BUSINESS UNITY SOUTH AFRICA

SUBMISSION TO

PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY

 

PUBLIC HEARINGS

 

JANUARY 2008

 

STANDARDS BILL [B46-2007] AND

NATIONAL REGULATOR FOR COMPULSORY SPECIFICATION BILL [B47-2007]

 

 

1.                   INTRODUCTION

 

Business Unity South Africa (BUSA) is a confederation of chambers of commerce and industry, professional associations, corporate associations and unisectoral organizations. In that role it represents South African business on macro-economic issues that affect it at the national and international levels (Annexure 1 sets out the member organizations affiliated to BUSA).   BUSA’s function is to ensure that business plays a constructive role in the country’s economic growth, development and transformation and thereby create an environment in which businesses of all sizes and in all sectors can thrive, expand and be competitive.

 

The increasing government emphasis on trade promotion required Government to review the national situation in respect of technical regulatory infrastructure and in 2000 initiated a review.  Business participated in this review of the current situation and in the subsequent consideration of the recommendations in Nedlac.

 

Most of the recommendations in the review were accepted and the dti commenced a process of implementation of the recommendations.  In 2004, Government tabled a Discussion Document on Modernising Technical Regulatory Infrastructure for discussion in Nedlac.  Agreement was reached on broad approaches that would be adopted in implementing the strategies contained in the document.

 

BUSA represented Business in the Nedlac consideration of the discussion document and the Bills and welcomes the opportunity to make a submission to the Portfolio Committee on the version now being considered.

 

BUSA believes that it is important to recall that these Bills need to be seen in the context of the Government’s overall approach to technical regulatory infrastructure.

 

BUSA understands that Technical Regulatory Infrastructure in a country comprises the network of institutions that support technical regulation, like a standards authority, an accreditation system and calibration facilities and regulators that can be either government departments or regulatory agencies.  Members may recall BUSA’s support for the two Bills, dealing with Accreditation and Measurement Units and Measurement Standards, during the public hearings in June 2007.  BUSA also supports these two Bills but with some reservations that are discussed below.

 

2.                   INDUSTRIAL POLICY CONTEXT OF THE BILLS

 

BUSA views industrial policy as an important framework within which more detailed strategies for key subsectors and cross cutting interventions, can be developed and implemented. In this regard it is essential that the National Industrial Policy Framework provides an enabling framework within which the specific interventions identified in the Accelerated Shared Growth Initiative can also be implemented.  The recently released Industrial Policy Action P includes implementation of the National Technical Regulatory Framework, including this Bill.

 

BUSA has always recognized the need for Government to play a leading role in the economy but has always argued for this role to be focused on providing the enabling environment that promotes enterprise development.   BUSA agrees with Government that enterprise development, particularly at the SMME level is one of the keys to economic growth and employment creation while at the same time ensuring that more citizens participate in the mainstream economy.  BUSA sees these Bills as an important intervention in improving the enabling environment for investment.  

 

The ultimate aim of the industrial policy is seen as being to increase the attractiveness of the South African economy relative to other investment destinations.  Providing a clear and unambiguous technical regulatory system is a major contributor to achieving this objective.

Business supports a much more assertive approach to market access issues such as specific non-tariff barriers and believes that the institutional arrangements contemplated in these two Bills and the two already established in 2007, can together make a significant contribution to the industrial policy objectives. 

While the important role that SABS, as currently structured, has played in the economy to date, is recognised, the review referred to above emphasized the need for a coherent state funded institutional arrangement which would facilitate compliance with WTO requirements, particularly in respect of compulsory specifications.

While the key manufacturing sectors identified in the NIPF and ASGISA already benefit from the use of standards and compulsory specifications, in that voluntary standards can improve competitiveness and compulsory specifications provide unambiguous requirements with which certain products must comply, enhancements to the system were identified in the review and are now reflected in these Bills.

 

Some examples of the use of standardisation in the key sectors identified by ASGISA include the following:

 

  • Chemical:  a national standard has been developed, which incorporates the international system of chemical classification and labelling, which has allowed the Department of Labour to introduce these requirements into South African Law through a simple regulatory process.
  • Biofuels: biofuels will be produced to comply with a national standard still to be developed.  Testing for compliance with that standard will be undertaken by accredited testing facilities rather than placing the enforcement burden entirely on the state.
  • White goods: household appliances are required to conform to safety standards against which products must be tested.

 

In addition climate change presents a significant challenge for the economy and standards dealing with energy efficiency and green house gas measurement are now being developed.

 

In addition to the benefits to key manufacturing sectors, the value to the regulatory system in pursuit of key government social development objectives should also not be overlooked.  Increasingly technical standards are being used to enforce compliance with a range of safety, health and environmental requirements.

 

3.                   STANDARDS BILL

 

3.1        Role of SABS as regulator

 

While it is accepted that the commercial activities of SABS are ring fenced and thus not subsidized by the state, the role of SABS as the regulator as well as operator of compliance testing facilities for voluntary standards and compulsory specifications has led to perceptions of unfair competition with private sector testing facilities, due to the state funding that the SABS receives.

 

The dual role of the SABS has led to limitation of access to testing facilities which are operated by the SABS, which in turn can lead to unacceptable delays in obtaining test results.

 

Separation of the current functions into two independent entities is therefore supported.

 

3.2        Engagement with stakeholders

 

Implementation of the wide range of technical regulations that national governments promulgate to protect consumers’ health, safety and environment are covering an increasingly wide range of commodities and sectors.  It is impossible for the Board of the SABS to provide strategic direction on all of these sectors.  BUSA therefore welcomes the establishment of the Advisory Forum (Section14) as a powerful instrument to address this gap.

 

A similar Advisory Forum for the Accreditation System has proved very valuable in alerting the Board of SANAS to challenges affecting sectors which can be addressed by accreditation.  The establishment of the proposed forum is therefore strongly supported and BUSA will encourage its sectoral affiliates to support these institutional arrangements.

 

The increasing technical complexity required to effectively regulate certain aspects of health, safety and environment has led government departments like labour and transport to more extensive use of national standards as part of the technical regulatory regime.  Lack of formal co-ordination mechanisms between SABS and the relevant government departments has resulted in unnecessary delays in finalising regulations. 

 

The establishment of the Government Consultative Forum is therefore also welcomed as a mechanism to alleviate this problem.

 

3.3        Profitability vs. state functions

 

The strategic priorities of an organization that is concerned about profitability are not necessarily the same as those of an organization which is undertaking a regulatory role on behalf of the state.  In BUSA’s view, this has led to conflicting approaches.  For example the manager of the regulatory section is not able to achieve faster turnaround times for compliance tests as he is under pressure to use SABS test facilities.

 

Potential for conflict also exists between the voluntary Mark Scheme and compulsory specification leading to increased costs for industry.

 

3.4        Incorporation of South African national standards in laws

 

BUSA notes with concern that the clause dealing with incorporation of national standards in laws, which was contained in the original draft on which we were consulted, has now been deleted.

 

BUSA supported the inclusion of this clause in the original draft on the basis that it would address a number of problems that were currently being experienced with the incorporation of national standards in legislation.

 

Some of the problems that are currently experienced in this regard are discussed below.

 

·         Lack of coherence between finalization of standard that will be taken up in legislation and the legal drafting process resulting in delays in promulgation

·         Limited opportunity to provide for a reasonable transitional period for compliance

·         Lack of clarity on enforcement regime

·         Lack of clarity on appropriate incorporation process.

 

It is therefore requested that the original text in this regard be reintroduced into the Bill.

 

The relevant text is quoted below for convenience:

 

27 bis: Incorporation of South African National Standards in laws

 

A South African National Standard that has been published may be incorporated in any law by reference to the title and number of that standard in respect of any commodity, product or service which may affect public safety, health or environmental protection by notice in the Gazette-

 

 

a)       By declaring a South African National Standard or a provision of a South African National Standard to be a compulsory specification

 

i)         By referring to the title and the number of that standard only, without indicating the year or edition number and that South African National Standard is amended, the South African National Standard is deemed to have been incorporated.

ii)       By referring additionally to the year or edition number of that South African National Standard

 

b)       Declare an amended South African National Standard or an amended provision of a South African National Standard to be compulsory specification; in the case where the original declaration was made in terms of subsection 3(a) (ii) or

 

c)       Withdraw a compulsory specification

 

(2)        A notice in terms of sub-sections (1) (a) and (b) –

 

a)       Must contain full particulars of the specification, provision or amendment;

 

b)       Comes into operation on a date fixed in the notice which must be not less than two months after the date of publication of the notice;

 

c)       May fix different dates on which different provisions of a compulsory specification come into operation.

 

(3)        The date referred to in sub-section 2(b) or (c) may altered by notice in the Gazette.

 

(4)        A notice may not be published under sub-section (1) (a) or (b), unless a preliminary notice has been published in the Gazette –

 

(a)     setting out full particulars of the proposed compulsory specification or amendment; and

 

(b)     in which interested persons are invited to comment on the proposed compulsory specification in writing by not less than two months after the date of the publication of the preliminary notice.

 

3.5        Accessibility of standards

 

Use of standards as the technical basis for regulation in regulations promulgated in

Terms of other Acts means that business does not have immediate access to the relevant standard as standards have to be purchased from the SABS.

 

In order to improve accessibility it is proposed that consideration be given to making all standards incorporated into legislation available free of charge.

 

3.6        South African National Standards

 

Section 23 and 24 of the Bill appear to have been amended in such a way as to have resulted in significant confusion.

 

BUSA understands the original intention of these sections to have been as follows.

 

Section 23 should refer to a specific national standard dealing with the development of national standards in contrast to Section 24 which should deal with all other national standards.

 

The way the sections are currently drafted appears to conflate the two types of standard.

 

It is therefore proposed that the two sections be amended to reflect this difference.  In respect of section 23 specific reference should be made to a standard for the development of national standards and subsections (4) (5) and 6) should be moved to section 24 with appropriate amendments to make clear that this section refers to all national standards except the one dealing with the development of national standards.

 

 

4.                   NATIONAL REGULATOR FOR COMPULSORY SPECIFICATION BILL

 

4.1        Demonstration of compliance

 

The Bill does not make any reference to independent third party certification as a means to prove compliance with a compulsory specification where that specification refers to a national standard. It has been shown in the rest of the world that referring to 3rd party certification schemes as a means to prove compliance with a technical regulation has been successful.

 

This should lead to more effective use of resources in that companies that make use of accredited facilities to certify performance will be able to demonstrate this thus relieving the regulator of the need to check compliance.

 

Implementation of the system could thus alleviate the enforcement burden on the state and should increase the enforcement effectiveness in the critical areas of safety, health and environmental performance in particular.

 

The value of accredited inspection and testing facilities was highlighted in the discussion on the Accreditation Bill.

 

It is therefore proposed that consideration be given to making provision for the use of accredited compliance facilities in addition to the regulator’s own facilities, which would bring the technical regulator in line with other government regulations which operate in this way

 

4.2        Engagement with stakeholders

 

Consistent with the support expressed for a similar forum in the Standards Bill, BUSA supports the establishment of the Advisory Forum.

 

4.3        Entrenchment of existing rights of permit holders

 

The Bill indicates that any regulation made under the previous Standard Act will continue and would be applicable to the appropriate new Act, Standard Act or Regulator of Compulsory Specification Act. Currently under the present legislation, SABS Permit Holders for products covered by a compulsory specification are exempted from the payment of the compulsory levies in terms of that compulsory specification by Government Notice R999 issued under the Standards Act of 1993. Whilst in the near term the government notice R999 will remain in force it could, in future, be withdrawn at any stage and this will lead to the removal of the exemption. SABS permit holders would then be required to pay both the normal Mark Scheme tariffs and the compulsory levies. This could mean a doubling of certification and approval costs. The obvious solution would be for a company to relinquish the SABS mark and only pay the statutory levies. This in turn would remove a significant way of identifying compliance products, would seriously affect the less knowledgeable buyers and would not ensure that products are safe and not inferior.  It is proposed that the exemption from paying the levies should be entrenched in the legislation itself. (Clause (35) (2) (c) and (d)).

 

4.4        Issue of sales permits

 

It is proposed that the conditions for the issue of sales permits (Section 14(4) and (5) must be spelt out in the Bill or prescribed by regulation.  However section 14(6) only makes provision for regulations in the case of section 14(5).

 

5.                   CONCLUSION

 

The finalization of the review of the technical regulatory infrastructure, of which these Bills are part, is recognised as a key action in the Industrial Policy Action Plan.

 

Achievement of economic growth targets requires increased access to global markets.  Such access can be facilitated by a strong technical regulatory system.

 

As a country we need to be able to demonstrate comparability to international standards.  Separation of the functions of the SABS into two separate entities allows each entity to focus on its strategic objectives without being diverted by sometimes conflicting interests.

 

We believe that the adoption of this legislation is an important intervention by Government in establishing an investor friendly environment.

 

In summary BUSA supports both Bills as drafted provided that the following concerns are addressed.

 

Standards Bill

 

·         Amendment of sections 23 and 24

 

·         Reintroduction of section on incorporation of standards in legislation

 

Technical Regulation for Compulsory Specifications Bill

 

·         Provision for third party compliance testing.

 

·         Entrenchment of existing provisions to avoid duplication of costs

 

·         Amend section 14.


Annexure 1

Business Unity South Africa (BUSA) Members

 

1.         African Minerals and Energy Forum (AMEF)

2.         Agri SA

3.         AHI

4.         Association for the Advancement of Black Accountants of Southern Africa (ABASA)

5.         Association of Black Securities and Investment Professionals (ABSIP)

6.         Automotive Sector

·         Automobile Manufacturers Employers’ Organisation (AMEO)

·         National Association of Automotive Component and Allied Manufacturers (NAACAM)

·         National Association of Automobile Manufacturers of South Africa (NAAMSA)

·         Retail Motor Industry Organisation (RMI)

7.         Banking Association

8.         Black Business Executive Circle (BBEC)

9.         Black Information Technology Forum (BITF)

10.        Black Lawyers Association (BLA)

11.        Black Management Forum (BMF)

12.        Business Leadership South Africa

13.        Casino Association of South Africa (CASA)

14.        Chambers of Commerce and Industry South Africa (CHAMSA)

15.        Chamber of Mines of South Africa (COM)

16.        Chemical and Allied Industries’ Association (CAIA)

17.        Confederation of Associations in the Private Employment Sector (CAPES)

18.        Congress of Business and Economics (CBE)

19.        Construction Sector

·         Master Builders South Africa (MBSA)

·         South African Federation of Civil Engineering Contractors (SAFCEC)

20.        Financial Planning Institute of Southern Africa (FPI)

21.        Life Offices Association (LOA)

22.        National African Federated Chamber of Commerce and Industry (NAFCOC)

23         NAFCOC Construction (formerly NAFBI)

24.        National African Farmers Union of South Africa (NAFU)

25.        National Black Business Caucus (NBBC)

26         National Industrial Chamber (NIC)

27.        Retailers’ Association (RA)

28.        Road Freight Employers Association (RFEA)

29.        South African Black Technical and Allied Careers Organisation (SABTACO)

30.        South African Chamber of Business (SACOB)

31.        South African Communications Forum (SACF)

32.        South African Institute of Black Property Practitioners (SAIBPP)

33.        South African Insurance Association (SAIA)

34.        South African Leisure & Tourism Association (SALTA)

35.        South African Petroleum Industry Association (SAPIA)

36.        Steel and Engineering Industries Federation of South Africa (SEIFSA)

37.        United Businesswomen of South Africa (UBSA)