and attorneys who were debt collectors, who held most of the debt. They were outside of the regulatory framework. She was not saying that debt collection was bad but legislation was not protecting the consumer. Debt counselling needed to be repaired - how far down could they stretch the debt counselling? Debt relief would not come without costs and what needed to be understood was what those costs were and who would be most affected. The issue on the table could not be seen in isolation.
DTI had already voiced its intention to evaluate the National Credit Act. The Committee needed to decide on a set of principles. National Treasury had set out some ideas of what it thought should be achieved. There should be different solutions for different categories. The NCT was a court, not a consumer advocacy body. It had to be balanced and it had to be fair. Extinguishing of debt related to unsecured debt was a central issue. There were different mechanisms for paying debt while, at the same time, protecting the consumer’s assets. A realisable asset at present included a motor vehicle. Was a vehicle necessary to a household? A comprehensive assessment was essential at each stage.
Evidence of past interventions needed to be re-visited but it appeared that approximately half of the beneficiaries of the debt clean-up remained in the clear – was that good enough? How could they keep people rehabilitated? One of the issues to be addressed was the fact that it was an Amendment Bill and not a stand-alone Credit Act. National Treasury was asking whether the Bill was intended to bring debt collectors into the process. There had to be consideration of the role of this Bill versus the broader Credit Act reform. Treasury was asking if the provisions given to the Minister should go into the Bill or whether that matter should become part of the broader reform of the National Credit Act. What was the role of the Minister of Finance and the banks and finance institutions?
National Treasury was engaging in research into the target audience but felt that R7 500 seemed a more reliable figure than R10 000 and no realisable asset, but that contradicted the idea of protecting the vehicle, unless it was seen as essential to earning an income.
Treasury advised having clearly defined categories of people who would benefit. For example, SASSA beneficiaries would automatically qualify for debt relief. It was a clear marker that did not need to be approved. The affordability criteria were complicated and credit providers were lending unsoundly. Some people owed up to 70% of their income. A simple categorisation of an affordable amount could be a percentage of the household income, such as 20% of one’s income. Currently there was no evidence of how much debt was being held. Evidence suggested that those earning below R15 000 per month did not hold heavy debt. It had to be remembered that parking debt was expensive, especially for non-regulatory bodies. Staggered rehabilitation was supported as it created the right incentives.
Capacity questions could not be answered without more information. Income would have to be checked. It seemed fair not to write off debt immediately without first having created stepping stones such as the debt review process. Treasury strongly supported the mechanism for changing financial behaviour. Urgency in the matter was critical but the Committee had to consider the consequences, intended and unintended. She pointed out that the reason for low auction prices for houses had been, until the very recent court judgement, because the buyers had to pay the outstanding municipal debt on the house. Ms Gibson noted that the research capacity in the Regulators had to be improved so that real time information was available.
National Credit Regulator (NCR) response to draft framework of Debt Relief Committee Bill
Ms Nomsa Motshegare, NCR CEO, stated that in terms of the NCR’s experience, the “missing group of consumers” should be included, that is, consumers who do not qualify for debt review and consumers who qualify for debt review but whose credit agreements do not solve. There will always be consumers who find themselves over-indebted because of circumstances beyond their control and therefore some of the measures that will be introduced to provide redress aimed at alleviating over-indebtedness by consumers should be ongoing, and not once off. NCR recommended that an impact assessment be conducted once the present measures that will be introduced have been implemented. The Debt Counselling Rules System agreed upon between the credit industry and the NCR should have a binding effect and be enforceable.
Mr Williams noted that the previous week, the Committee had been told that Treasury had attempted to influence the Parliamentary Law Advisor and that it was completely unacceptable for such lobbying to take place. The Committee wanted to encourage Treasury to lobby the Committee directly and not to go behind its back to those drafting the Bill. He was referred to the word “Comm” in its document. He asked if it was a reference to the Portfolio Committee, and, if so, Treasury should write the Committee’s name in fully. Treasury stated that debt collectors “must” be included. The point might be good, but he was concerned with the attitude of National Treasury as they appeared to be arrogant and were trying to steer the Bill. Its presentation was not trying to assist but trying to steer the Committee in a certain direction and it was inappropriate of Treasury.
Mr G Cachalia (DA) thanked Treasury for highlighting certain concerns which he shared with them, especially in terms of balance which he thought was very important. He was aware that they were researching quantification. Different categories of financial relief and the implications for ongoing credit provision were of concern to him. A mechanism for tracking the ongoing financial impact on recipients of relief would be important. In terms of debt to municipalities, what was the role envisaged for them, and what were the cost implications? What was the quantum and scope for debt transfer for paying consumers? Did they have any other carrot and stick methods to effect behavioural change?
Mr Macpherson noted that National Treasury and NCR had spoken about something that he had been raising for some time: the Committee had been so focussed on extinguishing debt as a form of debt relief that it did not see any other opportunities that were available for debt relief. The Committee did not know who it was speaking about. He could not see someone who earned R10 000 per month as indigent, but he did not want a bidding war on whom the Committee should focus. Should this be a stand-alone measure or part of the reform of the National Credit Act as a whole? Should the Committee be looking at the reform of the Act? He advocated the review of the whole of the Act. The Committee had been told that DTI would bring amendments to the NCA but the Committee did not know when it would happen. It could be 2019. The Committee seemed to be at the mercy of the DTI instead of driving the process. He wanted the Committee to look at reform of the NCA in its entirety.
Mr Macpherson said looking at the affordability criteria and simple measuring opportunities, such as a percentage of salary, was a good approach and he wanted to see more of that thinking. He did not know why there was a focus on credit providers extending debt but not government entities, especially municipalities. It was hypocritical that the Committee only wanted to focus on the private sector and not on government entities. One rule should apply for all. The big question was how they would maintain records of what the people who went through the process earned, etc. for five years? He did not know if National Treasury or NCR had a process to do that. He had been speaking for a long time about suspending debt during negotiations. Stopping reckless lending was also important. Had the NCR put concrete proposals on that to the DTI?
The Chairperson indicated that the Committee had taken a decision to have a Debt Relief Bill, initially Debt Forgiveness. It had been made very clear to Parliament that that was what was required and it was on that basis that the Committee was given permission to draw up a Bill. She emphasised that it was restricted to debt relief only. The Committee had to abide by that agreement. A broader approach to debt was critical and urgent but that was the second task. The Chairperson agreed that the National Credit Act required review and amendments but that was not the task before them as it would take an extensive period of time to process and consult on such an Act.
Ms van Schalkwyk agreed with the vision in the presentation by National Treasury that suggested that the crux of what the Committee wanted to do was to give South Africans who were chronically over-indebted, the opportunity to make a fresh start. The focus was on indigent people but it was not only about indigent people. She asked about the sampling of the 600 000 consumers as indicated in the presentation. Had those people been involved in the clean-up of credit in 2007? How many people, in total, had benefited from the clean-up of the credit bureaus. The Committee needed to know if 600 000 was a portion of a larger figure of people involved in the clean-up of debt. Debt collectors could not be included because it was probably not in the scope of the Committee Bill. The Committee valued the inputs but it did not want to be told what it should or should not do. The Committee did not want to be bullied.
Mr Esterhuizen agreed that debt counselling was failing, particularly the furniture industry that charged those that did pay, higher interest rates to make their businesses profitable. Nearly 50% of South Africans had short-term, unsecured credit. Most South Africans were spending 78% of their income on debt repayment. It was a huge mountain for the Committee to climb. Debt relief had to balanced. He agreed that financial institutions were already building in insurance against bad loans but looking after the lender protected the consumer. It was worrying that statistics show that South Africans are over-indebted, owing R1.6 trillion to lenders. NCR had the power to cancel registrations, to suspend, etc. and the powers should be used. In the furniture industry, people pay more than double in interest rates. The “in duplum” rule, whereby the interest on arrears ceases to accrue once the sum of the interest equals the amount of capital outstanding, should be applied. The NCR had to protect the consumer.
Ms C Theko (ANC) stated that the Bill was intended to assist the poorest of the poor. She felt that the National Treasury presenter was protecting someone, perhaps the service providers. The presenter was not saying it, but Ms Theko could feel it and it was just there behind her words. Last week the Committee had received a presentation that indicated that debt counselling was doing well, but how did someone who was poor pay a debt? That was what the Committee had identified as a problem. Treasury talked about groups but had not identified the groups. Why was the Committee still asking about the groups? They should have been given answers but it seemed that someone was trying to delay things. The Committee needed to know what aspects of the Bill the presenters agreed with, and presenters had to make suggestions on issues where the Committee did not have the answer. Treasury should not speak big English while debts were piling up on the ground. Treasury spoke of the register of persons who had received debt counselling and the need to amend it. However, the people who were currently in debt were not the ones who had been in debt previously. Systems were being put in place and then they were being amended, but organisations were not implementing their own policies.
Mr Williams said that South Africa was an over-indebted country because credit providers had continued to provide credit. Credit providers had caused the crisis of a R1.6 trillion debt. They could have rejected the applications but had kept on providing credit. The people who had caused the problem had to pay for it. National Treasury had said that the figure of R10 000 had been an estimation at the time. Did Treasury have any other figures that it wanted to tell the Committee about? The figure of R10 000 had caused problems for the Committee because it had been put in the Bill. Treasury should not provide unreliable figures.
Mr Macpherson wanted to add further questions but the Chairperson was adamant that each Member had had an opportunity to pose questions. She indicated that, as chairperson of the task team on the Bill, Mr Williams had been given a second opportunity.
Response by National Treasury
Ms Gibson apologised to Mr Williams if she had given the impression that she was doing anything untoward. That was not the intention. The engagement that was referred to with Adv van der Merwe was an attempt to understand fully the work that Treasury had been requested to provide input into, so that its work was properly informed. That was common practice in Treasury. The arrogance of the word “Comm” was inappropriate referencing and would be written out in future. The word “must” was unintentionally arrogant and not intended to instruct Parliament. It was simply a reflection of Treasury’s shock at the debt situation, especially following the debt investigation process which had been very disturbing. Treasury respected Parliament’s independence. In the course of the engagement, the R10 000 had been the figure suggested but Treasury had referenced the figure of R7 500 and felt that it was more appropriate. Wanting to have debt collectors included had not implied that credit providers should not be included. The balance had to be correct.
Ms Gibson told Mr Cachalia that from a government aspect, Treasury was conflicted about municipalities. There was sensitivity about including the municipalities because of the significant big fiscal impact. There was also a caution about the extent to which the municipalities could be brought into the process. Carrot and stick methods had been considered but the question was how to get cooperative coordination.
On the question as to who was indigent and why, Treasury was not clearer as to who should be captured in the net. For Treasury, it was a matter of the principles first. It was probably unwise to pick a number without developing a set of principles for picking the number. The reform of debt counselling was critical. The poorest of the poor, the indigent, were those who had an income of below R3 500 per month. Upwards of R7 500, debt counselling made sense and was cost effective. That left a gap between R3 500 and R7 500. Which way did they go? For a sustainable long-term future, it was necessary to get people below the figure of R7 500 involved in debt counselling. Debt counselling and extinguishing the debt was not mutually exclusive for that group. It was possible that debt counselling after extinguishing the debt was the way to go for long-term sustainability.
The question was not just who would record data but the need to ensure the integrity of that data. How did one get verification in a seamless, non-controversial, uncontentious way? In an open and transparent environment, she did not think that she could persuade independent-minded Members, and transparency was essential to the process. From a National Treasury perspective, it was so frustrating that there was so much legislation across the credit universe, but there was a group of five debt collectors outside of the regulatory framework who accounted for chronic abuses. If debt collectors were not addressed, a large number of people would not receive help. Over the course of the meetings, a number of concerns had been raised about debt counselling and so that was not a Treasury view. It had to be recognised that debt counselling had done a lot of good, but shortcomings should be addressed. Debt counselling needed to be expanded. Fees charged by debt counsellors were a concrete problem. People who had been in that situation needed to sustain a debt free existence. Borrowing patterns could direct NCR to those who needed debt counselling. It was a dangerous solution to think that debt relief was the only solution
Ms Motshegare pointed out that Section 69 provided for a register of credit agreements and the NCR could use that to collect data on debt relief but such a register was expensive to set up and maintain. A quotation of R5 million had been obtained some years ago. It would require Ministerial approval to develop the system but it could be done and would be an invaluable system. NCR did not have the powers to cancel registration of registrants. The matters were referred to the NCT as only the NCT had those powers.
Mr Macpherson felt that it was simplistic to say that credit providers had caused the problem of over-indebtedness. The Act’s affordability assessments were very strict. The practice of reckless credit and proper checks not being done had to be resolved. He could not get an explanation for why the Committee was not prepared to review indebtedness in its entirety. The Committee had not even referred to illegal debt. The Committee needed to be circumspect and had to work with the credit industry so that people could move upwards. People had a choice to get credit or not, except that the economy was so bad that they could be driven to credit. No one was talking about the economy.
The Chairperson believed other Members might agree with him. She raised the point that the Committee itself needing to deliberate the draft Bill so that the Committee itself could agree on what it wanted. The issue had not been resolved; it had merely been put aside. But time was not on the Committee’s side.
Department of Trade and Industry (DTI) response to draft framework of Debt Relief Committee Bill
Mr Lionel October, DTI Director General, understood that the Committee was looking for an additional measure within the arsenal of measures to deal with debt. For that reason, the DTI presentation was laser-focused on debt relief. The Committee was saying that all of the current measures, even when implemented 100%, were not sufficient to deal with the particular problem and therefore another measure was needed which would give additional relief to certain sectors of the community. There had been consensus in Parliament that such a measure was needed.
The question was who had the power to exercise that measure. The Committee had to play a strong role and some delegated power had to be given to the Minister to be able to deal with it. Secondly, the question of which constituency or sector of the population should be targeted. In terms of context, he noted that in all other spheres of society, including business debt, people could obtain a fresh start. People could go into liquidation and make a fresh start. But there was no mechanism for consumers to get out of debt. He warned that writing off debt impacted on other people’s assets, so there had to be a balance. The person to whom the debt was owed also had rights. The Minister’s power could, therefore, not be unfettered. In the same way that the Minister’s powers were limited, so must the categories of those who could get relief, be limited. One category was people who had been retrenched and consensus could be reached on that. That constituency of people had to be given some relief but the amount of relief had to be limited. The Committee had to agree on who was indigent and who were low-income consumers, but that category did need relief. In other societies, there were social security nets but South Africa did not have such safety nets. If the Committee could move fast on making those decisions, they could get into drafting the Bill itself.
He thought that it was necessary that there be negotiation with the banks, the retailers and the debt collectors. The Committee had to look at the practice of retailers and banks selling off their debt to debt collectors who then pursued the debts ruthlessly. This meant that the problem was that it was not the banks or the retailers who were claiming the money, but debt collectors and so there needed to be a way of dealing with them.
Mr MacDonald Netshitenzhe, DTI Acting Deputy Director General: Consumer and Corporate Regulations, noted that the DTI was largely in agreement with the Bill and had been participating all along, so they were just providing a response to the Portfolio Committee on the Draft Bill. The response focused on the type of debt which the Bill had identified; the measures and criteria to be considered and the impact of those measures; and the application of the “in duplum rule”. In addition to providing debt relief to retrenched consumers with no income and insufficient credit life insurance to pay off their debts, the DTI also proposed tangible debt relief for victims of unlawful deductions to child-support grants, reckless credit lending victims, victims of unlawful emolument attachment orders. Further, relief should be offered to victims who were unlawfully sold credit life insurance products, and victims of deductions related to prescribed debts. Those victims should be considered for once-off debt relief. Unlawfully attained deductions and recklessly granted loans had enriched credit providers and could not be viewed as the property of the credit providers.
The Committee should consider the simplest approach, such as the CCMA and Companies Tribunal where the merits of the case took precedence over legal technicalities. Refunds of unlawful deductions and partial or total extinguishing of credit obligations needed to be considered. Proper application of the ‘in duplum” rule was necessary. DTI recommended looking at the Debt Collectors Amendment Draft Bill which regulated debt collectors. It recommended that the parliamentary legal advisor drafting the Debt Relief Bill collaborated with those in the Department of Justice working on the Debt Collectors Amendment Bill.
In France, those who made reckless loans could not claim the loan. The Court of Laws Amendment Act, signed by the President recently, also needed to be considered.
The DTI Director General explained about the term “haircut”. Retailers and banks sold their loan book at a certain percentage and the debt collectors had to recover the money at a higher percentage to make a profit. He noted that the State had acted as a debt collector – the sheriffs acted as debt collectors in South Africa. Further, employers had to collect garnishee orders, which was not actually the job of employers. The legal system had been abused because the people at the other end were Blacks. The State had infringed on the rights of people. He concluded that input would be needed from the debtors and the creditors. In the end, the Bill had to be seen, on balance, to be in the public interest.
The Chairperson thanked DTI for keeping abreast of the progress of the Bill.
Mr Macpherson had picked up that consumers did not know that they had credit life insurance on products Often they were retrenched and did not know that they could claim on that insurance. On retrenchment, the employer should assist people with their debt. What did DTI think about educating people about credit life insurance and also involving the employers?
Mr Esterhuizen stated that it was not a question of who they wanted to target: it was a question of who they wanted to protect in a credit friendly market. The South African economy could not afford to be turned upside down. If banks and retailers were forced to build in protection against debt relief, people would go to informal debt collectors and that was whom the Bill should target.
Mr Cachalia noted that DTI agreed with the Committee on a number of issues. As he was new to the Committee, he wanted his view confirmed. Debt was sought and granted which created rights and responsibilities for both. When dealing with indigent people who had got in debt and found themselves in a parlous position, intervention was required to school and to capacitate responsible ongoing behaviour. If there were repeat circumstances, of no fault of their own, then they would be able to weather the storm.
The Chairperson noticed that the DTI had used the phrase “inquisitorial”. lt did not sound informal – it sounded like the Spanish Inquisition. She presumed that the idea was more of an informal enquiry along the lines of the CCMA. The Committee had met with the Portfolio Committee on Justice and Correctional Services and the meeting had been incredibly instructive. The Committee would meet with Justice on 17 October 2017 and she hoped that the DTI would be there to inform the Committees. She appreciated the constructive approach. Adv van der Merwe had done excellent work in crafting the Bill.
Presentation by the French Ambassador
The Chairperson welcomed the French Ambassador to South Africa, His Excellency Christophe Farnaud. France was one of South Africa’s senior trading partners and she felt that the Committee could learn from them.
The Ambassador was pleased to have the opportunity to meet with the Portfolio Committee on Trade and Industry. He acknowledged the importance of globalisation, which meant more connections, which meant more open markets, which meant more competition, which meant more opportunities but also more risks. Opportunities meant future growth but competition meant that there would be losers, but all countries had to build opportunities for employment, and especially for the youth. It was that interconnection that should be discussed. He believed in collective answers. The answers were to adjust nationally, and to build strong. long-lasting partnerships through government relations and new business models. A few words on France: France was the sixth economic power worldwide, close to Britain in fifth position, and France might move ahead as a result of Brexit. The two countries had more or less the same GDP – twice that of Russia. Growth in France was 1.8% in the current year, which was bigger than had been expected at the beginning of the year, which meant that France was keeping up, or had awoken. The answer might be that they were facing up to new challenges. In the French economic model, they had a few positive points and some challenges. Assets included the fact that they were creating new enterprises, many very small, and they had good credit for companies. A well-trained workforce was a key requirement to keep up with globalisation, as was a high level of research and development. They had a stable and visible legal environment which attracted foreign investors. France was a key country for investment. Some things needed to be improved. The legal framework and social levy system needed to be simplified and they had to keep up with training. French engineers were rated very highly world-wide. There was a lack of flexibility in some labour markets and competition could be greater.
France’s assets were greater than its liabilities. President Macron had been elected on a strong platform of reforms. Government was fast tracking legislation to make things easier and more efficient for small businesses. They had issued ordinances, which was fast-tracked legislation, aimed at supporting small and middle-sized enterprises while keeping the efficiency of the system. People agreed with it, which was important for democracy. The ordinances also allowed trade unions and companies to negotiate more easily. There was a need to develop the fiscal system, and the government wanted to encourage entrepreneurship and therefore had to facilitate that. Training was important for basic education as well as university. The government had launched reforms from the first year at school to allow more flexibility in the curriculum. They needed to create a favourable environment for business to thrive.
The French market needed to build partnerships abroad. What they were doing with South Africa, France was doing with all emerging economies and China. France had to be efficient at both government and company level. The French government needed, and wanted to have, a close relationship with companies to coordinate and to ensure access to French markets was easily available. It was for that reason that France had a Joint Economic Committee with South Africa. There had been a meeting between French officials and companies and South African representatives in Paris in April. It had led to a very fruitful exchange of ideas and proposals in many fields. They also exchanged legislation and policies relating to commerce and industry. They had focused on the necessity to build more partnerships in areas such as train building, aeronautics and composite materials. There was a need for rules between countries to ensure efficiency. Regular communication was critical. Key cooperation for France was in education with the Department of Basic Education and with the Departments of Science and Technology, and Higher Education and Training. Training had to be adjusted to companies and companies had to get involved with universities. The idea was to promote joint research, but also to build efficient training and suitable curricula to allow companies to find well-trained students. They had a series of training institutions including the Electric Education Centres (SASEC) and South African Institute in Agriculture (SAGRI) and a Product Lifecycle Management Competency Centre, built at universities in South Africa with investment by French companies in South Africa such as Schneider.
Business models were no longer about buying and selling but about building long-lasting partnerships. The strong commitment of the companies was essential. With every product, there had to be localisation to some extent. Localisation was well understood and strongly supported by France. The 3 600 train carriages being built in South Africa would bring 20 000 jobs for five years. L’Oreal Cosmetics had its regional base for sub-Saharan Africa in South Africa. A third example was the start-up on digital innovation: the South African French Tech Hub, which was a private initiative. French companies had invested because they had found young entrepreneurs in South Africa. South Africa had infrastructure, a stable legal environment and allowed access to the regional market and therefore cooperation with South Africa was important. French companies had continued to invest in South Africa so there was still strong potential. Black empowerment was a constraint for companies but French companies understood the rules and played by the rules. However, the rules needed to be clear. The question was no longer independence, but inter-dependence.
The Chairperson thanked the Ambassador.
Ms Theko said that it was a good presentation and it was what was needed in South Africa. Was the outcome of the investment to be found in South Africa? Were the carriages built in South Africa and if so, South Africa would benefit but there would be BBBEE. The country needed people to be capacitated so the skills had to transferred. She appreciated that the emphasis was on the youth. How many blacks were in the system in the French-built training institutions. She wanted to know if all races in South Africa were benefitting. How was France benefitting? South Africa needed to safeguard itself as a country.
Mr Esterhuizen stated that South Africa needed strong partnerships with European countries.
Mr Williams wanted to know if the fourth industrial revolution was on the table in France, was it progressing and what impact did it have on employment? What happened in cases of indebtedness of citizens in France? Was organised labour happy with the reforms? How did France promote local businesses in France? Did government departments have to buy locally? How did France deal with illicit flows of money out of Africa to the European Union and America?
Ms Van Schalkwyk noted that foreign companies did not empower local people at a high level. What was the Ambassador’s stance? There were 8 000 French people in South Africa. Did the French government have information about all the French people in South Africa, where they worked and lived and so on? When the Ambassador spoke of partnerships, she wanted to be sure that South Africa was benefitting from this. How did the capacity of French involvement empower South Africans? Was the workforce empowered so that the labour was sustainable even after the French companies had left? South Africa had a low and no skills workforce and so needed skills to be transferred.
The Ambassador explained that when he spoke of long-term partnerships, it meant that they had to ensure that their involvement in South Africa was sustainable. French companies understood that if they wanted to do business, they needed to play the game and they built skills so that people were trained, although everyone had to continue to evolve. The changes in required competencies meant people had to evolve their skills in an ongoing way in the modern world. In modern business everyone had to evolve their skills because things changed so fast. Basic education was important because it had to give people the skills to be able to evolve and to continue learning. He assured the Committee that most jobs in these companies were done by local people. 96.9% of the people working in the train building factory were South Africans. There were few ex-patriots. Even the CEO of French companies, such as Total, could be South African. It was mostly South Africans worked in the Tech Hub.
France wished to support young people and had awarded scholarships and bursaries to high level students. They facilitated other South Africans who wanted to study in France. France was one of the key destinations for international students and France would very much like to have more South African students studying in France. The French government was serious about it and had set up a joint committee on higher education with South Africa to exchange experiences.
On the Fourth Industrial Revolution, a key manager of Airbus Company had come to South Africa to make a presentation on the 4.0 Industrial Revolution. The presentation was based on models in France. The 4.0 Industrial Revolution was fast but complex and would take time, but it happened more in large high-tech companies. The Fourth Industrial Revolution was discussed in France at the joint meeting with South Africa and they discussed how to manage robotisation and to talk to employees about robotisation.
France was a vibrant democracy, they still had to see the response to reforms by labour unions. An advantage was that the reforms were presented during the elections and the party had received a strong majority. Labour reforms had been discussed intensely with unions and some unions support some aspects of it. On the day of the meeting, there were to be strikes and demonstrations in France. The first strike organised had not been very strong. So far reforms had been accepted. The idea was to open markets and make the environment more fluid, but France had to keep up the efficiency of the social systems. They had included a lot of smaller reforms about giving trade union members training opportunities. A key intention of the reforms was to get money to the lower classes. The government was in the process of reducing housing taxes and diverting a bigger part of income to go to lower income employees. The country had to keep on a narrow path to ensure a successful transformation.
The Ambassador explained that localising jobs in South Africa meant that they could keep jobs in France. It was better to have 60% of a project than to have 100% of nothing. French companies did not want protectionism, but they had to keep up quality and standards to keep the business.
The Chairperson noted that she had followed the elections and had seen how President Macron’s majority had allowed him to make reforms. President Macron also appeared to be more transparent. She was impressed by their need for competence in localisation and the idea of investing in another country in order to retain some jobs in the home country. Localisation was a concern to the Committee. Very often components were produced in South Africa but other countries were getting the jobs and the components were being imported. The reason was often that the local standard was not up to scratch, so she was interested to see how standards could be improved. It would be useful for the Committee to get a list of French companies in South Africa. She thanked the Ambassador and his team and asked him to share any challenges with the Committee.
The Ambassador mentioned that about 400 French companies active in SA employ a total of about 37 000 people. Localisation included building components for motor cars, which were exported. Denel and other companies were building or making parts for Airbus. The Ambassador invited further discussion after the meeting, and in the future.
- Copyright Amendment Bill: update; Debt Relief Bill; French Ambassador on entrepreneurship and employment 3
- Copyright Amendment Bill: update; Debt Relief Bill; French Ambassador on entrepreneurship and employment 2
- Copyright Amendment Bill: update; Debt Relief Bill; French Ambassador on entrepreneurship and employment 1
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