The workshop on the second day focused on the institutional arrangements within the Bill and how these would assist with implementation. The Bill provided for the formation of the National Consumer Commission, which would receive, investigate and then refer consumer complaints to the National Consumer Tribunal. Consumer complaints would be adjudicated at the Tribunal and the orders of this body enjoyed the same status as those of the Consumer Courts.
The Bill also provided for alternative dispute resolution, in terms of which the role of the various industry ombudsmen were highlighted.
Some members were concerned that the Bill was not accessible to the ordinary consumer, because of its language, and they would not be able to exercise their rights if they did not know them. However the Department assured members that the National Consumer Commission was given an advocacy role to ensure that consumers were familiarised with the content of the Bill.
Introductory comments by Department of Trade and Industry
Ms Zodwa Ntuli (Deputy Director General: Consumer and Corporate Regulation Division: Department of Trade and Industry) apologized for being absent from the previous days’ meeting. The present meeting was a continuation of the previous day’s workshop during which consumer rights had been articulated. The focus would now be on how the consumer could seek redress. There would be a focus on harmonizing the functions and ensuring co-operation between the various agencies across the provinces.
Ms Magauta Mphahlele (Full time member of the National Consumer Tribunal) corrected certain statements made by the Department the previous day. Firstly the Department had said that the Bill would apply to small businesses subject to a turnover threshold. This was incorrect and applied in the case of the National Credit Act (NCA), but not to this Bill. In terms of the Bill it would apply to transactions which were subject to a certain threshold. Its application was therefore unrelated to the turnover of the business, but depended on the size of the transaction. The former scenario was not possible in terms of this Bill because of the fact that it encompassed numerous transactions of different types and it would be very burdensome to produce income statements each time. In the case of the National Credit Act, provision of income statements formed part of the process of granting credit.
In addition there had been a question as to what would happen to existing institutions, which had been established under legislation to be repealed by this Bill. There would be an impact provincially, for example the Sales and Service Matters Act was being devolved to provinces and inspectors were responsible for enforcing that Act. In some provinces such as
Consumer Protection: institutional arrangements and enforcement
Ms Mphahlele said that the Bill would establish the National Consumer Commission (NCC), which was based on a similar model to that of the Competition Commission. The Bill recognized the National Consumer Tribunal, which had already been established in terms of the National Credit Act. The mandate of the Tribunal was being expanded to deal with all consumer protection issues.
In terms of the Bill the NCC would receive a complaint, conduct the necessary investigation and then refer the complaint to the Tribunal for prosecution. The Bill favoured alternate dispute resolution, in terms of which the average consumer complaint would firstly be referred to the relevant supplier’s industry ombudsman. These Ombudsmen would be accredited. Only if the complaint could not be resolved at this level would it be referred to the NCC for investigation and then to the Tribunal for adjudication. The Ombudsman scheme would be the first step because it was already working well. This office consisted of people who understood their respective industries best. Thus the NCC would not deal with too many individual complaints as most of them should be resolved at the level of the Ombudsman. Some provinces had Consumer Courts, which were established in terms of the Unfair Business Practices Act. These would enjoy the same status as the Tribunals. The Bill tried to avoid creating too many institutions. Tribunals had national jurisdiction and could move to different areas where there were no Consumer Courts.
Prior to its establishment, the Department of Justice had not been in favour of establishing the Tribunal. They had argued that there were already too many tribunals, which were diluting the role of the courts. It was decided that the Tribunal would be able to deal with most consumer issues, but would refer contractual disputes to the courts. The problem was however that courts were difficult for consumers to access. Thus the Tribunal had the power to order compensation for the consumer. Where the consumer approached the Ombudsman, the latter could enter a consent order, which can be taken to the Tribunal or court to be entered as an order (which could include damages). This shortened the process considerably, since a Tribunal order enjoyed the same status as an order of the court.
The Bill also introduced the issue of class action, which is not very well-developed in South Africa (SA). Instead its use in SA has largely been limited to constitutional issues.
The Bill was not intended to duplicate regulatory agencies. Instead it either excluded application to certain agencies upfront, for example the financial services sector; or it allowed a regulatory authority to apply for exclusion. By preventing duplication of agencies, the Bill managed to avoid possible jurisdiction issues and forum shopping.
The NCC would play a huge role in advocacy and would examine other legislation to identify gaps with regard to matters of consumer protection. For example, issues regarding the labeling of food derived from Genetically Modified Organisms (GMO) could be raised with the relevant departments. Civil society also had a huge role to play and the NCC was responsible for assisting community groups with accreditation. Civil society could request the NCC to initiate complaints.
The Consumer Protection Bill also decriminalized many actions of suppliers as consumers were not interested in jailing suppliers but merely wanted compensation or refunds for losses suffered. Only in cases where the supplier failed to comply with an order would it become a criminal matter.
The Bill emphasized national and provincial co-operation and the role of consumer affairs officers. Constitutionally, both spheres enjoyed concurrent jurisdiction over matters set out in the Bill. Provinces therefore could have their own legislation on this issue. However the provinces have complained that they were being given the role of consumer protection without the budget. S84 of the Bill provided that the Minister could hold discussions with the Member of Executive Council (MEC) of the relevant province in order to discuss these matters. The Bill has no cross-border jurisdiction. Where a matter fell within the jurisdiction of a particular province, only that province could deal with that matter. However where a province lacked investigative capacity they could request the NCC to initiate the complaint and investigation.
Ms Ntuli referred to the issue of class action and said that the concept was very developed in other countries, like the
Mr L Labuschagne (DA) referred to the exemption based on the transaction threshold. He referred to the situation where a customer purchased a teddy bear for R30, and this teddy bear then broke due to shoddy workmanship. He asked what threshold this would fall under.
Ms Mphahlele answered that the threshold would not apply where the consumer was an individual. It would only apply where the consumer was buying to resell or use for the purpose of manufacture. The Department had to guard against interfering too much in business to business transactions.
Mr Labuschagne referred to the NCC and compared it to the Compensation Commission. He felt that, based on experience with the latter body, it was important that there be limits placed on the amount of time the NCC spent on a particular customer’s complaint. This was to ensure that the customer did not wait for two years for redress.
Ms Mphahlele replied that service levels in some Departments were a problem. However part of the NCC’s mandate was to monitor service delivery. They would provide guidelines and provide codes of practice. He said that timelines could be provided for (as was the case with the Competition Commission).
Ms D Ramodibe (ANC) referred to statements that consumer protection was weak in some provinces. She asked why this was the case since these matters were important to all consumers.
Mr Mphahlele said that she had meant that only three out of the nine provinces had Consumer Courts. The issue of access had been a problem. However the establishment of the Tribunal addressed this, since the Tribunal had national jurisdiction and could go to any province. There were negotiations with some provincial authorities regarding the use of their premises for this purpose. It was important that each province should have its own courts. The Bill however provided for the Commission to cooperate with provinces where there were limitations on resources. The Minister and MECs could negotiate on these matters.
Ms F Mohammed (ANC) referred to estate agencies and how clients were held ransom by verbal misinformation. She asked how the Department dealt with the fact that service providers were defaulting on contracts.
Ms Mphahlele said that the Department had been involved in reforming the Estate Agents Affairs Act. This Act dealt with contracts in this sector and there was a section on disclosure with regard to price.
Ms Mohammed referred to the fact that banks, as members of the first economy, were aware that clients, as part of the second economy were unable to read and understand the small print in contracts. She said that in insurance contracts there was small print, which clients, as part of the second economy would not be able to read and understand. They would only become aware of its provisions once they tried to claim and were refused benefits.
Ms Mphahlele pointed out that banks had not been included in the Exclusion clause of the Bill. The Bill would therefore apply to banks. It did however apply to insurance companies. The NCC had the mandate to look at legislation governing the long and short term insurance sector again.
Mr N Mqungquthu (ANC- Free State) said that it was always easier for suppliers to obtain redress against consumers for non-payment. He asked how one could ensure the same redress against suppliers.
Ms Mphahlele replied that consumers could now litigate as they were able to have their matters heard by the Tribunal. Instead of hiring a lawyer, they could use the services of the NCC, which would have done all the relevant investigating. The NCC would represent the consumer at the Tribunal proceedings. These proceedings did not cost the consumer anything.
Mr S Rasmeni (ANC) asked how the consumer courts functioned and what expertise they had.
Ms Mphahlele responded that had been established in terms of the Unfair Business Practices Act. They were currently only found in three provinces. Where these courts existed, there was also a Consumer Protector to deal with complaints and investigations; and then to refer these to the
Mr Rasmeni referred to the earlier statements that the Bill would not have much impact on the NCA. He asked how this was possible since the Schedules have indicated that areas of the NCA would be amended due to the Bill.
Ms Mphahlele answered that the Tribunal was established in terms of the NCA. However the Bill amended the functions of the Tribunal in order to align it with the Bill.
Mr P Nketu (ANC- Free State) referred to earlier statements that the issue of consumer protection was not as strong in some provinces as in others. He said that there had to be recourse for consumers in weaker provinces too as there were consumers there as well.
Ms Mphahlele said that S83 of the Bill provided for capacity building at national and provincial levels. Where there were gaps the Minister could address solutions in negotiations with the relevant MECs. In addition, at institutional level, the Bill provided for cooperation between the NCC and the provincial authorities.
Mr Nketu referred to the fact that the NCC could adjudicate against the municipality for faulty billing systems. He asked if this was constitutional, as one organ of state was not allowed to take another to court.
Mr Brian Muthwa (Legislative Drafting Consumer and Corporate Regulation Division- Department of Trade and Industry) said that the Constitution encouraged conflict between Government departments to be resolved by cooperation. This was therefore the first step and had to be done in accordance within the relevant framework. However if this failed, the matter could be decided in court.
Ms M Ntuli (ANC) felt that the Bill was not capable of being implemented, since the ordinary person would not know how to enforce their rights and that they could refer matters directly to the Tribunal.
Ms Mphahlele agreed that when the ordinary person read legislation they would generally not be able to understand it. However this applied to legal documents generally. The Bill gave the NCC an educative function. They had to translate the Bill and express it in ordinary language. They had to explain its provisions to consumers by conducting workshops and on radio interviews, etcetera. The NCC had in fact visited all the provinces for this purpose. She agreed that if the NCC did not perform this educative role the legislation would be useless.
Dr P Rabie (DA) said that one of the problems facing small business was the red tape and forms requiring completion. He asked if the Department would be available to provide guidance with these processes.
Ms Mphahlele explained that part of the NCC mandate was to issue codes of practice and to show businesses how this Bill would have to be implemented.
Dr Rabie asked if the Department had considered the cost of implementing the Bill, as well as its impact on the price of goods to be sold.
Ms Mphahlele responded that the Department had not wanted to be too prescriptive. There would be initial compliance costs, for example labeling, price display and receipts. While there would be costs to business, one could not ignore the cost to consumers if this Bill was not implemented. The Minister had the power to exempt certain business from certain requirements.
Mr Rasmeni felt that Provincial Departments were not sufficiently involved in the participatory legislative processes regarding S76 Bills.
Mr Sibiya said that this had been raised in the Select Committee meetings. It had been decided that each Select Committee member would return to their respective province and arrange meetings with the Provincial and National Department officials. This process worked very well.
Ms Ntuli reiterated that certain provisions (for example S69 and S71) could only be understood by lawyers. Consumers would not be able to enforce their rights since they would not be able to understand these provisions, even if they were to be given training.
Mr Martins replied that all agencies and Members of Parliament would be involved in the training and advocacy processes. This issue could be flagged and Members could consider how one could ensure buy-in by all stakeholders, so that every consumer could be well-versed in the legislation.
Mr S Njikelana (ANC-Gauteng) asked if the Bill would not cause complications with the NCA.
Mr Fungai Sibanda (Chief Director: Policy and Legislation- Department of Trade and Industry) said that the NCA was responsible for national credit mattes and matters referred by the NCC. While the NCA also dealt with consumer protection it was limited to credit transactions. It was being amended to deal with consumer complaints.
Mr Njikelana asked the Department to provide a clear and comprehensive legislative plan from the present to the end of the process.
Mr Sibanda said that the Bill was with the National Council of Provinces (NCOP) and that this process was likely to continue until June, when it would be referred to the National Assembly. With regard to Transitional Arrangements, the Bill recommended that implementation would take place one year after promulgation to allow business and consumers to adjust to its provisions. This had worked well with the NCA.
Ms Mphahlele said that, as a Tribunal member, she had seen how intertwined the processes in the NCA were with those set out in the Bill. Until now, there had been no legislation to deal with the underlying item bought on credit. While the credit agreement had been dealt with in terms of the NCA, there was no legislation to deal with issues surrounding the underlying asset (for example guarantees and warranties). The introduction of the Bill would provide a harmonious way to deal with these issues.
Ms Zodwa Ntuli said that the Department was aware of the issues being raised by the Members surrounding the importance of education in simplifying the legislation for consumers. The issue of resources would need to be addressed to raise this awareness. She referred to concerns regarding the cost of implementation on business and said that the Department had been conscious of ensuring whether the costs were reasonable and justifiable. These costs had to be balanced with the objectives which the Bill sought to achieve.
Ms Z Ntuli added that consumers could approach the Tribunal without a lawyer. However experience in other tribunals has shown that parties do bring lawyers to these proceedings. This would have placed the ordinary consumer at a huge disadvantage, which is the reason the NCC was given the role of representing the consumer at these proceedings.
Ms M Ntuli asked how the Department would ensure that the legislation was having an impact on the ground. She asked what the Department would do if the Bill appeared to be having negative impacts on consumers.
Mr Sibanda said that there would be constant monitoring of the legislation and its impacts. There have been proposals for an autonomous body to implement the Bill. This would ensure that the Department would be able to monitor and identify challenges more effectively. With regard to the impact of the legislation on consumers, he said that the Department was ready to conduct constant monitoring, as was being done with the NCA.
Ms Mphahlele pointed out that the Parliamentary Committees too had a role to play in monitoring the legislation and its impacts. The executive authorities had to build the capacity to look at progress reports submitted to them and to respond to these reports. In addition civil society had an important role to play.
Mr Rasmeni asked if the Department had any knowledge about the workings of the Consumer Sector Board (which fell under the South African Board of Standards (SABS).
Ms Z Ntuli said that the Department officials present were not acquainted with this body, but would provide this information to Parliament at a later date.
Ms L Ntembe (ID) said that monitoring was poor in SA. Often problems were identified but nothing was done about them.
Mr J Maake (ANC) said that the NCC would respond to complaints. He asked what would be done if there were no complaints (due to consumers ignorance of their rights). He asked if the Department would just assume that all was well. It was important for advocacy to be ongoing.
Mr Martins said that it was good that Members were highlighting issues of concern to the Department. However one should remember that the Members’ roles did not end in Parliament, but extended to constituency work. This included examining and reporting on the implementation of legislation passed by Parliament. Members were best placed to do this, since they would have been in the discussions on the legislation and were therefore aware of what the legislation had sought to achieve. If there were problems with implementation, Members had to bring these to the attention of Parliament, as this could mean that the laws needed to be amended. It was the Members’ roles to keep their fingers on the pulse of the communities.
Mr Martins added that the process was currently with the NCOP. There would be public hearings, the date of which would be advertised in newspapers. The Bill would then be referred to the National Assembly, where it would be further examined. The Committee would then decide if further hearings would be required. He suggested that Portfolio Committee members should attend the Select Committee public hearings as far as possible.
Mr Sibiya concluded that it was very encouraging that the nature of the questions reflected the concerns of the population. He added that he hoped that the Select Committee would always be able to rely on the Department for their valuable input.
Mr Martins adjourned the meeting.
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