'Debt Intervention' National Credit Amendment Bill; ITAC confidentiality request: legal opinion

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Trade and Industry

15 August 2018
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Parliamentary Legal Services had been requested to provide an opinion on whether the International Trade Administration Commission of South Africa could present information on sugar tariffs in an open meeting of Parliament or whether it was a confidential matter and had to be closed to the public. Section 29 of the Constitution stated that Parliament had to be open and transparent as far as possible and, generally, meetings should be open to the public. Only when it was justifiable, could Parliament hold a closed session. The view of Legal Services was that the information relating to investments should be considered in camera on the basis that, firstly, in terms of its Act, ITAC had deemed that it was confidential. Secondly, to protect trade secrets and economic information, the information could only be made available to the Committee. ITAC could make the information available to the Committee in order to enhance the Committee’s oversight obligations. The recommendations made by ITAC to the Minister about the sugar tariff were confidential until the Minister had made a decision. However, as the Minister had made a decision the previous day, and had informed the public, that information could be made available in an open meeting.

Members asked what, exactly, were the trade secrets that were being protected in respect of ArcelorMittal. Why should information about the business model of ArcelorMittal, a publicly-listed company on the Johannesburg Stock Exchange, and which had received government support in return for certain commitments, including job creation, be kept confidential by ITAC? Why could the company approach government for help when it was in trouble, but refuse to come before the Committee when Parliament wanted to know about its business model? What about the commitments that the company had made to South Africans?

The previous day, National Treasury had raised questions about the readiness of the Department of Trade and Industry and its entities to implement the National Credit Amendment Bill. Members of the Committee had added their concerns. The Department of Trade and Industry referred to a presentation that it had previously made in March 2018 which gave specific details of the implementation plan and a presentation on 1 August 2018 that had given details of preparations for literacy training. The Department was confident that it would be ready for implementation. The National Credit Regulator and the National Consumer Tribunal supported the view of the Department. An official had been appointed specifically to manage the planning and had developed a comprehensive action plan.

Some Members expressed concern about the plans and asked whether the NCR could get the required number of debt intervention officers all at once. Were any of the requirements in the process of implementation? Had any tenders been put out? Had the budgets been put to National Treasury and had they been approved? On what basis had the estimate of numbers been made? What was the benchmark for the processing of one application per hour?

Other Members asked whether the attitude of ‘it was too difficult to implement’ was in the best interests of the country. How could anyone expect the Department and its entities to estimate something that they had not yet implemented? Was it not disingenuous to say that the Department did not have the resources to implement the legislation when the Department said that it had the resources?

Three drafting matters were addressed. The phrase ‘cost of credit’ in Section 101(1) meant something in practice which was different to its use in the Act. Wherever that phrase was used in the Bill, it would be replaced by ‘amount contemplated in Section 101(1)’. A second concern was whether it was clear in the Bill that the National Consumer Tribunal could reduce interest. If read in conjunction with Section 87 in the principal Act, it was clear that the Tribunal could do so. However, because Section 86 was not being amended, if the Amendment was read in isolation, it appeared that the Tribunal could not reduce rates. It was decided to repeat Section 86(7)(c)(2) in Section 87 so that the powers of the Tribunal were clear, even to someone who did not consult the principal Act.

Lastly, the term used in Clause 29 Section 171(a)(ii) (bb), the ‘Debt Counsellor Rule System’ was the name of a private IT system. As the principles for the system had been derived from a National Credit Regulator Guideline, it was considered wiser to refer to the Regulator’s Guideline. In the revised version, Clause 29 Section 171(a)(ii) (bb), required the Minister, when developing guidelines for magistrates and the Tribunal, to ‘reflect, insofar as it is possible, the industry guideline issued by the National Credit Regulator under the Debt Review Task Team of 2010 …’

The Chairperson instructed the Legal Advisor to prepare a final draft for the clause-by-clause deliberations that would be held on 21 August 2018.

Meeting report

Opening remarks
The Chairperson noted that Mr Esterhuizen’s wife was critically unwell and hoped that the prayers or thoughts of everyone in the meeting were with him and his wife. She reminded the meeting that the whip had also recently suffered a personal loss. She made a reference to John Donne’s meditation, ‘“Any man's death diminishes me, because I am involved in mankind’.

The Chairperson indicated that Adv Mbulelo Ruda and Adv Jenkins from the Parliamentary Legal Services would speak to the International Trade Administration Commission of South Africa (ITAC). It was very, very important. The Committee should have met ITAC two weeks earlier about the sugar tariff, but ITAC had stated that it would require a closed meeting to address the sugar tariff. However, holding a closed meeting was a very serious matter and not a decision to be taken lightly.

On the National Credit Amendment Bill, the Committee needed to instruct Adv van der Merwe on the final changes and amendments to be incorporated in the Bill by 21 August. The National Credit Regulator (NCR), Ms Nomsa Motshegare, had agreed to supply copies of the Task Team Agreement, which the Committee had to have sight of before the Committee could include a reference to the Agreement in the Bill which would become law. National Treasury officials were not in attendance. The Chairperson would get hold of from National Treasury DDG, Ismail Momoniat, about attendance of Treasury officials as it became a real challenge when people were not au fait with the position that the Committee had taken.

The Chairperson requested that all Members obtain copies of the latest World Bank Report as it had valuable information on South Africa in it, including the acknowledgement of South Africa’s unique diversity and the unique challenges that faced the country that had been colonised for so long and only a section of the population had been effectively serviced. It took all those factors into account and put forward proposals. It was one of the more balanced reports that she had seen out of the World Bank, albeit that was a personal opinion.

The Chairperson welcomed the Department of Trade and Industry, the National Credit Regulator, National Consumer Tribunal, Parliamentary Legal Services.

Legal Opinion on ITAC
The Chairperson referred Members to an opinion received from the Parliamentary Legal Services. She recognised that Adv Jenkins had been in that office for many years and had been at the coalface of very important legislation. She invited Adv Mbulelo Ruda to present the memorandum which had been labelled ‘confidential’ and she enquired the current status of the memorandum.

Adv Jenkins informed the Chairperson that the document was confidential in terms of client privilege but once the client had received it, it was open to the public, that is, to anyone who wished to read it.

The Chairperson declared that members of the public could, at that point, have a copy and asked the Committee Secretary to ensure that everyone received a copy.

Adv Mbulelo Ruda explained that he had just started working for Parliamentary Legal Services which had been requested to provide an opinion on whether ITAC could present information on sugar tariffs in an open meeting of Parliament or whether it was a confidential matter and closed to the public. The opinion was to indicate whether the matter should be kept confidential in terms of the ITAC Act.

The starting point would be Section 29 of the Constitution that stated that Parliament had to be open and transparent as far as possible, i.e. generally meetings should be open to the public. Only when it was justifiable could Parliament hold a closed session, and it was also according to the Rules of Parliament that all meetings should be open to the public. Having looked at the information, and consulted with his colleagues, his view was that the information relating to investments should be considered in camera on the basis that, in terms of its Act, ITAC had deemed that it was confidential, and to protect trade secrets and economic information, the information could only be made available to the Committee. ITAC could make the information available to the Committee in order to enhance the Committee’s oversight obligations.

Secondly, on the recommendations made to the Minister about the sugar tariff, his opinion was that, until the Minister had made a decision, the information was confidential. However, as the Minister had made a decision the previous day and had informed the public, that information could be made available in an open meeting.

Mr G Cachalia (DA) noted, after the Minister’s announcement, that the sugar tariff was in the public domain so that was no longer an issue. But, in terms of the former matter, what, exactly, were the trade secrets that were being protected in respect of ArcelorMittal. He would be keen to know, as that was the main issue. He was not sure what was being protected in relation to the under-invested industry of ArcelorMittal.

The Chairperson asked whether once information was disclosed to the Committee by ITAC, such information remained confidential to the Committee or whether the Committee could disclose that information to the public. Did it mean that, notwithstanding the fact that the country had constitutional rights, the ITAC laws seemed to indicate that only a court of law could enable the Committee or someone else to get that information? What had disturbed the Committee was the fact that one had to approach another arm of government to operate in one's own area. Did that mean that a closed meeting had to be held, notwithstanding the fact that the matter had been gazetted?

Adv Ruda responded to the first question. He had not been in the meeting that had discussed the matter. His brief had been that it was investment information which could fall under information of value as it dealt with making a profit. He would look at any investment information as a trade secret for any company. That information would remain confidential even after the meeting. The recommendation to the Minister was also confidential as the recommendation was not a decision and the Minister could take a different decision. However, once the information had been made public, an open meeting could be held. On the third point about the court of law, it was not a blanket refusal to disclose information. In terms of ITAC information, ITAC themselves could make confidential information available. In terms of the Committee’s need to conduct oversight, that information could be made available in a closed meeting. It would be confidential, but it would allow the Committee to hold ITAC to account.

Mr B Radebe (ANC) appreciated the information provided by Adv Ruda but he was more interested in ArcelorMittal. He understood that there was confidential information involved but he suggested that the Committee should consider a scenario where a private company and government had had an agreement, and where the Committee had oversight of government activities. The government had assisted the private company which had, in return, made a commitment to provide so many jobs, etc. The Committee had oversight of government, so why should that company refuse to give that information to the Committee? The company could have said that it would do it in camera, if necessary, rather than refuse to give the information. Government had taken a decision to assist that company in a way that affected other companies, so the Committee had a right of oversight of the company.

Mr D Macpherson (DA) noted that ArcelorMittal was a publicly-listed company on the Johannesburg Stock Exchange and was responsible to shareholders for the business model. He would be interested in the response from ArcelorMittal about its decision not to provide information to shareholders and how shareholders would respond to that. The Committee was not a shareholder but as government, the Committee was responsible for employing tariff protection to assist them and he thought that ArcelorMittal had a responsibility to account for what the company had done to uphold its end of the agreement. He was particularly interested in the company’s business model. There was a case for the company to appear before the Committee and if Legal Services deemed that it should be in camera, that would be fair. Parliament had the right to exercise its oversight and one of those oversights was over tariffs.

Mr Cachalia went one step further and said that it should not be in camera as it was a public-listed company and the company owed it to its shareholders and to the public, in general, to share the information, given the importance of the industry.

Ms P Mantashe (ANC) noted that she was not a specialist in the area where ArcelorMittal was operating but something was not adding up. When the company was in trouble, it came to government but now that the Committee wanted to know about the business model, the company would not come. And what about the commitments that they had made to South Africans? The Committee was not going to forget about that. She was not buying the argument.

Adv Ruda responded that if the matter was related to trade secrets, the meeting should be held in camera but that would not prevent the Committee from calling the company to account and from asking questions and about the business model. He heard the argument that the company was a private body and he would need more information to make a decision.

Adv Frank Jenkins added that the information provided to ITAC by ArcelorMittal was covered by the ITAC Act and ITAC had deemed it confidential and thus the Committee could discuss it in camera. The Committee could tell ITAC that the Committee had looked at the administration of the Act and noted that ITAC had deemed the information to be confidential, but the Committee had the right to ask for the information in camera. However, nothing prevented the Committee from calling ArcelorMittal directly instead of getting the information from ITAC. The Committee could call ArcelorMittal and explain that the Committee wanted to understand what the company had done with the support that it had received. If the company stated that it was a trade secret, parliamentary rules would guide the Committee. The rules stated that the Committee could hold a closed meeting and listen to the company. If the Committee then determined that it did not meet the constitutional test for there being reasonable and justifiable cause for not opening the meeting to society, then the Committee had no option but to follow the default position of opening the meeting to the public.

The Chairperson noted that the advice from Adv Jenkins had made it very clear that the Committee had every constitutional right, in terms of its oversight obligations, to call ArcelorMittal to clarify the issue and to respond to Members’ questions.

Secondly, the Committee had supported the request for the sugar tariff to be reviewed, but the Committee had been informed that one could only apply for a review once a year. It might be something that the Committee would wish to include in its report. It might be important to consider the timeframe and that one year might be too long to wait for a review of the tariff. The reason for wanting the change in tariff was because the country was being flooded with imported sugar and South African producers could no longer compete. SARS also had to be called to explain how duty-free sugar had found its way into the country. That was not an ITAC issue but a SARS issue, but that would be clarified.

Thirdly, Members could never forget that South Africa was part of the World Trade Organisation (WTO) and part of the emerging economies grouping of Brazil, Russia, India, China and South Africa (BRICS) and was bound by those agreements. When countries joined organisations, they signed agreements or treaties or, at the very least, a memorandum of understanding. The country bound itself voluntarily to certain things. The Committee was considering writing to BRICS as it was unacceptable for any of the country’s partners in BRICS to flood the country with sugar or any other product. South Africa did not do that. Furthermore, it undermined employment levels in South Africa.

The Chairperson put it to the Committee that the Committee should hold a closed meeting with ITAC, but should also call an open session with ArcelorMittal, and a couple of other companies, as per the process explained by Legal Services. She needed clarification for the third matter. She suggested that the Committee should hold a meeting with the sugar industry umbrella body of South African Growers Association (SAGA) and the Black South African Farmers Development Association (SAFDA) to the meeting on sugar tariffs. However, if it was a closed meeting, did it mean that only Members of Parliament and their staff could attend? The Committee had undertaken it oversight work and had to report back to the public on what it had done. So, how did the Committee report back?

Adv Jenkins responded. If the meeting was closed to Members and staff, the Committee could decide what information could be disclosed and then release whatever report was required, but individual Members were not permitted to speak about confidential matters.

The Chairperson was happy with the clarification. She suggested that the Committee would apply to the Speaker’s Office and to the Chair of Chairs, Mr Cedric Frolick, for the closed meeting. Secondly, the Committee would have the South African Growers’ Association (SAGA) and the South African Farmers’ Development Association (SAFDA) and ArcelorMittal at another meeting, following which the Committee could draw up its report for tabling in the House. The Committee would also write to SAGA and SAFTA because the associations had been concerned about what was happening.

Mr Cachalia asked for clarity on the sugar issue. He understood that the sugar tariff matter was no longer confidential because the Minister had announced the tariff increase.

The Chairperson agreed that the meeting with the sugar industry did not have to be closed.

Mr Radebe asked about a meeting held in camera with Members and then the unthinkable happened. What would happen if someone disclosed information from that meeting.

Adv Jenkins stated that the person could be found in contempt if found to have deliberately breached the parliamentary rules. The case could be referred to the Parliamentary Committee on the Powers, Privileges and Immunities of Parliament. An investigation would be conducted, and if a deliberate breach of the rules was established, the Act of Parliament would be invoked, and the person could be charged with breach of confidence. Penalties ranged from an apology in the House to a period of suspension without pay.

The Chairperson person confirmed that the ArcelorMittal matter would be addressed in a closed meeting with ITAC but there could also be a separate meeting with ArcelorMittal. Secondly, the sugar industry meeting would be open to the public and the Committee could share with them what Members had learnt. The concern that had been shared with her, lay with the secondary legislation, which the Committee called Regulations. The Regulations should not restore the old architecture. The Committee had constitutional oversight over that legislation as well. As she understood it, the regulations had not yet been finalized so the Committee could not have oversight over something that did not exist. When it was complete, the Committee would exercise its oversight. She requested Committee Secretary to arrange the meetings and to incorporate them in the Committee’s programme. There was general agreement with the decisions by Members of the Committee.

The Chairperson asked Adv Jenkins about another matter that had come before the Committee a couple of times. She, and a Member of the Committee, had received a communication on an official letterhead but it had turned out that the letter had not been authorised by the Head of Department. Neither she, nor a Member, could tell that it was not a legitimate letter. What recourse did Parliament have in terms of dealing with such matters?

Adv Jenkins stated that it boiled down to misleading Parliament and could be very serious and be seen as a crime, but the best way would be for the Department to deal with it. The Committee should communicate its concerns to the Head of Department. If someone had copied the DG’s signature, that was fraud and should be dealt with as such. The Matter had to be attended to and the Director-General (DG) had to report to Parliament on what had been done. In terms of protocol, only the DG could write to Parliament. The Committee had oversight over the Department.

The Chairperson stated it had not been fraud as it was a legitimate signature of a member of the Department. Her concern was that the substance might have value, but it needed to go through the appropriate processes. It went around the DG, but the Committee had oversight over the Department and the DG and the DG should ensure that measures were in place to prevent that from happening again. She would write to the DG and ensure that he prevented it from happening again.
 
The Chairperson thanked the Legal Advisors for their time and the clarification, noting that the matter had taken more than 40 minutes, but it had been important to clarify issues.

The Chairperson noted that the submission on the Copyright Amendment Bill by the Companies and Intellectual Property Commission (CIPC) was available and should be considered.

National Credit Amendment Bill: consideration
The purpose was to instruct the advocate as to what was required in the draft Bill that she would produce for the following Tuesday. The document had to be distributed to Committee Members by the following Monday.

The Committee Secretary noted that the copies of the Task Team Agreement as provided by the NCR had been distributed to Members of Parliament.

The Chairperson stated that she had not yet communicated with the Finance DDG, but she would be doing that. The previous day, National Treasury had raised issues about the readiness of the DTI, and specifically the NCR, to implement the National Credit Amendment Bill. Committee Members were informed that they would be going through the DTI presentation on Dealing with Debt Intervention but would not go through the entire presentation word by word. The presentation had been made before.

Dealing with Debt Interventions
Dr Evelyn Masotja, DDG for the Consumer and Corporate Regulation Division at DTI, informed the Committee that she would speak to extracts from the presentation made by DTI on 6 March 2018. The intention was to re-iterate what had already been said. She would highlight the key points. The NCR and NCT were established institutions with existing infrastructure and experience. They were confident that once the Act had been passed, they would be able to implement the legislation.

One of the key areas of responsibility was around education and literacy awareness. In terms of the numbers, the estimate was that 1.5 million consumers would be eligible for debt intervention. 29% of whom had outstanding debt over three months old.

NCR
In terms of implementation capacity for the NCR, one debt intervention officer was able to deal with one application per hour. Planning had been on maximum figures, but it was assumed that uptake would be slower. 125 000 applications would require 780 officers across the country. If spread over three years, 260 intervention officers could manage the process per year. If most of the consumers who applied for intervention were six months or more in arrears, the numbers would be much lower which would reduce the number of debt intervention officers required. Five financial literacy trainers were required but there was a plan for managing financial literacy training.

Resources required would include IT infrastructure, developing an IT application, and recruitment of officials to manage the processes. The cost was estimated at R125 million, up from the initial estimate of R50 million because extensive IT support and infrastructure would be required.

Processes would need to be developed. Those included the application for debt intervention processes; processes for recommendations to National Consumer Tribunal; processes for Orders from the Tribunal, and distribution to Payment Distribution Agencies (PDAs). The presentation included a list of things to be done in preparation for implementation.

NCT
In terms of capacity, it was anticipated that approximately 50% of the initial applications received by NCR, would be successful. One Tribunal member could adjudicate 700 applications per month. To deal with 63000 applications in a month, approximately 90 Tribunal members would be necessary, but that figure would be reduced to 30 Tribunal members if applications were dealt with over three years

Resources required would include enhancement of the IT system, an electronic interface with the NCR system, recruitment for personnel and Tribunal members and additional office space. The estimated cost would be R78 million for the first year.
Existing court motion processes would be utilised, including electronic submissions and processing.

In conclusion, DTI believed that the processes would be ready at the time of implementation of the Bill.

Discussion
Mr Macpherson asked if the Members could discuss that part of the presentation before moving on to the financial literacy training as it was an important document and had to be scrutinised. His concern was that nothing had not changed substantially since March and, in some places, there was still an ’X’ in place of estimated costs.

The Chairperson noted that the presentation had been discussed in March and she did not want a repeat of the discussion in March. However, she could point to three items that needed attention. Figures were still missing and there was the question of whether a Tribunal official could deal with 35 applications per day, and clarification on some other issues was required.

Mr Macpherson stated, with respect, that DTI and entities had ignored all proposals put to them. The Committee had been of the view that it was a non-implementable plan based on assumptions. DTI assumed that four million people would not apply at the same time, and they would apply in a reasonable manner and time. There was the question of whether the NCR could get the required number of 260 debt intervention officers all at once, and the real figure required would probably be closer to one thousand. Estimated figures were missing. No one had answered the question of whether a motion officer could adjudicate 35 applications a day. It seemed very high. The DTI had to carry the can at the end of the day and, for Ms Masotja’s sake, he did not want to see a collapse. Were any of the requirements in process of implementation? Had any tenders been put out? IT development took a long time and government tended to move at a snail’s pace. The cost was R50 million for the first year but there was no budget for future years. Had the budgets been put to National Treasury and had they been approved? That was what the Committee needed to get to the nub of.

Ms Mantashe understood that the DDG was bringing the presentation back to the Committee to prove that DTI and the entities had done what National Treasury had asked about. The slides showed that Treasury had provided the statistical information. National Treasury had said that it did not know about the plans but there was evidence that National Treasury had been involved. The Department could not advertise posts because the Bill had not yet been passed. How could they move forward? She appealed to comrades not to stall the Bill.

Mr Cachalia was concerned about cost and capacity and potential under-estimation because that was a very important aspect. On what basis had the estimates of numbers been made? What was the benchmark for one application per hour? The Committee needed to get a handle on the details before they were all in trouble.

Mr Williams was adamant that the attitude of ‘it was too difficult to implement’ was not in the best interests of the country.

The Chairperson had to intervene to prevent dialogues occurring.

Mr Williams added the Committee could go all the way back to 1994 with that attitude. The ANC had brought the Bill to the Committee in order to alleviate the plight of the poorest of the poor and to bring the massive gap between the rich and the poor closer to the middle. To say that the Department did not have the resources to implement the legislation when the Department said it had, was disingenuous. There should not be an attempt to move backwards with the Bill. The Committee had to move forwards. The Committee, and particularly the Sub-Committee, had discussed the challenges on many occasions over the past three years. He believed that the implementing bodies were going to implement, and the Committee needed to pass the Bill for the sake of the poorest of the poor.

The Chairperson quoted Nelson Mandela: It always seems impossible until it’s done. Nothing was impossible until it was achieved. When war was declared, the country on whom war was declared could not ask for a postponement. Many countries developed interventions when under pressure and were successful. She was mindful of the amount of hard work demanded by the legislation. However, there were one or two areas that needed more work. National Treasury had given the figures on which the estimates were based, and Treasury should remember that, but the estimated reduction in numbers could be worked out and a figure could replace the ‘X’. The other issue was the capacity to deal with 35 people or applications per day, which meant at least four per hour. She was aware that certain areas had been raised in March for a review by DTI. She wanted the Department to apply its mind to those areas. She added that she also knew that newly trained graduates could deal with certain functions and that graduates were a source of human resources that could be used to manage some of the processes.

Mr Macpherson stated that he did not want to stall the legislation. He wanted to see it implementable. Was it possible to adjudicate an application in 17 minutes? Was one applying one’s mind? Those deadlines were going to put pressure on the NCT and the CEO for every minute longer than 17 minutes that each application took. The CEO would have to manage the people who were waiting for their applications. He could not see how it could be seen as destructive to ensure that the Bill would work. Everyone wanted to see the Bill work, but it could not be processed in a vacuum of information. Anyone who did not want that information needed to take a step back and ask why the NCR and NCT should be set up for failure.

The Chairperson asked Mr Macpherson not to be repetitive.

Mr Radebe had always liked the natural sciences because one always was able to prove science in an objective way by implementing a process. Economists could never agree on a single thing because there was no objective proof. He did not know how someone could expect DTI, NCR and NCT to estimate something that they had not yet implemented. It was a developmental government and so he was not going to be apologetic. DTI would come back if more resources were required because the Department had underestimated. He was not going to be apologetic about going ahead even if they could not prove that it would work. The job of National Treasury was to supply the resources.

The Chairperson appreciated having Mr Radebe on the Committee because he had such a solid Science background. That was why she had raised the matter of the latest World Bank Report which might be subjective and was not always positive about South Africa but had some very positive things to say.

Prof Joseph Maseko, Chairman of the National Consumer Tribunal (NCT) said that the Committee might have forgotten that the NCR, NCT and DTI had already dealt with those types of cases before. The NCT could initially process three cases per day per member but currently the officials were dealing with 32 cases per day per official, so 35 was nothing. The IT system was being upgraded to do the checking that the officials currently did so the target was 40 applications per day. When a debt intervention matter was simple and not defended, it was quick to check, especially as there was an IT-based interface between NCT and NCR. Those cases were different from defended cases where people would fight it out and where the lawyers would be brought in to deal with it. In those cases, the lawyers would ensure that the officials would apply their minds. The NCT had dealt with thousands and thousands of uncontested cases and only about 40 contested cases. Doing the work electronically greatly facilitated the work. The IT system allowed people to work remotely.

The Chairperson accepted Prof Maseko’s statement as evidence, which was what Mr Radebe had said that they needed. It was useful to get a repetition of such information. The Chairperson had informed the Committee in March and he had repeated that information. The DTI had to fill in the missing numbers and the Committee should be informed of the numbers determined.

Ms Nomsa Motshegare, CEO at NCR, responded to the question of the capacity of NCR officials. She had used previous experience to estimate the numbers required. It might be a little slow at first, but the NCR would be recruiting persons with a legal background. She also noted that, over time, the officials would be able to speed up. The issue was that applicants would be required to take time to know what to submit with the application. If the correct documents were submitted, the process could be speeded up. The plan had not been implemented and staff had not yet been recruited because the Bill had not been passed. However, the plan was kept up to date as matters progressed at the Committee sessions.

The DDG stated that the presentation had been well thought-out. It was the first time that the entities had done debt intervention, but they had had similar experiences that were aligned to debt intervention. NCR had already appointed a person to develop a fully-fledged plan. All figures were estimated as figures did not exist. The caution was noted but it was part of risk management and mitigating that risk. However, it was important to keep moving forward.

The Chairperson reminded Members that the presentation was from March 2018 so certain aspects of the presentation, and even terminology, had changed. Members needed to have their own summaries and to keep tracking the progress of the Bill, but she had asked for the presentation as she had wanted to ensure that all matters were on track.


Drafting matters
Adv van der Merwe stated that there were still three outstanding matters relating to wording where the Committee had not come to a decision. The concepts had been agreed upon: it was a matter of wording.

The first matter was one raised by Mr Mashapa from the Credit Regulator and it was about the definition of ‘cost of credit’. She had said that she would consult with her drafting peers and she was satisfied that Bill, as it stood, addressed the concerns of the Regulator but she had emailed Mr Mashapa and she understood that he had a different concern. The DDG asked if there was a way to address her drafting concerns and Mr Mashapa’s concerns. She had discussed the matter with Mr Mashapa that morning and they proposed that the phrase ‘cost of credit’ in Section 101(1) be removed as it meant something in practice which was different to its use in the Act. Wherever that phrase was used in the Bill, it would be replaced by ‘amount contemplated in Section 101(1)’. The term would be replaced wherever it had been used, which was in Clauses 15 and 16.

Mr Williams asked whether removing the term ‘cost of credit’ and replacing it with ‘amount contemplated in Section 101(1)’ would change the intention in the Bill? Would the end result be the same? If not, there would be a problem.

Mr Macpherson noted that Adv van der Merwe had said that ‘cost of credit’ meant one thing to the NCR and something else to credit providers. What did ‘cost of credit’ mean to a credit provider and how would the word ‘amount’ be understood by a credit provider?

Adv van der Merwe stated that the removal of the phrase ‘cost of credit’ did not change the end result in any way but it avoided confusion. The heading of Section 101 of the National Credit Act was “Cost of credit” but subsection 1(a) refers to the principal debt. The credit, or principal debt, was addressed in Section 101(1)(a). The cost of providing that credit was addressed in Section 101(1)(b) to (g). In practice, when a credit provider told someone how much it would cost the provider to provide the credit, the person would be referring to paragraphs (b) to (f). In a court, “cost of credit’ had to include the principal debt. The counsellors were concerned about cases that did not go to court and that the credit provider could use the term ‘cost of credit’ to confuse the consumer into thinking that the principal debt could not be taken into account in debt intervention. The Bill would be clear as to which amounts were included as it referred to the entire Section 101(1).

Mr Macpherson asked how the term ‘total amount’ would be used. Would it be necessary to state that it referred to the principal debt? Once again, it seemed vague and a credit provider could decide which total amount he was referring to, and he may not be talking about the principal debt.

The Chairperson stated that it was not necessary to repeat what was in the Act. A reference to Section 101 was unnecessary as a credit provider would surely understand all terminology. In an Amendment, the principal Act was not to be repeated. The Committee was dealing only with an Amendment. It was illegal for credit providers to operate outside of the law and how did they know what the law was if they did not have the Act before them? She had pointed that out the previous day and did not want to bring in a State Law Advisor to tell people how to draft a Bill. An Amendment had to take cognisance of the principal Act and not repeat it.

Adv van der Merwe stated that ‘cost of credit was replaced by ‘amount’ but the reference to Section 101 remained.

Mr Lesiba Mashapa, Company Secretary at the NCR, confirmed that the NCR agreed with the change proposed by the advocate.

Adv van der Merwe’s second concern was whether the it was clear in the Bill that the Tribunal could reduce interest. The concern was two-fold. Firstly, because Section 86 was not being amended, if read in isolation, it appeared that Tribunal could not reduce rates but if read in conjunction with the Section 87 in the principal Act, it was clear. She had looked for way to make it clear. Section 86 could not be amended to include the word ‘Tribunal’ as it dealt with debt review, not debt intervention. There were three options to deal with the concern: Firstly, leave the Bill as it stood; secondly, specify what had to be changed, but then a change had to be made in five different places and something could be missed; thirdly, take Section 86(7)(c)(2) and repeat it in Section 87.

Adv van der Merwe recommended the third option. The only problem was that future amendments might miss the use of that section in both places. However, that was not the concern of the Committee. The Committee should advise between option one and three.

The Chairperson noted that Mr Mashapa had raised the issue and his concern had been about misinterpretation. Was she correct in saying that he would be happy with option three?

Mr Mashapa agreed but the Committee had to note that the Tribunal could not reduce the interest rates, except by consensus. If there was no consensus, the matter had to go to a magistrate’s court.

Prof Maseko stated that the NCT was happy to implement whatever the Committee decided. At present, the Tribunal could only finalize consensus cases. Contested cases were sent to the magistrates which meant that, substantively, the process did not change.

Mr Macpherson doubted that all credit providers would consent to reduce rates to zero, so would there be any cases for the Tribunal. Was there not a duplication of functions by the Tribunal and courts? Would the Tribunal not start making the orders when the magistrate’s courts should be doing it?

Mr Williams asked about option one. He understood that the implementers had opinions, but between option one and option three, which would best serve the people that debt relief was targeted at. Would doing nothing, as in option one, be more beneficial for the people?

Prof Maseko stated that the Tribunal had found that there was consensus between credit providers and consumers to apply zero-rated interest. The ‘in duplum’ rule was also applied and all role players had a right of response. It was better for a credit provider to get his capital back than to flog a dead horse.

Adv van der Merwe clarified that the Tribunal could make an order and the repayment plan with reduced rates could be made an order. However, currently, the debt counsellor had no leverage for getting credit providers to reduce the interest rate. The Bill had not envisioned that the Tribunal would deal with contested cases. That was the current position and would continue. However, the debt counsellor could now send a matter to the magistrate’s court which might persuade the credit provider to negotiate with the debt counsellor rather than letting a magistrate’s court take over the decision. There was no duplication as the Tribunal dealt with uncontested cases of debt review and the magistrates’ courts would deal with contested debt review. What a magistrate’s court could do in terms of debt review, the Tribunal could do in terms of debt intervention, i.e. deal with contested cases of debt intervention.

Neither option one nor option three made any difference to the consumers.

The Chairperson thanked everyone for the increased understanding, but the discussion could not ramble on.

Mr Radebe reminded the Chairperson that the Committee had to give the advocate clear instructions and he was proposing option three.

Adv van der Merwe stated that there was one last issue in Clause 29 Section 171(a)(ii) (bb) which referred to the guidance to be provided to the magistrates and the Tribunal and where the requirement was for the Minister to reflect the ‘Debt Counsellor Rule System’. The Regulator had proposed that the subsection stated that the guidance had to reflect, in so far as it is possible, ‘the industry guideline issued by the National Credit Regulator under the Debt Review Task Team of 2010’. That was the document known as the ‘Task Team Agreement’ which had been sent to the Committee. It would be a clear reference.

The Chairperson asked the CEO whether the document had been developed during her tenure.

Ms Motshegare stated that the task team had been established in 2010, before her time, and reviewed in 2015 when she was the CEO.

The Chairperson suggested that the proposal for the change be accepted as the guideline was solid. Previously, the Bill had referred to the DCRS but that was covered by copyright.

Financial Literacy training: implementation overview
The Chairperson referred to the use of the term ‘financial literacy’ as raised by National Treasury. It was as a result of the engagements with National Treasury that the Bill had been changed but the DDG could explain what had happened. The DDG would also recap the preparations for financial literacy training.

DDG referred to a presentation made the previous week. DTI had heard what National Treasury was saying about financial capacity and so that concept had been used in the definition, but the term used to describe the training would be ‘financial literacy’, which was a more widely used term.

The DDG also referred the Committee to the capacity options indicated in the presentation from 1 August 2018. Two key elements of the training would be the development of training materials and the appointment of suitably qualified trainers. Training methods for Financial Literacy Counselling would include:
- online applicants - online training video to be developed.
- cell phone app applicants - online training video to be developed.
- applications received through the call centre - telephonic counselling would be provided.
- all other applicants - face to face counselling through the NCR’s resources or the resources of the provincial consumer protection offices.
- radio sessions.

As far as funding was concerned, the NCR had a training fund. Fees for registration with the NCR would be increased to contribute to the training, memoranda of understanding had been signed with other organisations, and there were ongoing discussions with Treasury about its training programmes. An official had been appointed to manage the planning and an action plan had been developed. Attention would be paid to geographical factors and the various languages.

The DDG was confident that preparations for the implementation of the legislation were going well

The Chairperson believed that financial literacy should be incorporated in Life Orientation in Basic Education and would raise that matter in the Committee Reports. One could not be orientated if one were drowning in debt. She thanked the DDG, NCR and NCT. She wanted to make sure that Adv van der Merwe knew what was required. She asked Mr Williams to indicate what was required.

Mr Williams was unsure of what was required and suggested that the Chairperson address the issues.

The Chairperson noted that the Committee had already taken decisions in respect of terminology and had indicated options. The DTI had addressed the practicalities in the March presentation. There were a few pointers in that presentation that would direct the advocate, although the presentation was incomplete in certain respects.

The DDG stated that she would check her records and see if she could find an updated version of her March presentation as she did not want that presentation to delay the process.

The Chairperson stated that while the Committee needed to review things, Members had to keep up to date of their own accord. She could not continuously ask people to go over matters previously discussed or the Committee would get nowhere.

Mr Macpherson asked if the NCR had indicated how many staff they would need, and whether the entity would use internal staff or whether the function would be outsourced. What was the budget for the literacy training? Had the cell phone app been developed? What was the cost of advertisements, etc? He was concerned about the online training for the poorest of the poor as he would have thought that they would need face-to-face training. The training methods did not seem to focus on target market. He reminded the meeting that if the process was not in place by the time that applicants made applications, those applicants would not be able to meet the requirements of the Act.

The Chairperson pointed out various details in the presentation that responded to Mr Macpherson’s questions. Everything was there except whether the process had been costed. She asked the Secretary to re-issue the March presentation.

DDG stated that the estimate of R47 million had been indicated in the presentation and there were various ways in which the communities could access training, including via radio and cell phone. It was a new process and they would improve as they went along.

The meeting was adjourned.


 

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