National Credit Amendment Bill: consideration; Employment Creation Fund; UK study tour report

Meeting report

Employment Creation Fund

The Chairperson welcomed everyone and began by addressing one of the issues raised by Mr D Macpherson (DA) the previous day. She had received a letter relating to the Employment Creation Fund from Mr Macpherson. In the first instance, she was not sure how the letter in question had come to Mr Macpherson. She was not sure whether it was an official letter from the Department of Trade and Industry to one of the constituents in his area. Was it a letter that had been sent officially from the Department? She noted that Mr Macpherson had also raised the matter in the House on 15 June 2018.

Mr Macpherson said that he had put the same matter into a formal question to Parliament before he had had sight of the letter about the Employment Creation Fund, which had billions of Rands to create employment. However, the funds were not being released to beneficiaries to expand businesses and create jobs. The Department of Trade and Industry (DTI) administered the fund. In the letter, Mr Paseka Masemula, the Fund Manager, had accused the National Treasury of “undermining African leadership, hosting conspiracy theories” and all manner of bizarre and other crazy things without getting to the heart of the matter of where the money was and why companies were not receiving the funds that they had been allocated. The letter had been sent to the Employment Creation Fund’s clients and to date, none of that money had been made available.

As it was the Portfolio Committee’s responsibility to oversee the DTI, it was absolutely critical that the Committee got to the bottom of what was going on, and why billions of Rands were being withheld from companies to which the funds had been committed. As Members knew from the job numbers of the previous day, hundreds of thousands of people were losing jobs, but the government was committing funds yet failing to follow through on it. It was once again the government’s inability to implement its own policies. The Committee had a duty to follow through on it, and to call DTI and the National Treasury to inform the Committee about what was going on. He formally tabled the letter to the Committee for consideration and action.

The Chairperson had gone into the matter and had distributed to all Members a one-pager with 13 points which referred to the Employment Creation Fund. She had attached the response to Mr Macpherson’s earlier question in the House, which did have some relevance. The DTI administered the fund on behalf of the cluster, and there was a process involved in getting access to the fund. It was an audited process and entailed a site inspection. Linked to the process was National Treasury. The comments of National Treasury had been added to the report and a factual finding had then been drawn up. The final part of the process involved the client or applicant, and the applicant was then taken on board, according to the 13 points.

All Members of Parliament (MPs) were aware that funding could not be concluded only on the basis of an audit report or what the Auditor-General had said. The contract needed the application of the mind of National Treasury and the DTI. The money might have been committed, but only a certain amount would be paid out. Only after all processes had been completed would money be paid out and, if there was a slip-up, the recommendations ensured that the ‘slip-up’ would be addressed so that in the future, processes could be put in place to avoid the ‘slip-up’. That was the process.

The DTI was mandated to manage the employment opportunities creation, so the Committee had to refer to the Annual Report for details. The Chairperson had spoken to the Committee Researcher, Ms Margot Sheldon, about it and had asked her to begin exercising her brain so that when the Annual Report was received, she could investigate what it said about the Fund. The Annual Report would include details of the past, as well as the plans for the future. Once the Annual Report had been consulted, the relevant stakeholders and others involved would be called. That would address the issue appropriately. The Chairperson assured Mr Macpherson that it would not be too long before the matter could be addressed.

Mr Macpherson respectfully disagreed with the Chairperson, because R508 million was owed to people in 31 projects. The economy was in a crisis, and such issues could not wait until another day. People could not continue their businesses because they could not get the funding. The letter from an official to private businesses went on to state that “conspiracy theorists” would be forgiven for concluding the stand-off with Treasury was “a deliberate and organised attempt to undermine African leadership,” and referred to powerful civil servants “hell-bent on blocking efforts to lift black people out of poverty”.

The Chairperson was not sure how the letter had got to the client. She wanted to pursue the matter and find out where the letter had come from. She did not know whether it had actually come from the Department without the Head of Department seeing it, or where it had come from. She was pursuing that aspect. If it had come from the Department, it was a very serious matter and one on which she did not want Members of the Committee shooting from the hip.

Mr B Radebe (ANC) said that Members were not privy to the letter, but he agreed with the Chairperson that the relevant facts needed to be understood. At the right time, the Committee had to call the Department and the relevant stakeholders. One did not know if the letter had actually come from the Department. If it had, it was a sad day. The Committee needed all the relevant facts, and could deal with the matter only when the people were before the Committee. However, the meeting that day had been called for dealing with the Bill and the Committee needed to focus on that matter. Until Parliament resumed, the only matters that the Committee was supposed to deal with were the Bills. In the meantime, the Chairperson could start the process and attempt to get the Department to appear before the Committee at its earliest convenience.

The Chairperson explained that she had ruled on the matter. She had addressed the letter as part of her opening remarks because the focus of the meeting was on the legislation. However, she thanked Mr Macpherson for bringing the matter to the attention of the Committee. She had only had sight of the letter the previous day, and copies had been distributed to Members that morning.

Mr Macpherson pointed out that he had forwarded the letter to the Chairperson and the Committee Secretary the previous week, and had himself made copies for distribution. It was not acceptable to say that no one had had sight of the letter until that day. The copies of the letter on the table were copies that he himself had had printed the previous day and had asked the secretariat to distribute the previous day. It was not fair that when a Member raised an urgent issue, it was set aside for other dates.

The Chairperson thanked Mr Macpherson for raising the matter. She had been in London, and had not seen the letter. She was pursuing the matter.

The Chairperson said there would be no meeting the following day, as the Committee had not yet received a legal opinion on holding a closed meeting with respect to the International Trade Administration Commission (ITAC). ITAC’s legislation did not allow the entity to disclose certain information in public. The meeting had therefore been cancelled until the legal opinion was received. The issue of the South African Bureau of Standards (SABS) had been discussed the previous day. That meeting would be scheduled for later in August. Members would be flown home earlier.

Mr Macpherson asked when the meeting with SABS would be held.

The Chairperson indicated that Mr Hermans had drafted a fresh programme. The Secretary had proposed 28 August 2018.

The agenda was adopted.

Member’s participation in Paris meeting

The Chairperson asked Ms C Theko (ANC) to tell the Committee why she had been asked to go to Paris.

Ms Theko responded that before she spoke of her trip to Paris, she would like to inform the Committee that she was joining the ANC Young Women’s Desk march that day against gender-based violence. Marches were taking place throughout the country, as violence against women was escalating.

She had enjoyed the trip to Paris, but it had been a business trip because Parliament had deployed her to participate in the World Global Steering Committee. She had represented the country on the Committee, which was led by the World Group. Countries that had participated included Malaysia, Brazil, Turkey, Ukraine and France. It was an initiative to make sure that young Parliamentarians globally had a say in their Parliaments, and to ensure an infusion of young blood in Parliaments so that young Parliamentarians could take a lead in government.

A number of objectives had been established:

• Capacity-building methods to foster alliances with youth-associated networking, and sharing national perspectives on youth development, creating hubs and developing digital infrastructure in rural areas.
• Education and life-long development and early childhood development.
• Youth economic and political empowerment, recognising internships, apprenticeships and civil engagement.
• Promising a more equitable and prosperous society.

It would be an ongoing process, with ongoing engagements, and she would hand over to the young MPs after the election. She thanked the economic cluster for sending her to represent the country in Paris.

The Chairperson thanked Ms Theko for attending the meeting. She commented that Ms Theko had been sent by the Office of the Speaker, and asked that she share her report on the trip with the Committee once she had handed it to the Speaker. The priority of the Trade and Industry Portfolio Committee was to create an enabling environment for economic development and jobs. The Chairperson indicated her appreciation for the younger Members on the Committee.

National Credit Amendment Bill

The Chairperson welcomed the officials from the DTI, including Dr Evelyn Masotja, Deputy Director General (DDG) and Mr Siphamandla Kumkani Director, Credit Law and Policy; Ms Nomsa Motshegare, Chief Executive Officer (CEO), National Credit Regulator (NCR), Mr Obed Tongoane, Deputy CEO, and Mr Lesiba Mashapa, Company Secretary; Prof Joseph Maseko, Chairperson: National Consumer Tribunal; Adv Charmaine van der Merwe, Senior Legal Advisor; Ms Saraj Naidoo, Parliamentary Officer from the DTI; stakeholders and representatives of the media. She particularly thanked the media for raising awareness of the National Credit Amendment Bill, and for taking it very seriously.

She explained that the role of the Senior Legal Advisor was to draft a framework to assist the Committee, but that Members had to tell her what to include in the new draft of the National Credit Amendment Bill. Before Adv Van der Merwe began, the DTI would make a presentation on issues raised the previous day.

DTI on NCA Bill issues previously raised

Dr Masotja referred to two areas that had been discussed and flagged the previous day. These had involved financial literacy funding and comments submitted by National Treasury.

The draft National Credit Amendment Bill introduced financial literacy training, which was two-fold -- financial literacy counselling and financial literacy training. The DTI and NCR would be developing new material and considering existing material, including that used by the credit industry, which would be adapted to suit the target audience and translated. The NCR would appoint suitably qualified trainers from within the NCR and they would work with provincial consumer protection officers and Sector Education and Training Authorities (SETAs) and their existing infrastructure. The NCR would be utilising its own people and other capacity that was available.

A variety of methods would be used for literacy training:

• An online training video would be developed for online applicants;
• Cell phone app training video;
• Telephonic counselling would be provided through the call centre;
• Face-to-face counselling through the NCR’s resources or the Provincial Consumer Protection Offices;
• Radio sessions.

The Chairperson expressed her concern that Mr Macpherson, was not in the room as he had had many questions about funding.

Dr Masotja said that it was envisaged that an estimated amount of R47 million would be required to successfully implement the prescribed financial literacy training to be funded from various financial resources. This would be derived from the payment distribution agent interest, an increase in the registration fee, and an increase in the DTI allocation.

She assured the Committee that the DTI and the NCR would be ready when the Bill was signed. They would start by looking at a review of registration fees. The NCR would start with developing materials immediately and would ensure that accessibility, simplicity, illiteracy and other factors relevant to the target audience were taken into account.

The DTI’s response to the submission by National Treasury would be to treat it like other stakeholders and acknowledge their comments, but it would respond only to the comments on the clauses that were advertised.

Issues raised by National Treasury included the need for deeper discussions with the financial sector in respect of mandatory credit life insurance. Treasury was concerned about the powers given to the Minister, and proposed that Clause 29 be deleted. Treasury had suggested that efforts should be coordinated to prevent an overlap with its responsibility for developing financial literacy.

The DTI’s response was that the Department would consult on insurance and consider the scope at the Minister’s discretion, and would collaborate with National Treasury on training. However, it reminded National Treasury that the legislation was different, and that difference had to be respected.

National Treasury had suggested that the wording should be amended to ensure that sole proprietors and trusts would not qualify for debt relief. It had proposed that the term ‘financial literacy’ be deleted and the term ‘financial capability’ be used. The lack of defined guidelines for debt counsellors on how fees and interest would be charged might render the process unworkable.

The DTI preferred the term ‘financial literacy,’ as it was in line with worldwide best practice. It was not a major decision, but it would prefer to speak of financial literacy. As far as interest was concerned, debt counsellors would make recommendations to courts, not decisions. The question of the Minister’s powers had been responded to the previous day.

Treasury had suggested that a socio-economic impact assessment be undertaken, and that it should focus on both the impact and the implementation of the debt relief Bill. The DTI had noted its comments.

The Chairperson suggested that the presentation from the Legal Advisor be made before Members engaged in discussion. She confirmed that the meetings for 7 and 8 August had been postponed.

Framework for changes to NCA Bill

Copies of the framework for changes to NCA Bill were handed out to Members only.

Adv Van der Merwe said that the document had taken into account aspects that could improve the Bill, even concerning clauses not specifically advertised. She was presenting proposals only, and was awaiting direction from Committee. Nothing was cast in stone.

Long title

The Nedbank submission had found omissions in the long title. She had worked through the entire Bill and ensured that all aspects of the Bill were included in the long title, which subsequently included logistical arrangements in respect of working with debt relief by the NCR, for courts to make an order related to intervention, for the court to determine the minimum and maximum interest, and for guidance to be prescribed in that regard.

Clause 1(b)

She had deleted the term ‘financial literacy,’ based on the request from National Treasury for the use of the term ‘financial capability’. However, the DTI wanted to keep the term ‘financial literacy’.  It was no problem legally to use only one term. National Treasury had originally proposed both terms, but had changed its opinion.

The Chairperson reminded Members that the points made by Adv Van der Merwe were merely proposals. The Members had to make the final decision. She wanted that to be very clear.

Committee discussion and vote

Ms E Ntlangwini (EFF) asked if the Committee was voting on the proposals, as she wanted to propose the use of the word ‘literacy’.

The Chairperson explained that the Committee was not yet at the point of voting. She suggested that decisions should be made after the advocate had presented a few pages.

Mr B Radebe (ANC) said that he had understood that Adv Van der Merwe was going to provide the Committee with alternatives, but the decisions would be taken only when the Committee reached the clause-by-clause stage.

The Chairperson proposed something slightly different that would take the process forward. She suggested that simple things could be decided, but where there was a debate, the matter would be carried forward to the clause-by-clause phase.

Adv Van der Merwe explained that she needed guidance where there were options in order to prepare a draft on which the Committee could vote. It would be best to have the preferred options in the draft that she presented to the Committee for the voting stage.

Mr Macpherson was a little concerned. He pointed out that the day before he had asked the Committee to consider the public input. He would have liked to engage with the public and stakeholders who had made submissions before going through the draft with the advocate. It would have made more sense if the proposal had been accepted. How was the Committee going to deal with the submissions?

The Chairperson said she understood that agreement had been reached on the matter the previous day.

Mr A Williams (ANC) said that the Committee had had so many engagements around the Bill that there was no need for further engagements. He rejected the proposal by Mr Macpherson, saying the Committee needed to vote on the matter so that the Committee could move ahead. Further engagement was just a stalling tactic. It was an attempt to undermine the process. The Committee should move forward. The Committee did have the written submissions, and Members could raise points from them should they wish to do so. He noted that the Bill had been before the Committee since 2013. The process had started when Mr G Hill-Lewis (DA) had been on the Committee, long before Mr Macpherson had joined the Committee.

The Chairperson said that the Committee needed to formalise the proposal by Mr Macpherson. She asked for a seconder.

Mr Macpherson objected to the aspersions made by Mr Williams. It was not fair that he should cast aspersions on another Member of the Committee. He had raised an issue of process, but had been accused of undermining the process. He would have thought that the Chairperson would have called Mr Williams to order.

The Chairperson took his point, although she seldom called people to order. She noted that the proposal by Mr Macpherson was very clear, and asked for a seconder for the proposal.

Mr G Cachalia (DA) seconded the proposal.

Ms P Mantashe (ANC) said that the Committee had seen all the stakeholders, and most proposals had been taken care of. The previous day the Committee had discussed the fact that the Bill was going to be taken to the National Council of Provinces, where stakeholders who felt that their proposals had not been addressed would have another opportunity to engage with the Bill. She proposed that the Committee should not hear any further submissions. The Committee had completed that process. She did not support the proposal by Mr Macpherson

Mr Radebe seconded the proposal by Ms Mantashe.

The Chairperson said that it was seldom that the Committee voted on an issue, but she believed that the Committee would not reach consensus on the matter. She asked for an indication of those who supported the proposal made by Mr Macpherson, that stakeholders who had made submissions be invited to present to the Committee.

Mr Macpherson asked that the proposal be worded as follows: Did the Committee support the proposal for those that had made submissions on the three new clauses in the Bill, to be invited to the Committee for an opportunity to present the proposals.

The Chairperson called for a vote. The result of the vote was two votes from the DA in favour of the proposal, and five votes against the proposal -- four ANC votes, plus one vote from the EFF.

The Committee had formally decided not to accept the first proposal. To contextualise the situation, the Chairperson pointed out that very few comments had been received. The advertisement of the comments was to inform stakeholders of the new matters included in the Bill. The DTI and Adv Van der Merwe were taking account of the comments, and it was essential that Members took the comments into account and to weigh them up.

Framework for changes to the NCA Bill – continued

Long title

Adv Van der Merwe proposed that the reference to the Minister making decisions should be omitted from the long title.

The change on the following page was the deletion of the prescribed debt measure, as that was a consequential amendment should the Committee decide that the prescribed debt measure be removed. She moved on to the next amendment, which was also a consequential amendment.

Mr Williams stated that he saw no point in discussing what happened if the Minister’s powers were removed before that decision had taken place. It seemed as if it had been pre-determined that the Minister’s powers would be removed.

The Chairperson agreed that it was wise guidance, and ruled that Adv Van der Merwe should skip over consequential amendments.

Mr Williams suggested that when the legal advisor suggested amendments, Members should be told by whom and when the input had been made so that the Committee could show that it had considered the submissions.

Adv Van der Merwe explained that the proposal had come from the Banking Association of South Africa (BASA) from the second round of submissions. She could not accommodate any policy proposals made by those submissions on those three clauses. However, where a submission had made a technical proposal or a proposal relating to the wording, she had taken those into consideration if they improved the quality of the Bill.

Clause 6 section 69A(2)

The Banking Association of South Africa (BASA) had expressed a concern that the Regulator might be unable to publish the information required by that specific Act. She proposed the addition of the words, ‘this Act,” to make things clearer.

Clause 11 section 85(c )(2)

In the latest round of comments, the Debt Counsellors Association of South Africa (DCASA) had requested that it be made clear that a magistrate’s court could reduce interest to zero in respect of debt review and debt intervention measures. The Committee had decided previously that magistrates could manage the debt review process. She proposed adding section 87, which dealt with that kind of order, and which would then apply to magistrates.

Clause 13 section 86A(10) & (11)

During the last intake of comments, BASA had pointed out that the Bill spoke about a review in sub-sections 10 and 11, which could be read as ‘debt review,’ whereas the clause was about ‘debt intervention’. She proposed the removal of the word ‘review’ from sub-sections 10 and 11.

Clause 13 section 86A(12)

The first deletion in sub-section 12 related to a comment made by Adv Trengrove about inconsistencies. Clause 13 section 86A(1) set the requirements for a debt intervention applicant to earn no more than R7 500, and the debt could be no more than R50 000. She proposed that the sub-section 12 be moved out of Clause 13 and inserted in Clause 29, to avoid confusion in Clause 13. All exceptions would be included in Clause 29, as the clause dealt with regulations.

Clause 13 section 86A(12)(c)

Adv Trengrove had questioned the constitutionality of Clause 13 section 86A (12) (c). She did not agree with Adv Trengrove’s opinion, but she proposed an amendment that would not allow the Minister to extend the period of time, but which would require the Minister to perform an assessment of the impact of the process no later than 36 months after the process had started, and to present it to Parliament.

Clause 15 section 87A(4)(b)

The word ‘credit’ had been omitted and would be added.

Deliberation of clauses

The Chairperson observed that Adv Van der Merwe had gone through the first half of the Bill. Members would be given an opportunity to respond to the proposed changes in the first half of the Bill before she presented the rest of the Bill. She explained that it was not a voting process, but an attempt to clean up the draft. Consequential amendments would not be addressed.

Clause 1(b)

Ms Ntlangwini proposed the use of the term ‘financial literacy’.  Mr Radebe seconded the proposal.

The Chairperson noted that the proposal was accepted in principle, and that ‘financial capability’ would be removed from Clause 1(b).

Clause 6 section 69A(2)

Mr Macpherson asked the NCR if there was a public record of those who had been through debt counselling.

Ms Motshegare informed him that the credit bureau captured the credit status of the consumers receiving debt counselling.

Mr Macpherson asked if information on consumers undergoing debt intervention would also be publicly known on the credit bureaux.

Adv Van der Merwe confirmed that the same process would apply to consumers undergoing debt intervention. A debt review application, and all steps leading to, and including, any order would be on the credit bureaux records. BASA had requested that it be made very clear that the information required by that Act could be made publicly available.

Mr Macpherson accepted the addition if that would satisfy BASA, to ensure that credit providers did not lend recklessly.

Clause 11 section 85(c )(2)

The intention was to make it very clear that a magistrate could decide upon a zero-interest rating in respect of both debt intervention measures, as well as debt review measures.

Mr Williams was happy with the clause.

Mr Macpherson said that the Committee had not agreed to that clause, and he wanted to have an in-depth discussion on the notion of zero percent interest.

The Chairperson agreed that that, and other such clauses requiring debate, would be red-flagged.

Clause 13 section 86A(10) & (11)

Adv Van der Merwe was proposing a clarification to make sure that the word ‘review’ was not confused with debt review.

The Chairperson noted that a number of BASA’s comments had been accommodated.

Clause 13 section 86A(12)

Adv Van der Merwe said that the sunset clause would be a deletion for the sake of clarity. The matter of policy could be discussed when the Committee got to Clause 29.

Mr Williams required clarity on the removal of the clause. He did not think the discussion should wait until Clause 29. Where else would the amounts be contained in the Act? Why was it being removed? Surely it had to be clarified in the actual Bill, and not just in the regulations?

Adv Van der Merwe explained that that was the confusion she was trying to remove. Clause 13 section 86A (1) referred to debt intervention applicants, defined as someone earning under R7 500 and having less than R50 000 in unsecured debt. The criteria were set out in Clause 13 section 86A(1), and applied to all debt relief applications. Clause 13 section 86A(12) had been intended to state that those criteria would not change for debt suspension and extinguishing applicants. It looked like a disjuncture in the Bill.

Mr Williams accepted the point made by Adv Van der Merwe.

The Chairperson spoke to the Committee and the media, saying that Members and the media might not engage during engagement with a Bill. This would mean that Members were not applying their minds.

Ms Theko suggested that the issue be flagged.

Mr Macpherson asked about the position of the ANC, as he had understood that the ANC had said the previous day that it would concede on that point.

The Chairperson explained that that was the ANC position on another clause.

Mr Macpherson requested that the clause be flagged.

Ms Mantashe complained that it seemed that “Business Day” served the DA in that Committee.

The Chairperson indicated that she had addressed the matter of the media. and did not want any further reference to the media.

Clause 13 section 86A(12)(c)

Adv Trengrove had questioned the constitutionality of Clause 13 section 86A (12) (c). The legal advisor did not agree with Adv Trengrove’s opinion, but she proposed an amendment. The Minister would not be allowed to extend the period of time, but would be required to perform an assessment of the impact of the process no later than 36 months after the process had started, and to present a report on the assessment to Parliament. If an impact assessment was available, a change could be made very swiftly in Parliament.

Ms Mantashe suggested that the matter be flagged.

The Chairperson said she had understood, the previous day, that all Members had agreed with the change.

Mr Williams thought that everyone had agreed that the Minister had to bring a report to Parliament. He did not see the need for further discussion. He suggested that the Committee accept the proposal.

Mr Macpherson suggested that the issue should be flagged.

The Chairperson asked if Mr Macpherson had a challenge with the report.

 

Mr Macpherson said that it related to the Minister changing the maximum salary level, and therefore one could not be flagged without flagging the other.

Adv Van der Merwe explained that it was a different issue. Suspension and extinguishing applications were limited to 48 months. The Bill had given the Minister powers to extend that period. She was proposing that the Minister provide an assessment report 36 months after implementation of the measure, and Parliament could decide whether to extend the period of time for suspension and extinguishing applications.

Mr Radebe agreed with the removal of powers from the Minister. The request for a report from the Minister would put Parliament at the centre of law making.

The Chairperson agreed that Clause 13 section 86A (12) (c) was not related to the Minister’s powers to increase the income level or level of debt. She agreed with Mr Macpherson that that clause had to be flagged, but not the one under discussion. It was accepted that the Committee agreed in principle, and the clause would not be flagged for further discussion.

Clause 15 section 87A(5)(b)

It was agreed to correct the name of the NCR. “National Regulator” was changed to “National Credit Regulator.”

Framework for changes to NCA Bill – continued

Clause 16 section 88B

The question was whether the clause on rehabilitation was necessary. There was no harm in keeping the rehabilitation period, but was it necessary? Adv Trengrove had questioned the clause, which added significantly to the complexity of the Bill, but provided for a limit on applying for credit to a mere six to 12 months

The Chairperson explained that there was nothing wrong in retaining the section, but that it had become almost superfluous. If one wanted to simplify the Bill and ensure the sophistication and flow of the Bill, it might be a good idea to remove it.

Mr Williams asked whether anyone would be disadvantaged if the clause were withdrawn. If not, he suggested keeping it in the Bill.

The Chairperson asked if the DA agreed with keeping the section.

Mr Macpherson agreed that the section should remain in the Bill.

The Chairperson recalled that during the study tour to the United Kingdom (UK), Members had been informed that consumers in the UK could not access credit during rehabilitation, except on ring-fenced items or essentials below a certain amount.

Adv Van der Merwe explained that it would add to the complexity of the Bill if a list of approved credit were added.

Clause 5 section 157B(f)

The clause dealt with offences. BASA had pointed out a reference to a paragraph (c) that was not in the Bill. The cross-reference no longer existed. It had to be removed as a drafting technicality.

Clause 29 section 171(bA)

The term ‘financial capability’ had to be removed.

Clause 29 section 171(bB) (additional paragraph)

Public comments suggested that if a magistrate could reduce the interest rate to zero, there should be guidelines for the magistrate. However, the Act did not allow for guidelines to have regulation status. The DTI had said that guidance would be given to magistrates. The solution was to provide for the Minister to make regulations that allowed a magistrate to deprive property and to make guidelines for consistency across the courts. The Bill had to guide the Minister as to what would be in the regulations.

Adv Van der Merwe had listed points raised by public input about issues that would have to be considered by magistrates, including the consideration of standard industry practices and the current agreement by credit providers as regards concessions, as that agreement had industry buy-in. Other concerns about reducing the interest rate to zero were that any luxury items should first be disposed of by the consumer. Magistrates should consider whether the consumer was in possession of luxury assets. Furthermore, a magistrate had to consider lower interest rates before suggesting zero-rated interest. A magistrate had to consider the impact on credit life insurance, and exclude the credit life insurance from the zero-rated interest.

Should the Committee give the Minister the power to make regulations in respect of magistrates approving zero-rated interest? If so, should the Bill give the Minister guidance in respect of those regulations?

Clause 29 section 2A

The section dealt with the power of the Minister to prescribe debt relief. However, it actually empowered the Minister to duplicate what was already in Bill. Adv Van der Merwe had suggested deleting the same reference earlier in the Bill.

Clause 29 section 2B

The section was related to the Minister’s power to increase maximum salary and debt levels, but those changes could not be applied to a candidate applying for suspension or extinguishing of debt.

Clause 29 section 2B(c)

The definitions would also have to be deleted if the Bill did not give the Minister the power to make changes.

Certain changes would have to be made to the memorandum, but those changes could be made once the Bill was complete.

Deliberation of clauses

The Chairperson indicated that the Committee would address the flagged issues in the second half of the Bill.

Mr Radebe suggested that the issue in Clause 29 section 171(bB) would have to be discussed further. He was concerned about the fact that the magistrate could insist on the disposal of luxury items, because there had to be clarity as to what a luxury item was. Was it a stove? The Bill was dealing with the poorest of the poor.

The Chairperson determined that the Committee agreed to flag that issue.

Clause 11 section 85(c )(2)

Adv Van der Merwe said that the clause had been included because court cases had indicated that there was no legislation allowing the magistrate to reduce the interest. There was a voluntary system, but only 18% of credit providers engaged in the voluntary system. It was agreed that most debtors would never be able to pay off their debt unless the interest rate was reduced. There had been a lot of criticism from the public, but submissions had suggested that at the very least, guidelines should be provided to magistrates.

The Chairperson commented that she had heard on the radio that not only the poorest of the poor, but those on a low income such as constables and teachers, did not realise that unless they paid back more than the minimum instalments, they could be paying forever. Those things needed to be kept in mind.

Mr Williams said that the section had to be included, otherwise the magistrate would not be able to assist the poorest of the poor, which would make the rest of the Bill null and void.

Mr Macpherson reiterated his position that the Committee should be looking to strengthen the formal credit sector, and needed to look at how that sector generated income. It should be noted that interest was the primary return on lending money. If that source of income -- when money had been legitimately lent to the consumer -- was removed then credit providers would be wary of providing credit and that would open the doors to unregulated credit providers. Within the current regulations, a magistrate was able to restructure the amount to be paid each month, the terms of payment and to suspend part of the agreement. The interest agreed to between a consumer and a credit provider was based on a contractual obligation. Would it not be problematic to remove that obligation? The clause would make the cost of credit more expensive, and would restrict access to credit by the poor, leading to an uptake by unregulated credit providers. The DA believed that it was a dangerous proposal that would lead to a massive uptake in the use of unregistered and unregulated credit providers.

The Chairperson asked whether it was constitutional.

Adv Van der Merwe explained that the reduction of interest rates did constitute deprivation of property, but because the Bill was a Bill of application, and there were processes and procedures, including a court hearing, it was not unconstitutional. The Bill was also a law of general application. However, a magistrate could not reduce the interest rate unless there was legislation to support his actions.

The Chairperson understood that it could be done, but she had heard Mr Macpherson’s comments. She asked for further comment.

Mr Radebe seconded Mr Williams’ opinion. He said the magistrate should be given discretion to reduce the interest rate to zero, where necessary. The magistrate would work on a scale of reduction, and zero would be the last resort.

Mr Macpherson explained that interest was apportioned according to risk, so the riskier a consumer was, the higher the interest rate. He wanted to know how a magistrate would be able to determine the interest rate of consumers. How would the magistrate determine the rate between, say, 10% and 0%? Would there not be inconsistency in decisions by different magistrates? How would the scale of reduction of interest work? How would a magistrate get to a zero percent rating?

Mr Williams reminded the Committee that the Bill was intended to alleviate the position of the over-indebted poorest of the poor. Parliament could not give instructions to magistrates as to how to adapt the interest rate. The decision would be the result of a process. The Bill was aimed at the poorest of the poor. R50 000 was not a large amount of money, and would not impact significantly on the banks. The person should at least be able to pay back the capital. It was a plan to help people to manage their finances and to encourage them to pay their debts. Members should bear in mind who the people were who would be in that position.

The Chairperson asked the NCR to outline the current situation and the agreement after Mr Cachalia had spoken.

Mr Cachalia reminded Members that there had been particular input from the banking sector, and that the banks had already written off large amounts of money. The banks had written off the debts. When a consumer went to the courts, that process of the banks would already have been conducted with consumers. To allow the courts to vary interest on the basis of some subjective notion would fly in the face of good law.

Mr Mbuyane asked whether the Members could learn from the study tour, and how the situation was handled in the UK. He had observed the process on the study tour.

Ms Motshegare presented the current situation. The Task Team Agreement had been arrived at following an agreement between credit providers, together with the NCR, to assist over-indebted consumers to pay back what they owed credit providers. Credit providers were able to provide concessions and reduce interest rates for consumers.

Mr Mashapa, NCR Company Secretary, said that the agreement was in section 48(b) of the National Credit Act. It was part of the agreement for registration that the credit industry would combat over-indebtedness. The credit industry had a code of conduct. There was no personal bankruptcy law in South Africa. The Bill was proposing a different process from the insolvency process. In insolvency, the debtors received only the value of a consumer’s assets at that time. In the Bill, there were three options to assist the consumer to repay. It was a common problem that many creditors lost their capital. If the repayment plan was adjusted or interest rates adjusted, even to zero percent, there was a chance that a creditor could at least recoup the capital.

The Chairperson said that society had moved away from the Dickensian era. The UK worked with the Exchequer to adjust interest rates, but there were different approaches in various parts of the United Kingdom. Wales was far more lenient, as there had been great consumer distress in Wales. England was primarily concerned about the survival of the Bank of England. Scotland took a more measured approach.

Ms Sheldon, Committee Researcher, said that the UK model was about extinguishing debt. However, the clause in the Bill related to both debt review and extinguishing debt. It had to be remembered that there would not always be consensus by all credit providers, and the magistrate could overrule those credit providers who were not willing to drop their interest rates.

The Chairperson agreed that the principle of sufficient consensus would not necessarily prevail. Stakeholders had advised the Committee to put it into legislation that magistrates could determine interest rates.

Mr Macpherson reminded the Committee that Mr Williams had stated that the Bill was aimed at the poorest of the poor. Making credit more expensive for the poorest of the poor would be the consequence of the section, and that would affect the poorest of the poor. In the long term there would major problems for those poor people who wished to borrow money if registered lenders could not make a profit.

When it came to debt extinguishment, there were very clear processes, but the question was how far the zero-rate interest would extend. Once a category of zero-interest had been created, it would become very easy to extend that to other aspects of credit provision. He had understood that the Bill was to have been about ensuring that the poor had access to debt counselling and debt review. His aim in supporting the Bill was to help the poorest by ensuring that they could continue to remain in the credit market. There were caps on interest rates. There were affordability criteria. How would a magistrate decide who got 5%, who got 2% and 0%? Would the percentage drop with every re-application?

The Chairperson explained that consistency in decision-making by the magistrates was the very reason for the guidelines in the Bill.

Ms Mantashe noted that during the study tour, there had been no evidence that introducing debt relief had made loans more expensive, so she did not want the Committee to keep going back to that point, as there was no evidence to substantiate those claims.

The Chairperson added that the comparison studies presented to Members the previous year had shown that that was also the case in other countries, such as Croatia and India.

Mr Williams noted that the NCR had said that insolvency did not apply to the poor, and rich people went insolvent daily, but the credit providers had not gone bankrupt nor had the cost of credit skyrocketed. The poorest needed the same protection that rich people had when they ran into financial problems.

Mr Radebe said that Mr Williams had covered most of his points. Senior Counsel Trengrove had already stated that the procedure for debt review and intervention was long, thorough and perhaps even unduly arduous. Why should the interest gradually be reduced when someone was poor, while rich people went insolvent immediately they found themselves in difficulties? He felt deeply and strongly that the Bill had to help the poor that he saw every day. ANC Members would never agree with Mr Macpherson, because in the constituencies that they represented, they saw poverty and the impact thereof every day. The ANC would never agree with the DA.

The Chairperson said that everyone had given input and it had become clear that no consensus would be reached. She ruled that that section be flagged and put aside until the Committee reached the clause-by-clause phase.

Clause 1 section 1(b); Clause 13 section 86A (1); Clause 29 section 171(2B) (a), (b), (c), (d)

All of the above clauses needed to be read together. Clause 1 section 1(b) and Clause 13 section 86A (1) contained the two legs to the process of increasing the maximum wage and the maximum unsecured debt levels. Those two clauses had to be read together with Clause 29 section 171(2B) (a), which prescribed the factors that the Minister had to take into account to adjust the maximum income prescribed in section 1. Clause 29 section 171(2B) (b) prescribed the factors that the Minister had to take into account to adjust the maximum prescribed debt in section 86A (1). Clause 29 section 171(2B) (c) required the Minister to table an assessment of the measure, and to give a rationale for the proposed change. Only once the Minister had the approval of the National Assembly could he make the adjustment. Clause 29 section 171(2B) (d) stipulated that such a change in maximums could not apply to an applicant for debt suspension or debt extinguishment.

The Chairperson noted that the proposed amendments attended to the problem of the Minister making decisions on his own without the approval of the National Assembly.

Mr Williams agreed that the sections relating to adjustment of the figures would be necessary over time. It dealt with what was going to happen when inflation eroded the value of R7 500. He thought that the clauses were acceptable.

Mr Macpherson wanted to see a safeguard in terms of when the Minister might be able to do that, and how many times a year he could do it. Was there a timeframe according to which the Minister should introduce the change? He suggested that the period for an adjustment of the figures should be one or two years, or a maximum of three times a year.

Mr Williams conceded that Mr Macpherson might be correct, but that the adjustment could take place annually.

The Chairperson suggested that the review should take place annually.

Mr Williams said that the Minister had to look at it annually, and had to come to Parliament only if he wished to propose a change.

The Chairperson asked how the House would know that the Minister had reviewed the matter annually.

Mr Radebe suggested that after the review, the Minister should present a report to Parliament.

Mr Macpherson believed more clarity was best. He did not agree with an annual review, but suggested that there should be a specific period by when it should take place. It should not be more than the Consumer Price Index (CPI).

The Chairperson suggested that inflation would take into account the CPI. She noted that there was no consensus on the details of the timeframe.

Clause 29 section 2A

Adv Van der Merwe informed the Committee that the next major issue was about the Minister being able to prescribe a debt intervention measure. The section dealt with the power of the Minister to prescribe debt relief in the light of an exogenous shock or natural disaster, including who would benefit and the process itself. Adv Trengrove was of the opinion that it was a delegation of plenary powers. When that portion had been drafted, the legal opinions of Malindi and Budlender, and of Marcus and McConnachie, were that if the section focused only on exogenous shock and natural disaster, it would pass constitutional muster.

Adv Van der Merwe believed that there was an implementation concern, and not a concern about the delegation of plenary powers. The terms ‘exogenous shock’ and ‘natural disaster’ were very difficult to define and the definition used gave no more meaning than a dictionary definition. In order to define the terms more effectively, one would have to limit them, but the moment that they were limited they would lose their effectiveness, and something could happen that fell outside of the scope of the definition. The second problem was that the Bill needed to tighten up on who could benefit, but if that was tightened up, the Bill would stipulate that the Minister could prescribe only exactly what was in the Bill. Then it was unnecessary for the Minister to prescribe regulations. Her recommendation was that that section be removed.

Mr Williams said that removing the clause was the easy way. What would happen to the poor who would need instantaneous relie? He asked what had happened to the debt of the poor people following the fires in Knysna. The reason the clause had been inserted was so that poor people could be protected in such an instance. He understood the advocate’s position, but he was still of the opinion that there should be some mechanism to protect people in those circumstances. However, to move forward, he would agree to removing it.

Mr Macpherson asked about the regulations in respect of the guidance for the magistrate’s court. He was curious about the inclusion of ‘luxury items’. He would consider that the disposal of goods that could realise assets would have been less subjective.

With respect to the contractual obligation between the provider of the credit life agreement, it was clear that if payment was not made, the credit taker would have no cover. It was a separate insurance payment within the debt. He did not believe that one could reduce the amount payable on credit life insurance.

He added that if there were a disaster, the Committee was within its rights to develop and pass a Bill. It could be done in four days if an assessment had already been undertaken. Assistance was already provided to those people who had lost their jobs. Why should employers who terminated jobs not be required to go through the credit agreements with employees? He noted that credit insurance should cover the credit in such a case. It needed to be a joint responsibility of the employer as well as the credit provider to ensure that the employees benefited from their credit life insurance.

Mr Williams agreed that employer should do that to protect the vulnerable. However, it would need to be made compulsory.

Mr Radebe had flagged the section about disposing of a luxury item for precisely the same reason. The Committee Members should apply their minds thoroughly to that issue. He believed that ‘Acts of God’ were actually “acts of the devil,” and not something that God would do. God should be taken out of the legislation.

The Chairperson agreed that the reference to “Acts of God” should be omitted from the legislation, even though it was a term used by insurance companies. She wished to separate the two issues contained under Section 29. She asked Committee for a clear consensus. Was there consensus that the proposed draft be accepted? She asked Members to focus on the original section 29. Mr Williams had made a passionate plea for the legislation to protect the vulnerable.

Mr Macpherson said he had thought that there seemed to be broad consensus in the Committee to do away with the powers given to Minister. However, in cases of exogenous shocks, there was an opportunity for employers to be compelled to provide guidance about the credit situation of their employees. That would go some way to alleviate the concerns of Mr Williams.

Mr Williams said that if an emergency situation arose, the Committee could develop an emergency Bill. If the Committee could do it in four days, that would be even quicker than the Minister could do anything. He thought that the Committee should remove the section giving the Minister powers to prescribe measures in an emergency. He added that if the Committee wished to add the part to be played by employer, the Bill would require public comment and the Members would have to engage with labour and other stakeholders. It was a good idea, but it should not be incorporated in the National Credit Amendment Bill, as it would slow things down.

The Chairperson said that it appeared that the consensus in the Committee was that the powers of the Minister be removed. There had been some proposals in respect of the new clause 29, and maybe it was not necessary to throw it out in its entirety. The entirety of Mr Macpherson’s proposal did not fall under the Committee’s mandate. However, there might be aspects of Mr Macpherson’s proposal that could be incorporated.

Adv Van der Merwe said she was aware that the additional section that she had written that morning was not well written. She had found the details in the submissions made in response to the three advertised clauses. She pointed out that the DTI had suggested the use of the word ‘disposal’, in place of ‘liquidation.’ ‘Luxury items’ could be changed to ‘realisable assets.’ She added that the Department of Justice and Constitutional Development was reviewing the Magistrates Act.

If the Committee accepted that the power of the magistrate to reduce charges was retained in the Bill, then she recommended that there be guidance for the Minister to develop regulations for magistrates to ensure consistency across all magistrates’ courts. The Act itself, in Section 86, had its own limitations. She pointed out that the reduction of charges by the magistrate would come about only if the consumer was over-indebted and the consumer had gone through the debt review process with a debt counsellor. The debt counsellor would recommend to the magistrate what should be done.

The Committee could decide that the Act already provided sufficient guidance. However, the DTI had indicated that it wanted to provide guidance to magistrates, but that would not have the status of legislation unless the clause was inserted making that guidance formal. A regulation clause would have to be added to the Act.

The Chairperson suggested that if the Committee was going with guidelines, this had to be incorporated in the primary legislation.

Mr Radebe agreed that guidelines for magistrates were necessary. Too often the law was silent about important issues.

Mr Macpherson asked for some response on the reduction of charges on credit life insurance.

The Chairperson also observed that lower income consumers could not be sequestrated, nor did they fall the under the bankruptcy laws. She asked for clarification.

Adv Van der Merwe indicated that she had intended that charges on credit life insurance charges should not be reduced. The wording needed more work to make that clear. The reduction of interest rates did not come into play during sequestration, as the creditors received only what was available at the time of liquidation.

Mr Williams said that it was hard enough to deal with the legislation when the wording was correct, and he was therefore extremely concerned about the advocate bringing work that was not correctly worded. Members had been confused and had wasted ten minutes talking about the matter. Members could not have incorrectly worded clauses, as that could result in hours of unnecessary debate. From that point onwards, the work must be correct before it was presented to the Committee.

The Chairperson commented that the wording was not wrong, but perhaps a little too cautious.

Mr Williams said that he was talking in general, not only in relation to those particular clauses. He did not want clauses where the advocate admitted that she had quickly done the work that morning, and would have to change the language.

The Chairperson said that she did not like phrases such as ‘admitted’. She was not an official of the justice system. In fairness, the Committee had known that the advocate had to bring something back. She had brought what the Chairperson had called a ‘framework draft’. It was not her Bill. It was the Committee’s Bill, and every Member had to draft the Bill, which Members had done, literally, 20 years previously, although it had taken a lot longer to draft legislation. Now the Committee could ask for legal assistance. She agreed that perhaps the Committee had spent a long time on a clause unnecessarily. Mr Williams’ point would be taken on board. She suggested that the advocate offer alternative phrases in future. There was agreement that the credit insurance life charge was not to be reduced. That was the phraseology that would be adopted.

The next question was the disposal of luxury items. The Magistrate’s Act called a bed a realisable asset, but the Chairperson did not believe that that was acceptable.

Mr Williams said that the sub-committee had not wanted to define a luxury item. Earning less than R7 500 meant there would be no luxuries in the home, except perhaps what had been inherited. That was why ‘luxuries’ had been removed from the Bill. That would be making poor people even poorer. He rejected any definition of luxury goods.

Mr Macpherson disagreed with Mr Williams. If someone had bought a fridge and applied for debt intervention, that person was getting the fridge free of charge. One could create a culture where people were able to acquire assets free of charge. That was the moral hazard.

Mr Radebe said that the issue had been resolved, as the advocate would re-word the clause, but she had to deal with the issue of luxury items by considering the people that the Bill was intended to serve.

Ms Mantashe added that it sounded as if Mr Macpherson was of the view that a black person did not deserve to have a fridge. Black people had every right to have fridges, beds etc.

The Chairperson reminded the Committee of the Task Team Agreement which defined luxury goods as goods that one did not need.

Prof Joseph Maseko, Chairperson: National Consumer Tribunal, explained that what could be attached when a person was being sued was stipulated in the Sheriff’s Act. It was better to be silent on the matter in the Bill, as the Sheriff knew what could and could not be attached.

The Chairperson thanked him for the guidance, and pointed out to the Committee that it had already been assisted in that regard, so the matter of luxury items could be deleted.

Mr Macpherson said that, once again, it was disappointing that racial epithets were being bandied about. There was a view in the Committee that white people could not understand what black people needed. He objected to the attitude of certain Members of the Committee. The race of the person was irrelevant to the discussion, as it was about poor people. He asked the Chairperson to guide people away from racial labelling.

The Chairperson had not heard the reference to black, but she could check it in Hansard. What she had heard was that no one in that room would understand poverty. She did not know Ms Mantashe as one who was racist.

Mr Williams noted that Mr Macpherson kept referring to a ‘moral hazard,’ but the study tour had shown that a ‘moral hazard’ was not a factor in the process. The poorest of the poor were the last to exploit a moral hazard. The moral hazard lay in people of a certain race who had stolen the Road Accident Fund and had run away to Australia. He did not believe that the legislation would result in a moral hazard.

The Chairperson said that Professor Jacobs had reminded them that there was guidance available. While South Africa was trying to build a non-racial country, the past had to be addressed, and invariably the past included one racial group. She was aware that at one time the Afrikaans people were extremely impoverished and Afrikaans learners had had to go to school barefoot because their parents could not afford shoes. The reality was that the Land Act of 1913 had changed things. The Committee was not addressing race per se, but a particular target group based on poverty. People who had never paid tax were often persuaded to pay for one thing and then something else would be written off. It was pragmatic to get money back, but that opportunity was not regularly offered to low income people and the poorest of the poor.

The Committee wanted to encourage responsible borrowing and not only hammer reckless lending. She added that the Committee had been told that it was difficult to arrest illegal lenders, and the police could arrest them only when they retained people’s identity cards, as there was no legislation preventing illegal lenders.

The Chairperson wanted the Members from all parties to work together to prepare a robust piece of legislation that would survive and be the pilot for future legislation. She thanked those present for working with the Committee, and thanked Members for applying their minds to a very difficult piece of legislation.

Committee Programme

The programme was handed to Members. The Chairperson said that the meeting of 14 August was starting at 11h00, as it was difficult to get from the Eastern Cape to Cape Town. On 28 August, SABS would appear before the Committee. ITAC would appear on the same day.

Mr Mbuyane asked that all Tuesday meetings begin at 11:00 because of the logistical challenges.

The Chairperson explained that she could decide the time on 14 August, but after that the normal Parliamentary programme kicked in and meetings had to start at 09h00.

Closing remarks

The Chairperson asked Members to commit themselves on Women’s Day to mapping out a plan for the year ahead that would increase the respect that women should enjoy and reduce the violence against women and children.

The meeting was adjourned.