Meeting with Central Committee Delegation of Chinese Communist Party; Patents Amendment Bill: finalisation; Diamond Amendment Bi

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Meeting Summary

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Meeting report

SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS

SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
08 November 2005
MEETING WITH THE CENTRAL COMMITTEE DELEGATION OF CHINESE COMMUNIST PARTY; FINALISATION OF PATENTS AMENDMENT BILL; DIAMOND AMENDMENT BILL AND PRECIOUS METALS BILL: BRIEFINGS; NATIONAL CREDIT BILL: NEGOTIATING MANDATES

Chairperson:
Ms N Ntwanambi (ANC)

Documents handed out:
Brief Introduction to the Economic Affairs Committee’ from the Chinese Central Committee Communist Party Delegation
Patents Amendment Bill [B17B-2005]
Patents Amendment Bill amendments by Portfolio Committee (see Appendix)
Diamonds Amendment Bill and Precious Metals Bill presentation
National Credit Bill [please email
docs@pmg.org.za]
DTI Response to the NCOP Provincial Mandates
Eastern Cape Negotiating Mandate
Gauteng Negotiating Mandate
Western Cape Negotiating Mandate
Northern Cape Negotiating Mandate
Freestate Negotiating Mandate
Part 1, Part2, Part3 and Part4

SUMMARY
The Committee met with a Chinese Communist Party Central Committee delegation. Both Committees expressed a desire to work with and learn from each other as SA and China had common interests.

The Committee finalised and unanimously adopted the Patents Amendment Bill without amendment.

The Committee was briefed by the Department of Minerals and Energy on the Diamonds Amendment Bill and the Precious Metals Bill. Members raised various concerns about the purpose of the bills and the changes they would effect.

The Committee also received responses from the Department of Trade and Industry to the NCOP Negotiating Mandates in relation to the National Credit Bill. After some discussion, it was decided that final negotiating mandates were to be submitted by 9 November 2005. The Committee would meet with the Department to hear responses to these and other outstanding recommendations on 14 November 2005.

MINUTES

Meeting with Chinese Central Committee Communist Party Delegation
The Chairperson welcomed the delegation to South Africa. The counterparts of this Committee in the National Assembly had visited China in December. This Committee would very much like to visit China in the near future. SA would like to learn from China’s development in agriculture and industry. SA has common interests with China in trade and development. As part of the G20, it was particularly important for SA to keep current ties and good relations with China.

Mr Z Liu (Head of Delegation) said that China’s political consultative conference and the NCOP had enjoyed good relations for a number of years. Both select committees should work closely together and learn from each other. SA was the largest economy in Africa and had achieved sustained economic growth in the last few years. China had also focussed on its own economic development. He wanted to know the role of the select committee and the NCOP in boosting economic growth in SA. Apart from legislation and attending conferences such as the World Trade Organisation (WTO) what other activities were used to promote economic growth? For instance he had read of the programme to take Parliament to the people in the newspaper and was interested to learn more about this.

The Chairperson said that the NCOP brought the three spheres of government together under one umbrella. These were the National Parliament, the Provincial Legislatures, and Local Government. The main role of the NCOP was to serve the people from the national down to the local level and to ensure economic development was happening at the local government level. The NCOP made laws that had to be implemented at this level. Local economic development strategies were therefore informed by a process of consulting people and the consideration of whether there would be economic benefit to the community.

Ms M Temba (ANC: Mpumalanga) explained that the campaign to take Parliament to the people was important as there were many who were disadvantaged and unable to come to Parliament. As their representatives it was therefore the responsibility of Parliament to gather with the community and listen to what they had to say about service delivery. Ministers, Members of the Provincial Executive Councils, heads of departments, councillors, and mayors were all involved. Projects put in place were directly visited to assess whether the people were really benefiting from them. After such visits a report was written and compiled which would then be debated in Parliament. Ministers of different departments would come to the NCOP to debate. Follow up visits would be made to ensure any changes necessary had been made.

Mr J Sibiya (ANC: Limpopo) said that the National Development Strategy embraced the field of economics. The Department of Trade and Industry presented a strategic plan to Parliament. Parliament would look at the financial implications of this and make recommendations and ultimately approve it. The Department would then implement the strategic plan. The NCOP did not simply make laws. Visits were made to check that decisions were implemented. Talks were held with the people and suggestions made taken into account. Countries whose economies were functioning in a way that could benefit SA to learn from were also visited.

Mr D Gamede (ANC: Kwazulu-Natal) added that the NCOP dealt with all social issues such as vulnerable and disadvantaged groups. He expressed the wish that the Committees could share more in the future when SA visited China. China had played an important part in the liberation of SA.

Mr Liu said that although China had enjoyed economic growth it had its own problems of rural poverty and regional disparities and could learn much from SA. He thanked the Committee for hosting his delegation.

Finalisation of Patents Amendment Bill
Mr Mcdonald Netshitenzhe (Department of Trade and Industry) said that there was a need to popularise the Bill. Would it be possible for the Committee to send a letter to the Minister requiring that a programme be put in place? The Chairperson said this was possible but that it would have to be an open-funded mandate as the Committee did not have much money.

Mr Netshitenzhe briefed the Committee on the Bill. The Patent Amendment Bill dealt with the issue of genetic and biological resources. When someone innovated or invented that person may have used SA resources in that process. This Bill states that where communities have knowledge used by researchers or inventors in such an innovation or invention they should have a share in any benefit gained from that use. Internationally there were no international agreements dealing with this issue under the law of patents. The issue is still under discussion. SA had therefore made the decision to begin by passing national law on the subject. There was a hope this may influence the international debate. SA was the third richest country in the world in terms of natural resources. There was a need to prevent biopiracy and protect its biological resources in a way that its mineral resources were not protected in previous years.

Ms Temba said that it had been agreed at the last meeting that there was a need to mandate a popularisation campaign to spread word of this legal development, especially as this issue affected people in rural areas.

Mr D Mkono (ANC: Eastern Cape) asked what the arguments of those who were opposed to the Bill were.

Mr Netshitenzhe replied that the United States, Western Europe and Japan stood to lose financially from such laws and were therefore arguing against them. These countries had large pharmaceutical industries and indeed some politicians were executives on the boards of some of these companies. Getting these countries to agree to allow communities of developing countries a share of their profits was difficult. SA also has pharmaceutical companies who stand to lose profits and are agitating against such laws. This is why it was important to pass national legislation. It would give a great deal of political support to the debate on the international level.

The Chairperson stated that Members had had the opportunity to raise concerns at the last meeting. Did the State Law Advisors have anything more to add?

Mr J Strydom (State Law Advisor) took the Committee through the Bill clause by clause. He highlighted the changes made by the Portfolio Committee. In Clause 2 ‘may’ had been replaced by ‘shall’. Clause 3, referring to Section 61 of the principal act, dealt with the grounds for revocation of a patent. This amendment provides for new grounds for revocation. It should be noted that this would include negligence on finding out whether the invention was based on traditional knowledge and was not limited to intention to conceal the fact.

The Chairperson asked the Committee whether they agreed to the Patents Amendment Bill and it was adopted without amendment.

Mr Netshitenzhe asked the Chairperson whether she would participate in a debate on an amendment to the Genetically-Modified Organisms Act of the Department of Agriculture which was in session now. The issues dealt with by the Patents Amendment Bill were also relevant here. Without equivalent amendments in this area the progress made by the Patents Amendment Bill would be rendered meaningless.

The Chairperson agreed to this.

Diamond Amendment Bill presentation
Mr A Mngomezulu (Department of Minerals and Energy (DME) Deputy Director-General: Mineral Development) briefed the Committee on the Diamond Amendment Bill. The presentation began with the rationale for the amendment of the law. The objects of the Bill were then outlined. The South African Diamonds and Precious Metals Regulator that was to replace the current South African Diamond Board was introduced. The establishment of the State Diamond Trader was also explained. The functions of the Diamond Exchange and Export Centre were detailed, as were the effects of the amendments on licences and permits and the export of diamonds. A flowchart describing the process of diamond trading and export was provided. The necessary transitional provisions were also included in the presentation. The presentation then moved on to outline the main issues raised during public hearings on the proposed amendments. These included problems with the representation of the Regulatory Board; concerns over the functions of the State Diamond Trader; the necessity of further monitoring of synthetic and enhanced diamonds; and demands for reasons for market failure and sustainability of the supply of rough diamonds. The presentation concluded by stating three main aims of the amendments. These were to ensure equitable access to rough supplies; to maximise value addition; and to separate the regulatory function from the promotion function.

Discussion

Ms J Terblanche (DA: North-West) referred to the fact that only 21 days were given for interested parties to raise comments. Why was this Bill being rushed through Parliament? The Chamber of Mines had stated that the potential loss of jobs as a result of this legislation would be in the region of 8 500 compared to the 1 500 to 2 000 estimated job creation.

Ms Temba asked what was being done to ensure that the previously disadvantaged would now have access. She also expressed concern that the regulatory board be independent and representative. A further question was in relation to registration of exports and imports. What monitoring mechanisms would be put in place?

Mr J Aulsebrook (NADECO: Kwazulu-Natal) asked for reassurance that the issue of cherry picking had indeed been resolved. He also asked about the issue of pricing. This was determined by the world market. How would the State Diamond Trader determine the price for initial purchase?

Mr Hendricks (United Independence Party: Western Cape) asked for further information about the deal that De Beers was offering.

Mr Gamede said that the Bill was long overdue and asked for clarification as to how those who had been historically disadvantaged would be encouraged to participate in its benefits.

The Chairperson asked what would happen in the case of state owned enterprises such as Alexkor.

Mr Mngomezulu replied that Alexkor was not under the Department of Minerals and Energy but instead was under the Department of Public Enterprises. Currently their supply went to a De Beers institution which meant that a proportion of Alexkor’s production would have to go to the State Diamond Trader. There would not be an exception. However, he was aware that Alexkor had said that all its production would go to the State Diamond Trader.

De Beers had a subsidiary called DIAMDEL (diamond dealers) which it used for diamond trading. DIAMDEL operates almost identically to how the State Diamond Trader would operate and De Beers had approached the government with a proposal to enter into a 50/50 joint venture consisting of DIAMDEL and the State Diamond Trader. However, this would allow De Beers partial control over other companies who would supply rough to the State Diamond Trader in accordance with the provisions of the legislation. It was therefore very unlikely that the state would accept this proposal.

As to the predicted loss of jobs by the Chamber of Mines, since 1985 the number of employees in the mining sector had been steadily dropping. Whether or not the Bill was passed jobs in production would continue to be lost. The aim of the Bill was to start concentrating on creating jobs through beneficiation rather than production as the diamond resources would deplete over time. There was a need to move on to beneficiation and utilise the resources SA had rather than leaving this to the West.

The Board had a wide representation. The process by which its members were appointed was through a panel appointed by the Department of Minerals and Energy. This panel would call for nominations from the public. The panel would select and put forward names to the Minister. The Minister would make a decision and take the list to the Cabinet for final ratification.

Adv M Mononela (Department of Minerals and Energy; Chief Director: Mineral Development and Administration) said that there had not been a rush to get this Bill through Parliament. There had been an advert in the Sunday Times inviting the industry to comment. A phenomenal response had been returned. The Bill was sent to Cabinet in December 2004. At the beginning of the year it was published and comments invited. The date that the Member referred to was the date that the Portfolio Committee afforded the public a further opportunity to comment.

Mr L Selekane (SA Diamond Board; Chief Executive Officer) said that the diamond industry had its own institutions such as the United Diamond Association of SA. Such bodies kept the community informed of developments that were of relevance to them. The State Diamond Trader was also going to take a promotional function in order to ensure local communities were aware of the possibilities provided by the new legislation.

As to the registration of imports and exports, SA participated in a certification scheme. Due to concern over conflicts caused by commodities such as diamonds in countries such as Liberia, Sierra Leone and Angola, the measures controlling imports and exports were very stringent. There was no trade in rough in this country without certification indicating place of origin and the identity of the exporter. Registers were also kept.

The issue of cherry picking had been resolved. As to pricing, currently De Beers assessed their own production. The government would then have its own price. The difference between these two should not be more than 10%. In most cases it was not, but if it was, tracking systems were in place.

There would be no problem sourcing out previously disadvantaged workers for higher positions in the industry. Of the seven diamond trading houses only one was currently owned by a previously disadvantaged individual. However, three others had previously disadvantaged workers in high-level positions.

Precious Metals Bill presentation
Mr Mngomezulu briefed the Committee on the Precious Metals Bill. The Bill was intended to replace that presently governed by Chapter 16 of the Mining Rights Act, 1967. Background as to the aims and objectives of the Bill was provided. Critical definitions were introduced. The way in which the Act would be administered; special permits for unwrought precious metals; applications for licence, permit or certificates were contrasted with the current system. The requirements and functions of the Refining Licence, Precious Metals Beneficiation Licence, Jeweller’s Permit, Import and Transport Permits and Export Permits were all explained. The powers of the SA Police Services, offences, and penalties under the new system were outlined and updated from the old system. A transitional arrangement was described. By way of conclusion the presentation stated the four main aims of the new Bill. These were that silver would be deregulated; jewellers’ registers would be scrapped; any person including South Africans could own minted bars with its accompanying certificate; and law enforcement would be enhanced.

The Chairperson thanked the Department of Minerals and Energy for this briefing but stated that Members would raise any questions or comments in response at the next meeting. Time constraints meant that the Committee had to move onto the next item on the agenda.

Negotiating Mandate Meeting: National Credit Bill
Mr J Erasmus (Department of Trade and Industry) presented the Department’s response to the NCOP Provincial Negotiating Mandates. The mandates from Gauteng and Northern Cape had not been received until that morning and so could not be included in the prepared response.
In order to respond, the recommendations made by the provinces in relation to the National Credit Bill had been grouped into subject areas. The presentation took the form of a table which contained the recommendation; the province from which it came; the section of the Bill to which it referred; and the related responses of the Department of Trade and Industry.

The Chairperson asked what the response of the Department of Trade and Industry was to the recommendation of Gauteng in reference to Clauses 124 and 74(6). She noted that Gauteng’s recommendations should not simply state that such sections needed amendment, but should make recommendations as to what those amendments should be. She also asked for a response to the province’s claim that Clause 72(5) created significant risk for abuse.

Mr Erasmus commented that the point of Clause 72(5) was to protect the consumer. In those instances where wrong information was reported the onus was placed on the credit bureau to correct it as a matter of urgency.

Ms Temba said that the Department of Trade and Industry should respond to all those points raised in section 6 of the Gauteng mandate.

Ms A Mahunu (ANC: Kwazulu-Natal) asked where the Bill separated single from compound interest as it was compound interest that destroyed the people.

Mr Erasmus responded to the issue at section 6.1.1 of escalation of interest with regard to unemployed students. The student loan was an example of developmental credit and was therefore exempt from credit checks. Usually with an agreement of this nature the student would only be expected to repay once they were earning money. The Committee should be consulted on the interest regulated by regulations compiled by the Minister. Different types of agreement should be treated differently. On the issue of compound interest, the Bill tried to provide a cut off point. The current situation allowed credit providers to continue to charge administration fees even after the interest had been capped. This would not be allowed under the Bill which stopped increases in repayment once the amount had reached double the amount owed.

Mr M Sogoni (ANC: Gauteng) asked for further clarification on the question relating to student interest. What did the Bill say to this? Which section of the Bill covers escalation of interest?

Ms Temba asked what the Department had done to ensure that students were protected. This was not the first time the question had been raised.

Mr Erasmus conceded that he did not know. He was not aware of it having been raised previously but now that it was included in the Gauteng mandate it would be considered.

Mr Sogoni asked the Department to respond to section 4.3 of the Gauteng mandate.

Mr Strydom stated that there was a problem where spouses were married and the so-called marital power was not excluded. If a husband was blacklisted and a party wanted to enter an agreement with his wife they would be reluctant to do so if she was subject to the marital power of her husband.

Mr Strydom also responded to the point raised in section 6.2 of the Gauteng mandate in relation to Clause 72 of the Bill. This clause was based on fairness. If a person received an account from someone saying they owed them money and this was incorrect then this should be reported to the credit bureau. If this was not, then that person may have difficulty getting credit elsewhere. Clause 72 gives that person the right to challenge the accuracy of the information. The matter must then be dealt with in a prescribed time. Under Clause 72(5), which was the part that Gauteng had made recommendations in relation to, the credit bureau may not report information that is under challenge until that challenge is resolved. If the credit bureau does so in contravention of this section, then it will be committing an offence as outlined in Clause 72(7).

The Chairperson noted that Gauteng had only submitted its mandate today. The North West mandate had not been signed and so could not be considered. The Northern Cape mandate had also only been submitted this morning. Were the Department able to comment?

Mr Erasmus stated that they were. Selling of credit door to door was outlawed unless invited by the consumer. The Bill provided for the establishment of a National Credit Regulator. This would be regulated thoroughly as to what information they could keep and for what purpose. Personal information would not be kept. Mr Strydom added that it had been made clear that it was not a blanket amnesty. The essence of what was provided for in Clause 73 would eventually be decided in the regulations provided for by the Minister.

Mr Gamede said that a clear explanation of what was understood by the amnesty was needed.

Mr Erasmus said that the Portfolio Committee had raised the whole issue surrounding the amnesty in the public hearings. The compromise reached had been captured in Clause 73. A general amnesty would have a devastating effect on the credit market as this would leave no information as to how to assess credit records. It was agreed that the records would be cleaned up. Incorrect information would be removed. There was a need to take into account the predictive nature of the information and its socio-economic impact. A balance was required between the needs of the credit market and those of the consumers.

Mr Gamede stated that the Bill gave powers to the Minister to decide whether complaints from those who believed they should not be blacklisted be deflected from service powers.

Mr P Setou (Micro-Finance Regulatory Council (MFRC)) said that this was a contentious issue and that Clause 73 recognised this. The majority of South Africans were affected. However, there was a need for the credit market to function. The Minister would have to consult with all relevant stakeholders in order to come up with a compromise acceptable to all. The appropriate checks and balances were therefore in place. It was also stated in the Bill that whatever regulations were finally proposed, should be referred to the relevant parliamentary committees as a further check.

Ms S Mabe (ANC: Free State) asked for clarification as to who the amnesty applied to.

Mr T Hercules (State Law Advisor) said that the section acted as an oversight function in respect of consultation with various stakeholders.

Mr Erasmus said that qualifying persons would only be determined after the consultation process had been concluded.

Ms Temba spoke on behalf of the Mpumalanga province. Their main recommendation had been that provincial credit regulators should have jurisdiction over all credit providers operating within their provincial boundaries.

Mr Erasmus said that this had been covered in the presentation. The reason that the Bill provided for a National Credit Regulator was to try and avoid uncertainty in the market. If a credit agency operated in more than one province it had to register with the National Credit Regulator. If it had to register in every province it operated in, it would first of all make the national regulator obsolete. More importantly, it would leave open the possibility that each province would treat the same set of facts differently which would lead to uncertainty for consumers. It was also worth noting that most serious abuses happened at the provincial or local level with operators that only worked in one province. These were the ones that would be forced to register with the provincial credit regulators. Provincial regulators would therefore deal with these as the National Credit Regulator was not best placed to deal with such problems anyway.

Mr Aulsebrook represented the province of Kwazulu-Natal. He asked about the recommendation raised by the province in relation to the definitions of credit agreement and credit facility. It was felt that legal uncertainty should be removed. He accepted that the Department had agreed to look into it and return a comment by 14 November 2005. However, it would be useful to get preliminary comments at this stage to bring back to the province so that it could formulate a final mandate in the meantime.

Mr Erasmus stated that this was a complex issue. For instance, a cell phone contract is never intended to become a credit agreement. However, if the customer does not pay and interest is added to payments made in arrears this becomes a type of credit agreement. Only certain parts of the Bill should apply to this. Many ways have been considered in order to distinguish between such incidental instances of credit and those that were always intended to be credit. The current suggestion was the implementation of an intention test. This was not ideal and the technical team had been asked to look at it. They may come up with a better way of dealing with the problem before 14 November 2005. He was not able to provide any further information at this stage.
The Chairperson asked whether they could provide the information any sooner to provide Kwazulu-Natal with a chance to consider it before producing their final mandate.

Mr Erasmus said he would try to do so.

Mr J Sibiya (ANC: Limpopo) said that Limpopo’s concerns had been covered.

Mr Erasmus said, in relation to the comments of the Free State, that these had been technical and stylistic in nature and did not change the essence or the meaning of the Bill.

Mr D Mkono (ANC: Eastern Cape) said that the issues raised by the province had been covered in discussions with other provinces.

The Chairperson said that most provinces still wanted to know their role so it would be useful for the Department to clarify this.

Mr Gamede expressed concern that ‘may’ and ‘entitled to’ under Clause 129(3) were not the same.

Ms Mabe said that the Free State wanted to know how the consultations were done and who was consulted.

The Chairperson asked what ‘could be done’ meant in relation to the Eastern Cape’s recommendation that the report on the review of the National Credit Regulator and Tribunal be sent to the Premier. Mr Erasmus said this meant that this would be included in the final draft.

Mr Strydom said that the use of ‘may’ twice in Clause 129(3) was repetitive.

Mr Hendricks said that this dealt with a bill being paid. It left it unclear whether the person was entitled once he had paid his dues. Mr Strydom replied that there may be an instance where ‘must’ would mean that the consumer was obliged to resume possession when the consumer may prefer to exercise the right not to exercise the right conferred by the word ‘may’.

Mr Hendricks accepted this but said that ‘entitled to’ produced the same effect. Mr Strydom said that he would provide evidence that ‘may’ confers the necessary right.

The Chairperson said that as the North West mandate had not been signed it should be disregarded. She asked that the provinces submit final mandates by 9 November 2005 at the latest.

The meeting was adjourned.


Appendix:
PORTFOLIO AMENDMENTS TO PATENTS AMENDMENT BILL B 17-2005

CLAUSE 2

1. On page 3, from line I, to omit subsections (3 A) and (3B) and to substitute:

"(3A) Every applicant who lodges an application for a patent accompanied by a complete specification shall, before acceptance of the application, lodge with the registrar a statement in the prescribed manner stating whether or not the invention for which protection is claimed is based on or derived from an indigenous biological or genetic resource, or traditional knowledge or use.

(3B) The registrar shall call upon the applicant to furnish proof in the prescribed manner as to his or her title or authority to make use of the indigenous biological or genetic resource, or of the traditional knowledge or use if an applicant lodges a statement that acknowledges that the invention for which protection is claimed is based on or derived from an indigenous biological or genetic resource, or traditional knowledge or use.".

CLAUSE 3

1. On page 3, in line 23, after "knew" to insert "or ought reasonably to have know"

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