Draft documents not handed out to the public
The Committee considered feedback on concerns raised by stakeholders which included expenses incurred through credit obligation cannot be deductible for tax purposes; SARS and municipal debts should be excluded from debt relief because they are not credit agreements; and during the debt relief period a debtor will not be allowed to enter into a credit agreement.
Members asked about the overarching principle of R7 500 defining who qualifies and does not qualify for debt relief; if the Bill deals with unscrupulous lenders; how the Bill will deal with people who have been granted credit legally; NSFAS loans; whether the R7 500 reflects one’s gross or net income; and the 25% formula for over-indebtedness.
The Committee also considered its terms of reference for the Inquiry on compliance with local public procurement and localization; South African Farmers Development Association and for the technical panel for Copyright Amendment Bill. All terms of reference were adopted.
The Chairperson stated submitted to members the adoption of the agenda, and further stated that since the Committee has reached its quorum, there are outstanding matters that need to be dealt with and adopted. Furthermore, she submitted all the apologies from the late coming and absent members and handed over to Advocate Charmaine van der Merwe to take the members through the feedback on issues raised by stakeholders on the debt relief policy bill.
Parliamentary Legal Advisor feedback on matters raised by stakeholders on Debt Relief Bill
Adv Charmaine van der Merwe, Parliamentary Legal Advisor, had asked the Department of Justice and Constitutional Development (DOJCD) about whether the National Credit Regulator (NCR) could work with the DOJCD to ascertain the people who are in debt. It was established that this could happen.
Adv van der Merwe said that the question posed to the South African Revenue Service (SARS) was not really answered. The answer provided about capital gains tax was about assets that are over R2 million. SARS also mentioned that a debtor cannot deduct expenses (borne through debt) for tax purposes. SARS and municipal debt are not credit agreements for the purposes of the Bill and therefore do not constitute debt as defined in the Bill. The NCR made it clear that the debt to SARS is automatically excluded, as well as municipal debts. All of these fall outside of the Memorandum.
Adv van der Merwe felt that it is not necessary to amend the definition of 'once-off debt relief'. She did not see any added value in amending the definition as the current definition would suffice.
The Tribunal proposed that the lack of participation of credit providers in the bill process is very concerning. The process should be finalised in order for credit providers to make their submissions. During the debt relief period, the person granted debt relief is not allowed to enter into a credit agreement; this is directly affecting a constitutional right. Once the order is granted it must be served to the credit provider. However, there will be further deliberation on this with relevant stakeholders.
Adv van der Merwe said she does not want to dwell much on the in duplum rule because she essentially agrees with the principle.
The definition of “household” has been broadened as the result of the suggestion to add “child-headed households” as part of the “household” definition. She believed that this would be incidental debt (or inherited debt), because a child is not normally legally permitted to enter into a credit agreement. The inclusion of households headed by the elderly and persons with disabilities was also suggested, as well as women-headed households. She felt that if these categories fall under the R7 500 income bracket, they would automatically fall into the “household” definition; therefore she felt this was not necessary to include i.e. child-headed and elderly headed households in the household definition.
On affordability assessments, this is something that the Committee can consider but it deals with emolument attachment orders which is something that is not relevant to the Bill.
The Chairperson stated that it might be useful for members to ask questions as that input was very crucial. The Committee appreciates the number of amendments that have been made by the Department of Justice.
Mr A Williams (ANC) stated that people earning R7 500 per month should be the overarching principle in the household definition including child-headed households, because if the Committee forgets to include a certain category or group that might be problematic. The household or individual income up to R7 500 should be the defining point on who qualifies for debt relief or not.
Ms E Ntlangwini (EFF) said that she thinks the definition of debt relief in the Bill should be included and made very clear. As for the R7 500 threshold, she asked how the Committee came to decide on that specific amount. The majority of public servants are extremely indebted but if that group is excluded it brings into question the entire purpose of the Bill.
The Chairperson agreed with Ms Ntlangwini’s remarks.
Ms P Mantashe (ANC) said that the Committee should insist on the South African Reserve Bank presenting the qualitative assessment that they were supposed to submit to the Committee. She is also worried about Treasury and SARS not getting back to the Committee on its requests. Perhaps, Adv van der Merwe can advise on the direction that the Committee should take about those requests.
Ms S Van Schalkwyk (ANC) valued the input of broadening the definition of “households” to child-headed households, even if the parents are already mentioned in the current definition; because there are parents who are incapable of handling their households. So if that scope can be broadened then those children can be assisted with over-indebtedness of their households.
Mr Williams said that he disagrees with Ms Ntlangwini that debt relief should be defined. He asked the Parliamentary Legal Advisor if it should be defined and the advantages and disadvantages of defining it.
The Chairperson expressed her concern about the engagement with the Department of Labour and the information received from it on the data. It was very clear that the Unemployment Insurance Fund (UIF) data depends on the information submitted by the employer. The Committee questioned the integrity of that data. She asked if the Parliamentary Legal Advisor can assist with this and see if it would it be possible for the Department of Labour to request UIF to assist the Committee on the financial information.
Adv van der Merwe responded that she was not sure if the category targeted should be limited to households or individuals earning an income of up to R7 500 per month, and then remove the addition of "child-headed households", she was not sure if both can be done. She believes that those households would automatically fit in there; she agrees that those households would fall under the R7 500 threshold.
On the definition on debt relief, the Bill already sets out in the Preamble what it is that is aimed to be achieved, so if they were to put a straightforward definition in the Bill, the definition outlined in section 88 would apply. The other option would be to say that the debt relief measure is something that alleviates household debt by extinguishing it. She believes that adding the definition does not add value but it is not something that would create a loophole; she cannot think of the word(s) that can be added to the current definition.
On the question of public servants, upon perusing the responses received to date from various stakeholders, National Treasury first stated that that for debt review, a debtor would have to earn R10 000 or more per month. However, Treasury came back to say that at the time it provided that figure there was some data missing and the amount came down to R7 500. This correlated with Debt Busters who indicated that people earning under R7 500 cannot afford debt review. Perhaps, after inviting public comments on this, the number might change and this is something that can be looked into. The reason public servants were not included is because if there are public servants that earn under R7 500, they would automatically fall into the category that is eligible for debt relief.
People earning more than R7 500 would automatically qualify for debt review. The problem is that people earning less than R7 500 cannot afford debt review. This is where the Bill comes in to bridge that gap to cater for those individuals who cannot afford debt review.
She indicated her concern about how it can be proved to the NCR that the child is actually heading the household where a parent is unfit to head the household. For this kind of category, the Department of Social Development would need to be involved which would definitely prolong the process, especially the verification process. It can be added but it makes the application and the verification process much longer.
As for the quality of the information in the UIF database, the Department of Labour has put in place some proactive measures and it is making use of an external consultant to check the information. It is working on improving the database, but it noted that where someone is not formally employed then that information would not be available. The information about an employee recorded by the NCR in its database should correspond with the information in the Department of Labour’s database. In a situation where someone is informally self-employed, that information will not be in the UIF database, and it might be difficult to ascertain that information.
Mr Williams said that there must be a definition for child-headed households in other pieces of legislation, and if it is defined elsewhere, he asked if the Committee can use that instead of coming up with a new definition. On civil servants, he said that the Committee needs to be realistic in its expectations; that not everybody can be included and be mindful of how much money the financial institutions will lose from writing off these debts. So there must be clarity that the aim is to help poor people not civil servants.
Ms Ntlangwini asked Mr Williams to define poor, because there are public service servants that are poor because of educational debt, and other necessary credit commitments. Some civil servants cannot afford to even pay for child education fees. As for child-headed households, she agreed that the Committee needs to look at other legislation and ascertain if the there is a definition that the Committee can use for this Bill.
Ms S Van Schalkwyk (ANC) said there are still lower level public service servants who will fall within the R7 500 bracket, so the Bill will be able to cater for “poor” civil servants.
Mr D Macpherson (DA) said that he was uncertain about where this Bill fits in, but he asked if the Bill is a stand-alone Bill or an Amendment Bill for the National Credit Act. There needs to be clarity if the debt relief is going to be a once-off measure or a continued measure. If it is once-off, it should be a stand-alone Bill. If someone has been granted credit legally, what are the remedies for that, unless the financial institution is completely unwilling to restructure that agreement to assist the debtor to be in a position to settle the credit – it would be unfair to penalise the financial institution when it has done everything required by law. The Committee is failing to recognise that the financial institutions have an incentive to restructure debt to keep customers healthy in the credit system. It is not in anyone’s interest to keep people out of the credit system for five years, which is what will essentially happen when this comes into effect. The first cause of action should be rehabilitation not debt relief which would keep people out of the credit market. Lastly, he asked about the time period, what is the time period for when people can apply for debt relief and when will the cut off date be?
Adv Van Der Merwe responded that the definition of child-headed household comes from the legislation on municipalities; she did not look at other legislation for a definition of child-headed household. However, if there are other definitions out there, that does not mean that it cannot be broadened. If this Bill is a once-off measure, there is no reason why it cannot be included. There are also items in the National Credit Act that must be amended in order to make provision for the Bill to be included in the existing legislation. There is something that is called a sunset clause that she has not included in the Bill yet, but she is currently looking into it. On whether this Bill is a once-off measure or a continued measure, this is a policy issue and she would need to get a directive from the Committee on that.
As for legally granted credit, Treasury proposed that in looking at reckless lending it will not just be everyone who earns an income of up to R7 500 who will qualify for debt relief, it must be people who are actually in debt and have debt problems. Some of the questions the Committee will have to answer because they are policy issues.
Mr Williams asked about the sunset clause, and who instructed the Law Advisor to look into it.
Mr Macpherson said his biggest concern is that unless there is space for both creditor and debtor to restructure the debt the whole process of debt relief becomes problematic.
Adv van der Merwe responded that the sunset clause is a drafting principle she was thinking could be brought in. If the Committee instructs her to draft a stand-alone Bill then she will introduce it, but she has not yet had time to look into a sunset clause but she has definitely thought about it.
The Chairperson said that this Bill was intended to be part and parcel of the National Credit Act, and the provisions of the Bill provide relief to over-indebted South Africans. The Department has identified a number of challenges in the Act and expressed new challenges on a further review of the credit law that indicated that the National Credit Act needed to make provision for debt relief. The Committee Bill may not at this stage address all the challenges that the Credit Law Review identified. The Committee remains of the view that over-indebtedness must be urgently addressed, and it would be important to establish the criteria of who is being addressed in the Bill as a matter of urgency. This is why it is important to have the Bill and the Committee should not lose sight of its intentions. She hopes that Members would go back to the earlier discussions on why there was consensus to introduce this Bill.
Mr Macpherson asked where the Committee deals with unscrupulous lenders in the Bill. He shared his concern that the intention of the Bill is diverting from the motion that was passed in the National Assembly. He does not see any mechanism to deal with legal credit; it seems the focus is on people who have been lent money by registered creditors who have gone through the affordability test with the borrowers. So how do we deal with the people who have been granted credit legally since it appears that the Bill is dealing with debt that has been legally administered?
The Chairperson said that there are limits within the Bill, there is so much that needs to be done but the Committee cannot address everything but only a targeted intervention. The Bill is not a stand-alone bill and this was indicated when the Committee made a submission to the House. This is an Amendment Bill to the National Credit Act; it becomes part and parcel of the Act.
Mr Macpherson said that the motion recognised the need for a debt counselling framework for lower income people, but it should be noted that the aim is not to shut people out of the system for five years. Unscrupulous lenders, this was one of the key focuses, yet nothing much has been said about it, especially those that prey on poor people. We are not prepared to assist poor people from the unscrupulous lenders at this time. Perhaps the Committee needs to pause and reflect on where this Bill is intended, and if it is meeting the intended target. In some parts it is addressing the challenges but in some other parts, it is not particularly focusing on unscrupulous lenders.
Mr Williams said that the Committee should not pause at all otherwise this Bill will never be finalised. The Committee needs to look at the Memorandum and the motion to Parliament to ensure that everything has been covered. The Committee just needs to make a few tweaks here and there, and there are certain parts that have certainly been added as the process unfolds. He strongly disagreed with the proposal to pause.
The Chairperson said that the Committee was not planning to address everything through this Bill because that would have been impossible to begin with.
Debt Relief Bill / National Credit Amendment Bill drafting changes
Adv van der Merwe went through the changes she had effected to the Bill. She highlighted that she will not go through the minor changes but will focus on the matters that are still outstanding.
Mr Williams asked for clarity on “debt responsibility intervention” that was proposed regarding the Long Title of the Bill.
Adv van der Merwe replied that she also does not know what “debt responsibility intervention” means, it was suggested by Mr Cachalia. She also had her own reservations about how the proposed name relates to the intended or proposed measure of the Bill, however she managed to find a place where it can fit it in.
Mr Williams suggested that it should then be changed to “debt intervention” and take out the word ‘responsibility’.
Mr Williams’ suggestion was welcomed by Members.
Adv van der Merwe said that on the date of the application of debt relief the person must be a consumer because the word ‘consumer’ is very relevant in the National Credit Act.
Mr Williams asked about the 25% formula; he was not too sure how it works and at what point the Committee decides how much a person must be indebted in order to qualify for over-indebtedness. Secondly, what percentage out of what you pay in your salary triggers indebtedness – this is a figure that the Committee still has to decide.
The Chairperson asked if this percentage is calculated on the net or gross salary.
Adv van der Merwe replied that she will have to go back and look into this; she made a note of it.
Mr Macpherson said that the Committee needs to have all the hard data available because if that data was available, Members would not be asking these questions. He emphasised the importance of having the data available.
The Chairperson said that there is already a figure, and the Committee does not necessarily have to wait for National Treasury. She advised that the Committee flags this for now until the data is made available to the Committee.
Mr Williams said that the NSFAS loan should not be included. The loan had to be repaid because this is a loan that upon repayment will assist another student to further their education.
Ms Ntlangwini said that the NSFAS issue is much broader, so she will make a submission on it and perhaps it can be interrogated further thereafter.
The Chairperson thanked the members and Adv van der Merwe.
Terms of Reference: Inquiry on compliance with local public procurement and localization
The Chairperson read out the terms of reference to Members, page by page, and asked them to propose amendments.
Mr Williams pointed to page 4 and 6, and proposed that the Committee include local government structures such as SALGA and municipalities because procurement in local government for furniture has been silent. The Committee needs to interrogate why local government has not bought local furniture since 2012.
Mr Macpherson said that he sent an email yesterday to the Chairperson detailing what he would like to see in the terms of reference. He would like to see included the names of the people who are not employed by these state owned enterprises anymore. He had mentioned a number of individuals in the email, and he would like the Committee to include those names. The individuals on boards are very influential in the awarding of tenders and they need to be questioned on what basis those tenders were awarded. He asked the Chairperson to outline what matters would be sub-judice in her opinion. He said that it would be very important to invite organisations and investigative journalists that have investigated this matter to present information on this.
Ms Ntlangwini asked about the work that other Committees are doing on this inquiry, as well as the type of work that they have put together thus far.
The Chairperson replied that there are things that some other Committees have already done, the Committee will focus on areas that are within its mandate. She was not aware that the sub-judice definition would be a big issue. In her understanding when a matter is before the court, it is normal practice not to pursue that until the court has concluded on the matter. People cannot be stopped from taking matters to court, so the Committee has no choice but to wait for those structures to wrap up their processes.
Mr Williams said that the individuals that Mr Macpherson was referring to, those individuals should not be questioned in this inquiry because the Committee is concerned about localisation not corruption. This will move away from the point of the inquiry. If the Committee loses direction on this, then it will defeat the purpose.
Mr Macpherson replied that the Committee needs to understand why those individuals did what they did. Those individuals are no longer in Transnet. The Committee needs to understand why those contracts were negotiated and what emanated from those negotiations which resulted in the award of the tenders.
The Chairperson said that there is an inquiry that is mostly likely going to capture this information. The Committee’s focus is on localization and employment unless during the process the Committee feels that those individuals need to be brought in to contribute to the inquiry. She appealed to the Members to move to a position to adopt the terms of reference.
Terms of reference were adopted with no substantive amendments made.
Terms of Reference: South African Farmers Development Association
The Chairperson said that the Committee wanted to get all stakeholders and the DTI to provide a progress report on what is actually going on with the South African Farmers Development Association. She read out the terms of reference to members, and no proposed amendments were suggested.
The terms of reference were approved by the Committee.
Terms of Reference: Technical panel for Copyright Amendment Bill
The Chairperson said that the general view is that at this stage this Bill can be adopted as it is, but a technical panel would ensure that all the relevant sectors are covered by the Bill.
Mr Williams said that sectors that should be included on the panel should be performers, publishers and people from a university background.
Mr Macpherson said that performers is a very broad overarching category, so he was not certain if the Committee would pick one person from the different categories under performers.
The Chairperson said that the Committee will try to cover broadly all the relevant sectors, so the Committee can move for the adoption of the Bill with the suggested changes.
The terms of reference were adopted.
The Chairperson said the Committee can then go back to deliberating on debt relief.
The meeting was adjourned.
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