'Debt Intervention' National Credit Amendment Draft Bill: Nedlac submission

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Trade and Industry

20 February 2018
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Business Unity South Africa (BUSA) was present to represent the Business constituency in NEDLAC and COSATU represented the Labour constituency. Business was disappointed at the decision of the Committee to bypass the NEDLAC process for the Draft Bill. Business maintained that there was a need for a Socio-Economic Impact Assessment (SEIAS), as it allowed legislators to pre-empt concerns. Business proposed that the Committee engage the Reserve Bank on its offer to conduct a quantitative impact study. Business said that the onus on credit providers to report suspicion of reckless lending was impractical. Sharing of such information could fall foul of competition law. Powers granted to the National Credit Regulator (NCR) to investigate and adjudicate were overly broad and unconstitutional. Proposals on debt intervention could increase the cost of credit. There were constitutional concerns about debt intervention. Many credit providers were not licenced insurers, which could increase the cost of credit. The Bill could be challenged on the grounds that credit providers need not to have demonstrated intent in reckless lending. Business stood ready to offer support for an impact assessment conducted by the Committee.

COSATU welcomed the Draft Bill. There had been attacks by Business and attempted delays, but National Treasury and the DTI supported the Bill. COSATU recognised the current high levels of indebtedness and abuse, and supported the progressive provisions. COSATU was in favour of inflationary adjustments for the R7 500 and R50 000 limits, and the R10 000 amount on realisable assets such as household goods to be increased to R25 000. On penalties, attention had to be given to fines and imprisonment; loan sharks; and bank accessibility, rates and criteria. Areas needing attention and amendment were home, vehicle and farm loans; abuses and corruption; bank rates for the poor and rich; ownership of other lenders by commercial banks; retrenchments; outsourcing and rural branch closures in the banking sector, and a state bank for the poor and rural areas. Proposed amendments included a R50 000 exemption for student loans.

In discussion, there was general agreement that passing the Draft Bill was a matter of urgency, especially in the light of the approaching election year. There was some divergence of opinion about the involvement of NEDLAC in the Bill process, even within the DA. One DA Member insisted that NEDLAC involvement would challenge the primacy of the Committee, as it was a Committee Bill. The other DA Member felt that business opposition, as expressed by BUSA, was not to be ignored for the sake of political expediency, and that it was not advisable to rush the Bill through. The Chairperson countered that argument by saying that debt relief had been considered an urgent one for eight years.

The DA challenged COSATU on its assumption that the Draft Bill was a response to unethical conduct by credit providers as the National Credit Act could deal with that. COSATU was asked to provide support for the wholesale reform of the NCA. On constitutionality, the DA questioned BUSA on debt extinguished retrospectively, but the ANC was skeptical about business doubts about constitutionality. The EFF challenged business about its inability or unwillingness to prioritise the fact that the vast majority of the overindebted were black, and the lack of counter proposals from business. The EFF also called for strengthening of the NCR. There were remarks and questions about who would do the SEIAS; the need for an independent legal opinion; how the Draft Bill would affect small retailers; competition law, and rural community issues. The Parliamentary Legal Adviser dealt with questions about NEDLAC involvement by stating that the Committee had done its legislative duty, as far as NEDLAC was concerned.

Meeting report

Introduction by Chairperson
The Chairperson referred to the investment by Isuzu which took over the General Motors operation. General Motors had disinvested from South Africa the previous year, due to a position taken by the US President. GM had also pulled out in other places. The Minister had tried along with other Ministers and the private sector to attract interest to fill the gap. She asked the DTI Director General, to comment.

Mr Lionel October, DTI Director General, commented that the automotive industry contributed 7.5% of the GDP, and employed 200 000 workers. VW at Uitenhage was the largest centre. General Motors (GM) was at Port Elizabeth, and in Tshwane it was Ford and BMW. GM did not do well in the SA market. It had underinvested for a long time, and could not produce the 50 000 units required to qualify for the incentive scheme. Isuzu produced vans and cars, in addition to Toyota. The Isuzu investment proved the sustainability and competitiveness of the automotive industry. It was possible to quickly put in a new investor, after an appeal for support.

Mr G Cachalia (DA) added that the CEO of GM had stated that returns on investment were not high enough.

Mr D Macpherson asked that the Minister or the DG comment on BEE buyout options, that multinationals were capable of. He asked how that squared up with local BEE requirements.

The Chairperson answered that it could be addressed.
 
BUSA submission
Mr Michael Lawrence, who represented business through BUSA in the NEDLAC Trade and Industry Chamber, said business was disappointed at the Committee decision to bypass a NEDLAC process for the Draft Bill. It was felt that the NEDLAC process could provide a multisectoral perspective that included the voice of small business and less well resourced sectors. Business maintained that there was a need for a Socio-Economic Impact Assessment System (SEIAS), as it allowed legislators to pre-empt concerns and mitigate problems. Business proposed that the Committee engage the Reserve Bank on its offer to conduct a quantitative impact study. Business felt that the onus on credit providers to report suspicion of reckless lending was impractical. Sharing of such information could fall foul of competition law. Powers granted to the NCR to investigate and adjudicate were overly broad and unconstitutional. Proposals on debt intervention could increase the cost of credit. There were constitutional concerns about debt intervention. Many credit providers were not licensed insurers, which could increase the cost of credit. The Bill could be challenged on the grounds that credit providers need not to have demonstrated intent in reckless lending. Business stood ready to offer support for an impact assessment conducted by the Committee.

COSATU submission
Mr Matthew Parks, COSATU Parliamentary Coordinator, said COSATU welcomed the National Credit Amendment Draft Bill. There had been business attacks and attempted delays, but Treasury and the DTI supported the Bill. COSATU recognised the existing high levels of indebtedness and abuse, and supported the progressive provisions. COSATU was in favour of inflationary adjustments for the R7 500 and R50 000 limits, and for the R10 000 household goods amount to be increased to R25 000. COSATU said attention had to be given to fines and imprisonment; enforcement; destroying loan sharks; bank accessibility and differing rates for the poor and rich; vehicle and farm loans; abuses and corruption; ownership of other lenders by commercial banks; retrenchments; outsourcing; rural branch closures in the banking sector; and a state bank for the poor and rural areas. It proposed a R50 000 exemption for student loans.

Discussion
The Chairperson remarked that the business and union members of NEDLAC had each presented in their own right. Many of the issues had been raised before, but the meeting provided the opportunity to engage directly with NEDLAC.

Mr A Williams (ANC) asked if BUSA agreed with COSATU that a NEDLAC process could be completed in two to three months. He said the conventional NEDLAC process could slow things down until 2019. He asked if there could be a swift conclusion to the process.

Mr G Cachalia (DA) asked if the Draft Bill had to go through NEDLAC, seeing that it was a Committee Bill, and not a Cabinet Bill. He was concerned that if it went through NEDLAC, MPs would be sidelined in the process. It was a Committee Bill, and had to be managed in the Committee.

Ms N Ntlangwini (EFF) agreed about the urgency of passing the Bill. The question was who was addressed via the Bill. In all the submissions during the public hearings, one thing was consistently overlooked. The people that had to be helped through the Draft Bill were black people. The big banks protested that the country would lose out economically. It was never mentioned that the majority of the overindebted were black. The capacity of the NCR had to be looked into. It had to be strengthened as a body, with regard to its human resources. Parliament could advise on the matter. BUSA had missed out on the opportunity to make counter proposals. It was a cry baby scenario. BUSA had failed to make concrete proposals.

Mr D Macpherson (DA) commented that it was a Committee Bill, and hence MPs were responsible for its success. There were still a lot of questions to be answered, and it was not proper for the Draft Bill to be rushed through for the sake of expediency. He reminded the Committee that the Intellectual Property (IP) Bill was sent back to Parliament by the Constitutional Court, as the Portfolio Committee had not done sufficient oversight. Comments that ignored business opposition were not helpful, as it presumed that there was only one correct voice. Concerns were raised on all sides, and all voices had to be listened to. He said that Mr Ehrenreich was mistaken about what the aims of the Draft Bill were. It was not a response to unethical conduct of credit providers. The National Credit Act (NCA) and the NCR had to address that. It was not the object of the Draft Bill to address reckless lending. According to the Act, if any party was found guilty of reckless lending, the debt had to be extinguished immediately. There was no need for a process. Mr Ehrenreich’s argument was well made, but it pointed in the wrong direction. He advised him to rather support the Committee cause for the wholesale reform of the NCA. The Draft Bill failed to deal with unscrupulous lending. Treasury had commented that one to nine million could be assisted. But that amount would probably be doubled, if people indebted to non-registered credit providers were counted in. Only people indebted to registered credit providers were as yet taken into account. BUSA recognised the importance of a SEIAS. He asked if the DTI could provide clarity on whether that would have to be done by the Committee or someone else. He referred to concerns about the constitutionality of the Bill. There was the question of debt being extinguished retrospectively. He had made about 20 appeals for a legal opinion on the constitutionality of the Draft Bill. Business concerns could not be ignored.

The Chairperson told Mr Macpherson that his comments were valuable, but it was a Committee Bill, and what he had raised had to be part of Committee deliberations, and not of the current engagement.

Mr Macpherson answered that BUSA and COSATU were competent to respond on that. The question was how the Draft Bill would affect small retailers that provided credit. He agreed that NEDLAC was not to be used as a stumbling block to the process, but it was not to be ignored for reasons of political expediency. It was necessary to hear from BUSA and COSATU why NEDLAC had to be part of the Bill process.

Ms P Mantashe (ANC) commented that BUSA had referred to the possible unconstitutionality of the Draft Bill, but it was not known who BUSA represented. She asked COSATU if the R7 500 cap and the R50 000 limit had been researched, and if the research was available.

The Chairperson noted that the BUSA submission referred to small business. The Draft Bill would be tabled in the Committee, and would then go out to the whole of NEDLAC. It would be gazetted as being open to public response, and submissions were awaited. The NEDLAC reference to SEIAS was well taken. There was reference to competition law but it was not spelled out. The Committee would look at the constitutional issues raised, through engagement with COSATU and SACTU. She referred to household and student loans. The Committee had decided not to deal with student loans. There were proposals to increase household goods debt, but it had already been increased beyond R2 500.

Mr Lawrence from BUSA answered Mr Williams about a speedier NEDLAC process. It was not based on the fact of the elections in 2019, but rather on practicality of implementation. Speed was called for, for pragmatic business reasons. BUSA supported a shorter time frame. He answered Mr Cachalia that NEDLAC usually got Bills from government departments. It did not believe itself entitled to deal with a Committee Bill. He answered Ms Ntlangwini that a SEIAS would address the profile of those overindebted. It could be different to national profile statistics. The question was whether a market profile had been determined by particular regions or sectors. It was not possible to make counter proposals in the absence of a SEIAS. SEIAS and Reserve Bank research could give clarity on the grey areas in the Bill. There were concerns about anecdotal issues. He answered Ms Mantashe that all business sectors referred to the Draft Bill’s constitutionality. BUSA was concerned that there were too many flags going up. It did not matter whether it was red, yellow or green. NEDLAC did not have a legislative mandate that could sideline Parliament. There was a lack of clarity about competition law. A SEIAS could help provide clarity on competition law. Counterproposals could be put on the table once there was independent research acceptable to all parties. NEDLAC respected the role of the Committee, and did not want to undermine or diminish its role. NEDLAC concerns were with implementation.

The Chairperson remarked that the advice of Senior Counsel would be sought on the Bill’s constitutionality.

Mr Parks replied that a NEDLAC process could be concluded within three months. Fast tracking could be encouraged by a commitment to weekly meetings. The Bill was not to be allowed to die because of the 2019 elections when all legislation in Parliament would lapse. He answered Mr Cachalia that there had been a similar debate a year or two before, around other legislation. Labour and socio-economic legislation had to go to NEDLAC first. In the current instance, the Committee represented government. He agreed with Ms Ntlangwini that the Draft Bill had to assist the poor. The approaching 2019 election was a real challenge, it could cause conclusion of the Draft Bill to be deferred to 2020 or 2021. Time frames and due process had to be balanced. The Committee had other legislation to deal with, and the Draft Bill should not to die a quiet death in Parliament. COSATU was happy about the R7 500 qualifying amount, to target the poorest of the poor. The R50 000 was a Committee proposal that COSATU was not opposed to. COSATU had flagged student debt. If the parents were police officers or teachers, student debt that could run up to R100 000 a year, could not be afforded. COSATU had flagged household debt, as it insisted that the Draft Bill had to address the needs of the poorest of the poor.

Mr Tony Ehrenreich, COSATU Western Cape Provincial Secretary, affirmed that there was no intention in NEDLAC to exclude MPs. NEDLAC would look for the most elegant way to manage the Bill, and to deal with challenges that could delay the Bill.

Mr Ettiene Vlok, SA Clothing and Textile Workers' Union (SACTU) researcher, responded that there were two themes to the discussion. The first was the question whether intent would be honoured, and the second was time issues. Honouring of intent was a big issue, as a lot of energy had been invested. There was strong support on the part of Labour for the intent and form of the Bill. Business was also speaking to satisfying the intent of the Bill. Business should not be party to watering it down. It was not necessary for Business and Labour to agree at NEDLAC. If Labour believed that Business would want to fundamentally alter the Draft Bill in a way that would shatter its spirit, it could disagree, and the opinions of the different constituencies could be included in a NEDLAC report.

The Chairperson remarked that the Committee had engaged with other organisations.

Mr Williams said that the Committee understood that if the Draft Bill went to NEDLAC, it could reject the NEDLAC report and recommendations. He asked COSATU and BUSA if they thought that it had to go to NEDLAC. The Committee had maintained that student bank loans could not be written off because then the same would have to be done for government student loans.

Mr Macpherson commented that NEDLAC could be embraced in the spirit of the new dawn. He asked who would have to be responsible for the SEIAS, whether it would be the Department of Planning Monitoring & Evaluation (DPME) or the Committee itself.

Ms Ntlangwini said that she wished to allay the fears of her colleagues. The Committee was doing well under the leadership of the Chairperson. Things were not swept under the carpet, as they were in some other Committees that she attended. BUSA misunderstood the object of the Bill, and everyone failed to enlighten them. The majority of overindebted people were black. There had to be a breakdown in terms of retail, clothing, and others, without underplaying that point. Blacks were overindebted. The Senior Counsel opinion would help iron out the grey areas. The Bill process had to be concluded before the Fifth Parliament closed.

Ms Mantashe said that it was not a matter of rushing the Draft Bill through before the elections. It was rather there was an urgent need to rescue people from the pool of indebtedness.

Mr Cachalia emphasised the primacy of the Committee. It was a matter of not wasting time, balanced against inappropriate haste. He was of the opinion that the Draft Bill did not have to go through NEDLAC. He would ask, like Mr Macpherson, about the status of whoever commissioned the SEIAS. He asked if the SEIAS would be for the benefit of the Committee, or whether other constituencies would conduct their own assessments.

The Chairperson asked the Parliamentary Legal Adviser to comment.

Adv Charmaine van der Merwe, Senior Parliamentary Legal Adviser, commented that it was a novel process for NEDLAC. The Parliament drafting unit had contacted NEDLAC to confirm how things worked. NEDLAC had advised that NEDLAC be brought into play. The Act required that NEDLAC had to consider all changes to socio-economic policy. But the Act did not describe a process. The drafting unit spoke to officials at NEDLAC and they pointed out that there was no process. The Committee members were advised to go to NEDLAC. But the problem was that it was easy for one person to fly up, if it was a Private Member Bill. But for a Committee Bill, if the whole Committee had to be involved, there would be logistic challenges about who would be sent, and who would provide inputs. In terms of legislative process, the Committee had complied with the Act. A letter was written to NEDLAC to bring the Draft Bill to its attention. NEDLAC could come to the Committee to state its considerations. On the SEIAS, the Committee had done some work on impact with Treasury, and had allowed presentations. Requirements for SEIAS were usually a Cabinet decision, but a Private Member’s Bill or a Committee Bill was not subject to that. Whether that was good or bad practice was a different argument. Concerning SEIAS, the National Assembly Rules required that a Private Member or Committee had to consult the Department, as the Department had to implement the Bill. If the Draft Bill impoverished the economy of SA, the Department had to bring its concerns and objections to the Committee. A DTI representative of the SEIAS unit had attended the presentations. The DTI was aware of possible impacts and would advise on it. The DTI had also offered to conduct a SEIAS. The Committee had done its legislative duty and was continuing to do so.

The Chairperson remarked that the debt relief issue had already appeared in the Committee Annual Report in the Fourth Parliament. It was placed on the radar in 2014, but there was no follow-up. People had to be clear about what they said when they referred to rushing or railroading the Bill. The issue had been around for eight years. It was taken up by the current Committee in 2016. Elections were every five years. It was imperative that the Committee get on with its work. She asked that Members understand the volume of the work to be dealt. There would have to be meetings on Thursday or Tuesday night, and on Saturday mornings. She emphasised that when legislation was on the table, it had to take precedence over oversight trips. Every party in the Committee took legislation seriously.

She told BUSA that she knew how business thought, as she had been personally involved, but she also knew how villagers thought. Issues related to rural communities were not to be overlooked. She was in weekly contact with informal settlements and understood their hardships. The President had made it clear that the time had come for South Africans to set aside parochial differences when socio-economic issues came up. Business wanted to cooperate but there were challenges around the grey areas in the Bill. BUSA had mentioned challenges in its constituency related to that. The Subcommittee on the Bill was chaired by Mr Williams, and consisting of Mr Macpherson, Ms Ntlangwini, Ms Mantashe and Mr Mbuyane. It did detailed work, with inputs from different parties. BUSA need not fear that the voice of business would not be heard. The voice of workers would also be heard. She thanked all who had participated, and also Treasury for being present. She welcomed visitors from the Eastern Cape and explained to them what the meeting was about.

Mr Ehrenreich noted the concerns raised about the primacy of the Committee. This would be attended to in the next Trade and Industry Chamber meeting. He asked that the minutes of the day’s meeting be made available for that purpose.

Mr Lawrence added that BUSA was in support of that, as it would give NEDLAC a chance to close the loop.

The Chairperson announced that the Subcommittee would meet on the following day.

Mr Macpherson asked the Chairperson about her reference to oversight.

The Chairperson replied that she had referred to the Committee Report on the sugar cane growers. She told Mr October that it was not currently possible for the Committee to travel overseas.

The Chairperson adjourned the meeting until the 27 February 2018.

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