CIPC & NCR’s contribution to government’s COVID-19 response; 3rd Quarter Report of DTI and EDD
12 May 2020
The Portfolio Committee on Trade and Industry was briefed by the Companies and Intellectual Property Commission (CIPC) and the National Credit Regulator (NCR) on their contributions to government’s response to the Covid-19 pandemic.
The Companies and Intellectual Property Commission highlighted the workings of the BizPortal system which is an integral part of its response to the COVID-19 pandemic. During level 5 lockdown, approximately 270 000 companies applied for essential service certificates. Upon the extension of lockdown, CIPC issued all applied companies new certificates with additional wording, to meet the additional requirements of the South African Police Service. CIPC thereafter was involved in additional essential service categories coming online during the Lockdown being graded to level 4 on 1 May 2020. To date, approximately 360 000 companies had applied and received their essential service certificates. The BizPortal, CIPC websites and social media platforms have also been used to clarify application criteria and additional information on how to use the system. A dedicated query resolution email had been created for all essential service queries as well as training staff to answer and resolve these queries.
Members asked how sole proprietorships could register as essential services and about the reach of the Commission’s services in rural areas and townships, and sought clarity on some technical details of obtaining certificates. They asked about the expedited Competition Tribunal in the context of Covid-19, as well as reckless trading and lending. Were there any cases before the Tribunal relating to reckless trading and lending so far?
The National Credit Regulator, in presentation, outlined its initiatives in response to Covid-19, advice provided to its stakeholders, and post-lockdown compliance monitoring. The NCR had given credit providers, debt counsellors and credit bureaus until after the lockdown to provide statutory reports and also proposed the waiver or extension of NCR registration fees. Advice was being afforded to credit providers, National Treasury, the Department of Trade, Industry and Competition, the South African Reserve Bank and the South African Future Trust regarding relief for consumers and small businesses. In particular, interest-free loans from the South African Future Trust would go directly to employees of small businesses and would be in the form of weekly allowances given directly to employees for 15 weeks. Since no interest was being charged, these loans would not need to be registered with the NCR.
Members sought clarity on the terms of loans offered by the South African Future Trust, and the effect of forbearances and payment holidays granted to consumers. They inquired about the regulation of unscrupulous debt practices and asked for detail on the Regulator’s raids on debtors using illegal collection methods.
The Committee formally adopted its 3rd quarter report on the Departments of Trade and Industry as well as Economic Development.
Chairperson Nkosi welcomed all Members and guests and asked the Commissioner of the Companies and Intellectual Property Commission (CIPC) to deliver his presentation.
Briefing by the Companies and Intellectual Property Commission (CIPC)
Mr Rory Voller, Commissioner, CIPC, highlighted the workings of the BizPortal system which is an integral part of CIPC’s response to the COVID-19 pandemic. CIPC was contacted by the Ministry a day before the announcement of level 5 lockdown by the President and asked to develop a system for essential service applications by companies. CIPC was given a two day lead to develop, test and implement system to go live by the first day of the original lockdown. Additional functionality was developed and added to the CIPC BizPortal application to include a category for COVID-19 essential service companies.
During level 5 lockdown, approximately 270 000 companies applied for essential service certificates. Upon the extension of the lockdown, CIPC issued all applied companies new certificates with additional wording, to meet the additional requirements of the South African Police Service. CIPC thereafter was involved in additional essential service categories coming online during the Lockdown being graded to level 4 on 1 May 2020. To date, approximately 440 000 companies had applied and received their essential service certificates. The BizPortal, CIPC websites and social media platforms have also been used to clarify application criteria and additional information on how to use the system. A dedicated query resolution email had been created for all essential service queries as well as training staff to answer and resolve these queries.
BizPortal application criteria
- The system can only be used by registered companies that have not been struck off/deregistered/liquidated - The company registration number and name applied for is used to cross- reference the CIPC registry/database to ensure legal status
- The system is fully automated with no human intervention or examination due to volumes received
- The system fully states and disclaims that it is the company’s responsibility to ensure that they meet the designation of being an essential service. CIPC does not advise in this regard and have been told not to as we are not experts in this area.
- The system and certificate fully states that an applicant becomes legally liable should they submit false information and declarations to the CIPC.
- The system does not accept any other form of business namely, a sole proprietor, Trading Trust, Industry Body, Partnership etc. as the CIPCs legal mandate only extends to companies in terms of the law.
The CIPC proactively and reactively revokes or withdraws certificates of companies who irregularly applied and informs the Ministry of same for actioning through the SAPS – Support SAPS/Ministerial Litigation. To date approximately 1300 certificates have been revoked and continues to do so as more information becomes available.
Mr Voller said that the CIPC was not invoking the reckless trading provisions of section 22 of the Companies Act if the Commission believed that a company’s insolvency or illiquidity was a result of the national disaster. The period from 24 March to 4 May had also been declared as dies non (days not counting for legal purposes). This was particularly important for companies that had gone into business rescue, which involved many time-sensitive obligations. 140 companies had already gone into business rescue this year and 37 companies had applied for business rescue since the start of the lockdown in March.
Mr Voller added that that while some CIPC services had been unavailable during the first phase of the lockdown, all services were now running, although there could be delays. A large percentage of staff were now working from home, and he anticipated some permanent changes to work patterns at the CIPC.
Mr M Cuthbert (DA) understood the difficulty in allowing other kinds of businesses, particularly sole proprietorships, to apply for essential service status. He wanted to know if there was some way of cross-referencing these businesses; perhaps ID numbers or other personal particulars could be used. This matter was being continually raised by constituents.
Mr Voller, in response, agreed that sole proprietors needed assistance. There were currently very long queues at municipal offices. Verification was the main problem. However, it might be possible to use the tax registration database. The CIPC was also in discussion with the Department of Small Business Development to formalise the small business, sole proprietor and informal trader categories.
Mr S Mbuyane (ANC) asked about the expedited Competition Tribunal in the context of Covid-19, as well as reckless trading and lending. Were there any cases before the Tribunal relating to reckless trading and lending so far? On the credit guarantee system and the 270 000 companies that had applied to be recognised as offering essential services, were these companies verified? He sought clarity on the contents of the media statements that had been issued on the application criteria for essential service status. Lastly, how was the risk-adjusted reopening programme going to be carried out at the CIPC?
Mr Voller explained that the CIPC would be lenient in pursuing cases of reckless trading if it was related to the state of disaster. The media statements on the application criteria for essential service status would be supplied to the Committee. On the risk-adjusted reopening programme, the regulations specified which categories of businesses were allowed to reopen at each level of lockdown. The CIPC would simply follow these regulations.
Mr J Mulder (FF+) asked if companies would have to reapply for their certificates if the lockdown level changed.
Mr Voller replied that companies would not have to reapply. A new certificate would be automatically sent out.
Mr W Thring (ACDP) asked what percentage of the total number of registered companies had applied for essential service status. He noted that it was the responsibility of the applicant to ensure that they met the criteria for being an essential service. However, some companies were coming into conflict with police despite holding a certificate. What was the CIPC doing or looking to do to help companies to comply with the criteria?
Mr Voller replied that approximately one third of companies had applied. He clarified that the certificate was not a permit or a license. It was intended to be a record of companies that were trading as essential services providers. He explained that it was not within the mandate and expertise of the CIPC to advise companies in this way. The Minister had actually informed the CIPC not to offer this kind of advice.
Ms J Hermans (ANC) asked whether the dies non period would be extended and for how long. Were distressed businesses being linked to remedial support?
Mr Voller replied that the dies non period was expected to continue until June 2020.
Ms R Moatshe (ANC) asked how the online registration of businesses would be made available to businesses based in rural areas.
Ms P Mantashe (ANC) was also concerned about the accessibility of the CIPC’s services to rural businesses and provinces with limited network access.
Mr Voller said that the CIPC tried to communicate on all platforms, but he appreciated that not everyone had good internet access. The CIPC was looking into using provincial and local radio stations to disseminate information and enabling accessibility.
Chairperson Nkosi said that it would be very useful to have information on the 440 000 companies that had applied for essential service status.
Mr Voller agreed that this would be a very valuable source of data. It would be packaged and made available to government and academics.
Briefing by the National Credit Regulator (NCR)
Ms Nomsa Motshegare, Chief Executive Officer, NCR, took the Committee through a presentation on the NCR’s initiatives in response to Covid-19, advice provided to NCR stakeholders, and post-lockdown compliance monitoring.
COVID-19 response initiatives
On initiatives in response to Covid-19, the NCR had given credit providers, debt counsellors and credit bureaus until after the lockdown to provide statutory reports and also proposed the waiver or extension of NCR registration fees. Advice was being afforded to credit providers, National Treasury, the Department of Trade, Industry and Competition, the South African Reserve Bank and the South African Future Trust regarding relief for consumers and small businesses. In particular, interest-free loans from the South African Future Trust would go directly to employees of small businesses and would be in the form of weekly allowances given directly to employees for 15 weeks. Since no interest was being charged, these loans would not need to be registered with the NCR.
Compliance monitoring post-lockdown
Post-lockdown, the NCR would review credit agreements that had been entered into during the lockdown to ensure compliance with the National Credit Act. It would look at the effect of the relief provided by banks during the lockdown on credit scores to ensure consumers were not prejudiced. It would intensify monitoring activity, conducting raids in smaller towns, townships and rural areas to uncover illegal debt collection methods such as the retention of bank cards and identity documents. The performance of loan books of credit providers will be analysed to monitor the impact of COVID-19 on consumers. Further, NCR’s focus post-lockdown will be on the following: debt collection practices (e.g. repossessions) because this is prohibited at this stage; issuance of a circular for credit providers and credit bureaus to submit monthly statistical reports to monitor impact of COVID- 19; and consumer education drives mainly on debt counselling and credit life insurance.
Mr M Dangor (ANC, Gauteng) asked whether the exorbitant interest rates and illegal collection methods of micro-lenders were being monitored by the NCR. What were the relevant regulations? He wondered whether the interest rate clock could be capped.
Ms Motshegare replied that micro-lenders were not supposed to be operating at present. The NCR would conduct raids on unscrupulous micro-lenders.
Ms Y Yako (EFF) noted that furniture stores were not open during the current lockdown level. This could become a problem. For example, a learner who was relying on a television set for education would not be able to replace it if need be. Had the NCR engaged with furniture retailers and manufacturers? She wondered whether 15 weeks was enough time for small businesses to repay South African Future Trust (SAFT) loans.
Ms Motshegare replied that issue by Ms Yako could be best dealt with by the National Consumer Commission. The mandate of the NCR only covered credit agreements.
Mr Thring was also concerned about the aforementioned 15 week period. Could it not be extended? What would happen if a small business defaulted?
Ms Motshegare clarified that the SAFT loans consisted of weekly allowances given directly to employees for 15 weeks. They would only become repayable from 31 December 2025.
Mr Mbuyane asked if the NCR was monitoring lending that was taking place outside the normal framework of the National Credit Act. He wanted to know whether there were any educational initiatives taking place alongside raids in townships and small towns. Was the NCR acting on shops illegally stockpiling goods and raising prices?
Mr Lesiba Mashapa, Company Secretary, NCR, explained that regulating the price of goods fell outside the mandate of the NCR.
Mr Mulder asked for clarity on the period during which debt collection was prohibited. At some stage debt collection would have to be allowed again.
Mr Mashapa replied that the presentation was referring to debt collection during lockdown. The resumption of normal debt collection would be guided by the government’s risk-adjusted strategy.
Mr Cuthbert asked if this implied that consumers should stop repaying debts during the lockdown. Would they be able to continue with repayments if they chose to? What would happen with loan forbearances and payment holidays?
Ms Motshegare explained that consumers were still expected to continue repaying their loans wherever possible. Together with the Credit Bureau Association, the NCR was looking at the impact of loan forbearances and payment holidays on credit information.
Ms Mantashe asked when the illegal collection method raids would commence. The problem of illegal collection methods was not new. Did NCR have the capacity to curb these practices?
Mr Mashapa replied that raids were conducted quarterly. The NCR worked closely with provincial consumer affairs offices. Raids were conducted with the assistance of the police.
Ms Motshegare added that the raids were an ongoing part of the NCR’s activities. However, it was not possible to undertake raids at present, due to the lockdown.
Ms Mantashe was not completely satisfied with the responses. She asked for a list of provinces where the NCR had conducted raids and what they had found. She had never seen NCR inspectors in her town.
This question could not be answered due to technical issues. The NCR would answer it in writing by Monday 18 May.
Mr Thring said that many renters were struggling to keep up with monthly rental payments. What kind of assistance, if any, was the NCR looking at to help tenants and landlords?
Ms Motshegare replied that this fell outside the mandate of the NCR.
3rd Quarter Report on DTI and EDD Performance
Mr Andre Hermans, Committee Secretary, Portfolio Committee on Trade and Industry, explained that the report had been considered the week before. He put the report up for formal adoption.
Ms Mantashe moved for its adoption.
Mr Mbuyane seconded.
Ms Yako abstained from voting. There were many aspects of the report that the EFF did not agree with.
Mr Mulder said that the FF+ could not support the report because of the inclusion of racially conditional incentives.
Ms Mantashe asked what laws Mr Mulder was referring to.
Mr Mulder replied that he wanted to see a South Africa where everyone was an equal partner. It was time to get rid of any racially discriminatory laws. His objection to the report was an objection to racial exclusion measures.
Ms Hermans said that Mr Mulder’s comment could not remain unanswered. South Africans were not all equal in their economic rights. South Africa was a very unequal country, and the face of poverty was the face of a black woman.
Chairperson Nkosi noted the views expressed by Members and added it was a matter of transformation, rather than discrimination.
Ms Mantashe observed that the FF+ had tried unsuccessfully to defeat black economic empowerment legislation in the Committee, in Parliament and in the courts. They should now “shut up” and allow the legislation to be implemented.
Mr Cuthbert objected to Ms Mantashe’s conduct. He hoped that in future, Members of the opposition would be afforded the same freedom to make ad lib comments as had been given to Ms Mantashe.
Mr Nkosi asked all Members to be respectful of each other, even when opposing views were voiced.
The report was adopted and the meeting adjourned.